-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KE5WQ0N/hKUOslTKF1r2pp9tsf2OmlGKa9vFcZtSH5/Lt/w37PL21DWKatvTS+LY bPvnSEciSjO/nVa1UKELpQ== 0000891554-99-002106.txt : 19991115 0000891554-99-002106.hdr.sgml : 19991115 ACCESSION NUMBER: 0000891554-99-002106 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991029 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMERGING ALPHA CORP CENTRAL INDEX KEY: 0000904147 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 721235449 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 033-61888-FW FILM NUMBER: 99748035 BUSINESS ADDRESS: STREET 1: 220 CAMP ST CITY: NEW ORLEANS STATE: LA ZIP: 70130 BUSINESS PHONE: 5045241801 MAIL ADDRESS: STREET 1: 220 CAMP ST CITY: NEW ORLEANS STATE: LA ZIP: 70130 8-K 1 CURRENT REPORT - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): October 29, 1999 EMERGING ALPHA CORPORATION (Exact Name of Registrant as Specified in its Charter) DELAWARE 33-61888-FW 72-1235449 (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 220 Camp Street New Orleans, Louisiana 70130 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (504) 524-1801 - -------------------------------------------------------------------------------- Item 2. Acquisition or Disposition of Assets On October 29, 1999, pursuant to the terms of the Stock Purchase Agreement by and among Emerging Alpha Corporation ("Emerging Alpha") and the stockholders of Gas Jack, Inc., an Oklahoma corporation ("Gas Jack"), Emerging Alpha acquired all of the outstanding capital stock of Gas Jack for $2.7 million in cash. The purchase price was financed through a $2.8 million term loan facility provided by Hibernia National Bank to Emerging Alpha. In addition, Emerging Alpha and Gas Jack entered into a $1.0 million working capital facility with Hibernia National Bank primarily to be used to finance the working capital requirements of Gas Jack. Gas Jack is now a wholly owned subsidiary of Emerging Alpha and its principal operating subsidiary. Gas Jack is a compressor manufacturer and service provider to the oil and gas industry. Gas Jack is based in Oklahoma City, Oklahoma and has field operations in Oklahoma, Texas, New Mexico, Kansas, Arkansas and Colorado. In addition, on October 29, 1999, Emerging Alpha acquired all of the outstanding units of GJ Measurement, L.L.C., an Oklahoma limited liability company, for 33,333 shares of Emerging Alpha common stock. GJ Measurement is now wholly owned subsidiary of Emerging Alpha. GJ Measurement is a natural gas measurement and testing service company. Item 7. Financial Statements and Exhibits (a) Financial Statements of Business Acquired. To be filed by amendment. (b) Pro Forma Financial Information. To be filed by amendment. (c) Exhibits. 10.1 Stock Purchase Agreement, dated as of October 29, 1999, by and among Emerging Alpha Corporation and the Stockholders of Gas Jack, Inc. 10.2 Loan Agreement, dated as of October 29, 1999, by and between Hibernia National Bank and Emerging Alpha Corporation. 10.3 Loan Agreement, dated as of October 29, 1999, by and among Hibernia National Bank, Emerging Alpha Corporation and Gas Jack, Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EMERGING ALPHA CORPORATION Date: November 9, 1999 By: /s/ JERRY W. JARRELL -------------------------- Jerry W. Jarrell Chief Financial Officer INDEX TO EXHIBITS Exhibit Number - ------- 10.1 Stock Purchase Agreement, dated as of October 29, 1999, by and among Emerging Alpha Corporation and the Stockholders of Gas Jack, Inc. 10.2 Loan Agreement, dated as of October 29, 1999, by and between Hibernia National Bank and Emerging Alpha Corporation. 10.3 Loan Agreement, dated as of October 29, 1999, by and among Hibernia National Bank, Emerging Alpha Corporation and Gas Jack, Inc. EX-10.1 2 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT by and between EMERGING ALPHA CORPORATION, and THE STOCKHOLDERS OF GAS JACK, INC. Dated as of October 29, 1999 ATTACHMENTS Appendix I - Definitions Exhibit A - List of Sellers and Share Ownership Exhibit B - Form of Escrow Agreement Exhibit C - Form of Employment Agreement Disclosure Schedules STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "Agreement") is made as of October 29, 1999, by and among (i) Emerging Alpha Corporation, a Delaware corporation ("Buyer"), and (ii) each stockholder of Gas Jack, Inc., an Oklahoma corporation (the "Company"), set forth in Exhibit A (individually, "Seller" and collectively, "Sellers"). RECITALS: WHEREAS, Sellers own all of the outstanding capital stock of the Company; and WHEREAS, Buyer desires to purchase from Sellers all of the Company's outstanding capital stock, and Sellers desire to sell to Buyer all of the Company's outstanding capital stock, in accordance with this Agreement's terms and conditions. AGREEMENT: NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants contained herein, Buyer and each Seller agree as follows: ARTICLE 1. PURCHASE AND SALE OF SHARES 1.1 Purchase and Sale of Shares. On and subject to the terms and conditions of this Agreement, Buyer agrees to purchase from each Seller, and each Seller agrees to sell to Buyer, all of the Shares such Seller owns for the consideration specified in Section 1.2. 1.2 Purchase Price. The purchase price for the Shares is $2,700,000 (the "Purchase Price"). The Purchase Price will be allocated among Sellers in proportion to their respective holdings of Shares as set forth in Exhibit A. 1.3 The Closing. The closing of the purchase and sale of the Shares (the "Closing") will take place at the offices of the Company at 8224 SW 3rd Street, Oklahoma City, Oklahoma, commencing at 9:00 a.m., local time, on the business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the purchase and sale of the Shares (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as Buyer and the Requisite Sellers may mutually determine (the "Closing Date"). 1.4 Deliveries at the Closing. At the Closing: (a) Sellers will deliver to Buyer: (i) certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers); (ii) a certificate, duly executed by or on behalf of each Seller and the Company, as to whether each condition specified in Sections 6.1(a)-(h) has been satisfied in all respects; (iii) except as contemplated by Section 1.4(a)(iv), a copy of each Organization Document of the Company; (iv) a certificate of incorporation and good standing/existence of the Company certified by an appropriate authority of the Governmental Authority issuing such certificate; (v) secretary's certificates of each of the Sellers that is not an individual in a form reasonably acceptable to Buyer; (vi) opinion of counsel to Sellers in a form reasonably acceptable to Buyer; and (vii) the resignation, effective as of the Closing, of Chen Ding as director of the Company; (b) Buyer will deliver to Sellers: (i) $2,200,000 in cash, via Fedwire transfer, which will be allocated among Sellers as set forth in Exhibit ------- A; (ii) $500,000 to be deposited into the escrow account established in accordance with the Escrow Agreement; (iii) a certificate, duly executed on behalf of Buyer, as to whether each condition specified in Section 6.2(a)-(c) has been satisfied in all respects; (iv) a certificate of incorporation and good standing/existence of Buyer certified by an appropriate authority of the Governmental Authority issuing such certificate; and (v) the Employment Agreements, duly executed on behalf of Buyer. (c) The respective parties thereto will execute and deliver the Employment Agreements (and Sellers will cause the Company to execute and deliver the Employment Agreements.) (d) The parties thereto will execute and deliver the Escrow Agreement (and Sellers and Buyer will use their Best Efforts to cause the Escrow Agent to execute and deliver the Escrow Agreement). 2 ARTICLE 2. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION 2.1 Representations and Warranties of Sellers. Each Seller hereby severally and not jointly represents and warrants to Buyer that the statements contained in this Section 2.1 as to such Seller (but not as to any other Seller) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 2.1). (a) Status of Certain Sellers. Each Seller that is an entity is an entity duly created, formed or organized, validly existing, and in good standing under the Laws of the jurisdiction of its creation, formation, or organization. There is no pending or, to each Seller's Knowledge, Threatened, Action (or Basis therefor) for the dissolution, liquidation, insolvency, or rehabilitation of any Seller. (b) Power and Authority; Enforceability. Each Seller that is an entity has the power and authority to execute and deliver each Transaction Document to which such Seller is a party, and to perform and consummate the Transactions. Each Seller that is an individual has the requisite competence and authority to execute and deliver each Transaction Document to which it is a party, and to perform and to consummate the Transactions. Such Seller has taken all actions necessary to authorize the execution and delivery of each Transaction Document to which it is party, the performance of such Seller's obligations thereunder, and the consummation of the Transactions. Each Transaction Document has been duly authorized, executed, and delivered by, and is Enforceable against, such Seller. (c) No Violation. The execution and the delivery of the Transaction Documents by each Seller party thereto and the performance and consummation of the Transactions by such Seller will not (i) Breach any Law or Order to which such Seller is subject or, if such Seller is an entity, any provision of its Organizational Documents, (ii) Breach any Contract, Order, or Permit to which such Seller is a party or by which such Seller is bound or to which any of such Seller's assets is subject, or (iii) require any Consent. (d) Brokers' Fees. Such Seller has no Liability to pay any compensation to any broker, finder, or agent with respect to the Transactions for which Buyer or the Company could become directly or indirectly Liable. (e) Shares; Seller Information. Such Seller holds of record and owns beneficially the number of Shares as set forth next to such Seller's name in Exhibit A, free and clear of any Encumbrances (other than any restrictions under the Securities Act and state securities Laws). With respect to such Seller, Exhibit A also sets forth the address, state of residence and federal tax identification number (or social security number, as applicable) of such Seller as of the date hereof. Such Seller is not a party to any Contract that could require such Seller to sell, transfer, or otherwise dispose of any 3 capital stock of the Company (other than this Agreement). Such Seller is not a party to any Contract with respect to any capital stock of the Company. 2.2 Representations and Warranties of Buyer. Buyer represents and warrants to Sellers that the statements contained in this Section 2.2 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 2.2). (a) Entity Status. Buyer is an entity duly created, formed or organized, validly existing and in good standing under the Laws of Delaware. There is no pending or, to Buyer's Knowledge, Threatened, Action (or Basis therefor) for the dissolution, liquidation, insolvency, or rehabilitation of Buyer. (b) Power and Authority; Enforceability. Buyer has the relevant entity power and authority to execute and deliver each Transaction Document to which it is party, and to perform and consummate the Transactions. Buyer has taken all action necessary to authorize the execution and delivery of each Transaction Document to which it is party. Each Transaction Document to which Buyer is party has been duly authorized, executed and delivered by, and is Enforceable against, Buyer. (c) No Violation. The execution and delivery of the Transaction Documents to which Buyer is party by Buyer and the performance and consummation of the Transactions by Buyer will not (a) Beach any Law or Order to which Buyer is subject or any provision of its Organizational Documents; (b) Breach any Contract, Order, or Permit to which Buyer is a party or by which it is bound or to which any of its assets is subject; or (c) require any Consent. (d) Brokers' Fees. Buyer has no Liability to pay any compensation to any broker, finder, or agent with respect to the Transactions for which any Seller could become Liable. ARTICLE 3. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY Each Seller severally and not jointly represents and warrants to Buyer that the statements contained in this Article 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article 3), except as set forth in the Disclosure Schedules delivered by Sellers to Buyer on the date hereof (the "Schedules"). 3.1 Corporate Status. The Company is a corporation duly created, formed or organized, validly existing, and in good standing under the Laws of Oklahoma. The Company is duly authorized to conduct its business and is in good standing under the laws of each jurisdiction where such qualification is required. The Company has the requisite power and authority necessary to own or lease its properties and to carry on its businesses as currently 4 conducted. Schedule 3.1 lists the Company's directors and officers. Sellers have delivered to Buyer correct and complete copies of the Company's Organizational Documents, as amended to date. The Company is not in Breach of any provision of its Organizational Documents. There is no pending or, to any Seller's Knowledge, Threatened, Action (or Basis therefor) for the dissolution, liquidation, insolvency, or rehabilitation of the Company. 3.2 Power and Authority; Enforceability. The Company has the relevant corporate power and authority necessary to execute and deliver each Transaction Document to which it is a party and to perform and consummate the Transactions. The Company has taken all action necessary to authorize the execution and delivery of each Transaction Document to which it is a party, the performance of the Company's obligations thereunder, and the consummation of the Transactions. Each Transaction Document to which the Company is Party has been duly authorized, executed, and delivered by, and is Enforceable against, the Company. 3.3 No Violation. The execution and the delivery of the applicable Transaction Documents by the Company and the performance of its obligations hereunder and thereunder, and consummation of the Transactions by the Company will not (a) Breach any Law or Order to which the Company is subject or any provision of the Organizational Documents of the Company; (b) Breach any Contract, Order, or Permit to which the Company is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Encumbrance upon any of its assets); (c) require any Consent; or (d) cause the recognition of gain or loss for Tax purposes with respect to the Company or subject the Company or its assets to any Tax. 3.4 Brokers' Fees. The Company will, at the time of the closing, have no Liability to pay any compensation to any broker, finder, or agent with respect to the Transactions. 3.5 Capitalization. The Company's authorized Equity Interests consist of 5,000,000 Shares, of which 2,364,753 Shares are issued, 1,504,319 shares are issued and outstanding, and 864,434 Shares are held in treasury. All of the issued and outstanding Shares: (i) have been duly authorized and are validly issued, fully paid, and nonassessable, (ii) were issued in compliance with all applicable state and federal securities Laws, (iii) were not issued in Breach of any Commitments, and (iv) are held of record by the respective Sellers as set forth in Exhibit A. No Commitments exist with respect to any Equity Interest of the Company, and no such Commitments will arise in connection with the Transactions. At the time of the Closing, there will be no Contracts with respect to the voting or transfer of the Company's Equity Interests, and the Company will not be obligated to redeem or otherwise acquire any of its outstanding Equity Interests. 3.6 Records. The copies of the Company's Organizational Documents that were provided to Buyer are accurate and complete and reflect all amendments made through the date of this Agreement. The Company's minute books and other records made available to Buyer for review were correct and complete as of the date of such review, no further entries have been made through the date of this Agreement that have not been made known to Buyer, such minute books and records contain the true signatures of the persons purporting to have signed them, and such minute books and records contain an accurate record of all actions of the shareholders and directors of the Company taken by written consent, at a meeting, or otherwise since formation. 5 3.7 Subsidiaries. The Company has no Subsidiaries. 3.8 Financial Statements. Set forth on Schedule 3.8 are the following financial statements (collectively the "Financial Statements"): (a) audited balance sheets and statements of income, changes in stockholders' equity, and cash flow as of and for the fiscal years ended December 31, 1993, 1994, 1995, 1996 and 1997 as of and for the fiscal year ended December 31, 1998 (the "Most Recent Year End") for the Company; and (b) unaudited balance sheet and statement of income and cash flow (the "Interim Financial Statements") as of and for the nine months ended September 30, 1999 (the "Balance Sheet Date") for the Company. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, present fairly the financial condition of the Company as of such dates and the results of operations of the Company for such periods, are correct and complete, and are consistent with the books and records of the Company; provided, however, that the Interim Financial Statements are subject to normal year-end adjustments (which will not be material individually or in the aggregate) and do not contain footnotes and other presentation items. 3.9 Subsequent Events. Except as set forth in Schedule 3.9 and 3.18, since the Balance Sheet Date there has not been any Material Adverse Change with respect to the Company. In addition, since that date, except as set forth in Schedules 3.9 and 3.18, none of the following has occurred to the date of this Agreement and, except in the Ordinary Course of Business, none will occur to the date of the closing, without the approval of Buyer. (a) the Company has not sold, leased, transferred, or assigned any assets other than for a fair consideration in the Ordinary Course of Business; (b) the Company has not entered into any Contract (or series of related Contracts) either involving more than $10,000 or outside the Ordinary Course of Business; (c) no Seller that is party to any Contract to which the Company is a party or by which it is bound or any of its assets is subject has Breached any such Contract; (d) no Encumbrance has been imposed upon any of the assets of the Company; (e) the Company has not made any capital expenditure (or series of related capital expenditures) either involving more than $10,000 or outside the Ordinary Course of Business; (f) the Company has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital 6 investments, loans, and acquisitions) either involving more than $10,000 or outside the Ordinary Course of Business; (g) the Company has not issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any Liability for borrowed money or capitalized lease Contract either involving more than $10,000 individually or in the aggregate; (h) the Company has not delayed or postponed the payment of accounts payable or other Liabilities outside the Ordinary Course of Business; (i) the Company has not canceled, compromised, waived, or released any Action (or series of related Actions) either involving more than $10,000 or outside the Ordinary Course of Business; (j) the Company has not granted any Contracts or any rights under or with respect to any Intellectual Property; other than in connection with the sale or lease of the goods or services in the Ordinary Course of Business; (k) there has been no change made or authorized to the Organizational Documents of the Company; (l) the Company has not issued, sold, or otherwise disposed of any of its Equity Interests; (m) the Company has not declared, set aside, or paid any dividend or made any distribution with respect to its Equity Interests (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its Equity Interests; (n) the Company has not experienced any damage, destruction, or loss (whether or not covered by insurance) to its properties; (o) the Company has not made any loan to, or entered into any transaction outside the normal course of employment with, any of its directors, officers, or employees; (p) the Company has not entered into any employment, collective bargaining, or similar Contract or modified the terms of any existing such Contract; (q) the Company has not committed to pay any bonus or granted any increase in the base compensation (i) of any director, officer, or employee thereof that is a Seller or an Affiliate thereof, or (ii) outside of the Ordinary Course of Business, of any of its other directors, officers, or employees; (r) the Company has not adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or similar Contract for the benefit of any of its directors, officers, or employees (or taken any such action with respect to any other Employee Benefit Plan); 7 (s) the Company has not made any other change in employment terms for (i) any officer or employee thereof that is a Seller or an Affiliate thereof, or (ii) outside of the Ordinary Course of Business, any of its other directors, officers, or employees; (t) the Company has not made or pledged to make any charitable or other capital contribution either involving more than $5,000 (individually or in the aggregate) or outside the Ordinary Course of Business; (u) there has not been any other occurrence, event, incident, action, failure to act, or transaction with respect to the Company either involving more than $10,000 (individually or in the aggregate) or outside the Ordinary Course of Business; and (v) the Company has not committed to do any of the foregoing. 3.10 Liabilities. The Company has no Liability (and there is no Basis for any present or future Action or Order against any of them giving rise to any Liability), except for (a) Liabilities reflected in the Interim Financial Statements and not heretofore paid or discharged, (b) Liabilities which have arisen after the Balance Sheet Date in the Ordinary Course of Business which, individually or in the aggregate, are not material and are of the same character and nature as the Liabilities reflected in the Interim Financial Statements none of which results from or relates to any Breach of Contract, Breach of warranty, tort, infringement, or Breach of Law or arose out of any Action or Order; (c) Liabilities under the items disclosed in Schedules 3.9, 3.14(b), 3.18, 3.21 and 3.26; and (d) product warranty obligations and liabilities arising in the Ordinary Course of Business. 3.11 Legal Compliance. The Company and its respective predecessors and Affiliates has complied with all applicable Laws, and no Action is pending or, to the Knowledge of any Seller Party, Threatened (and there is no Basis therefor) against it alleging any failure to so comply. 3.12 Tax Matters. Except as set forth on Schedule 3.12, the Company is not is subject to any Liabilities for Taxes, including Taxes relating to prior periods, other than those set forth or adequately reserved against in the Interim Financial Statements or those incurred since the Balance Sheet Date in the Ordinary Course of Business. The Company has duly filed when due all Tax reports and returns in connection with and in respect of its business, assets and employees, and has timely paid and discharged all amounts shown as due thereon. The Company has made available to Buyer accurate and complete copies of all of its Tax reports and returns for all periods, except those periods for which returns are not yet due. The Company has not received any notice of any Tax deficiency outstanding, proposed or assessed against or allocable to it, and has not executed any waiver of any statute of limitations on the assessment or collection of any Tax or executed or filed with any Governmental Authority any Contract now in effect extending the period for assessment or collection of any Taxes against it. There are no Encumbrances for Taxes upon, pending against or Threatened against, any asset of the Company. The Company is not subject to any Tax allocation or sharing Contract. 3.13 Title to Assets. The Company has good, marketable, and indefeasible title to, or a valid leasehold interest in, the properties and assets they use, located on their premises, or 8 shown on the Interim Financial Statements or acquired after the date thereof, free and clear of all Encumbrances, except for properties and assets disposed of in the Ordinary Course of Business since the date of the Interim Financial Statements. 3.14 Real Property. (a) The Company does not own any interests in real property, other than leases listed on Schedule 3.14(b). (b) Schedule 3.14(b) lists and describes briefly all real property leased or subleased to the Company. Sellers have delivered to Buyer correct and complete copies of the lease and sublease Contracts (as amended to date) listed in Schedule 3.14(b). With respect to each lease and sublease Contract required to be listed in Schedule 3.14(b) and to the extent necessary to ensure that the Company will not suffer any material damage, loss or diminution of enjoyment in respect of the real property leased or subleased: (i) the Contract is Enforceable; (ii) the Contract will continue to be Enforceable on identical terms following the consummation of the Transactions; (iii) no party to the Contract is in Breach, and no event has occurred which, with notice or lapse of time, would constitute a Breach thereunder; (iv) no party to the Contract has repudiated any provision thereof; (v) there are no Actions, Orders, or forbearances in effect as to the Contract; (vi) with respect to each sublease Contract, the representations and warranties set forth in Sections 3.14(b)(i) through (v) are true and correct with respect to the underlying lease Contract;. (vii) the Company has not granted or suffered to exist any Encumbrance in the leasehold or subleasehold Contract; (viii) all facilities leased or subleased under the Contract have received all Permits required in connection with the operation thereof and have been operated and maintained in accordance with applicable Laws; and (ix) all facilities leased or subleased under the Contract are supplied with utilities and other services necessary for the operation of said facilities. 3.15 Intellectual Property. Except as set forth in Schedule 3.15, the Company owns, or possesses adequate rights to use, all Intellectual Property used in its business as currently, or 9 as currently proposed to be, conducted. No Consent of any Person is required for the Company's interest in the Intellectual Property to continue to be Enforceable by the Company following the Transactions. The Company's use of the Intellectual Property in its business as currently conducted does not and the use of the Intellectual Property by the Company after Closing will not, infringe upon any rights any other Person owns or holds. 3.16 Tangible Assets. The Company owns or leases all buildings, machinery, equipment, and other tangible assets necessary for the conduct of its businesses as currently conducted. Each such tangible asset is free from defects (patent and latent), has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is suitable for the purposes for which it currently is used. 3.17 Inventory. The Company' inventory, whether reflected on the Financial Statements or not, consists of raw materials and supplies, manufactured and processed parts, goods in process, and finished goods, all of which is merchantable and fit for the purpose for which it was procured or manufactured, and, except as has been written down or reserved against on the Interim Financial Statements, none of which is obsolete, damaged, or defective. Any inventory that has been written down or reserved against on the Interim Financial Statements has either been written off. written down or reserved against to its net realizable value. The quantities of any kind of inventory are reasonable in the current (and the currently foreseeable) circumstances of the Company. 3.18 Contracts. Except as otherwise disclosed in Schedules 3.9, 3.10, 3.14(b), 3.15, 3.21 and 3.26, Schedule 3.18 lists the following Contracts to which the Company is a party as at the date of this Agreement (but not thereafter): (a) any Contract (or group of related Contracts) for the lease of personal property to or from any Person providing for lease payments in excess of $10,000 per annum; (b) any Contract (or group of related Contracts) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the performance of which will extend over a period of more than one year, result in a loss to the Company, or involve consideration in excess of $10,000; (c) any Contract concerning a limited liability company, partnership, joint venture or similar arrangement; (d) any Contract (or group of related Contracts) under which it has created, incurred, assumed, or guaranteed any Liability for borrowed money or any capitalized lease in excess of $10,000, or under which it has imposed or suffered to exist an Encumbrance on any of its assets; (e) any Contract concerning confidentiality or noncompetition, except a confidentiality agreement with Brooks Mims Talton; 10 (f) any Contract with any Seller or any of their Affiliates (other than the Company); (g) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other similar Contract for the benefit of its current or former directors, officers, and employees; (h) any collective bargaining Contract; (i) any Contract for the employment of any individual on a full-time, part-time, consulting, or other basis providing annual compensation in excess of $10,000 or providing severance benefits; (j) any Contract under which it has advanced or loaned any amount to any of its directors or officers or any Seller or, outside the Ordinary Course of Business, to its employees that are not Sellers. (k) any other Contract (or group of related Contracts) the performance of which involves consideration in excess of $10,000. Sellers have delivered to Buyer a correct and complete copy of each written Contract (as amended to date) listed in Schedule 3.18. With respect to each such Contract to the extent necessary to ensure that the Company will not suffer any material damage, loss or diminution of enjoyment in respect of the subject matter of such Contract. (a) the Contract is Enforceable; (b) the Contract will continue to be Enforceable on identical terms following the consummation of the Transactions; (c) no party is in Breach, and no event has occurred which, with notice or lapse of time, would constitute a Breach under the Contract; and (d) no party has repudiated any provision of the Contract. 3.19 Receivables. All of the Receivables are Enforceable, represent bona fide transactions, and arose in the Ordinary Course of Business of the Company, and are reflected properly in its books and records. All of the Receivables are good and collectible receivables, are current, and will be collected in accordance with past practice and the terms of such receivables (and in any event within six months following the Closing Date), without set off or counterclaims, subject only to the reserve for bad debts reflected in the Interim Financial Statements. 3.20 Powers of Attorney. The only outstanding power of attorney executed on behalf of the Company is to the third-party payroll processing vendor for the sole purpose of filing payroll tax returns. 11 3.21 Insurance. Schedule 3.21 sets forth the following information with respect to each insurance policy Contract (including policies providing property, casualty, liability, and workers' compensation coverage and bond and surety arrangements) to which the Company has been a party, a named insured, or otherwise the beneficiary of coverage at July 31, 1999: (a) the name of the insurer, the name of the policyholder, and the name of each covered insured, (b) the policy number and the period of coverage; (c) the scope (including an indication of whether the coverage was on a claims made, occurrence, or other basis) and amount of coverage; and (d) a description of any retroactive premium adjustments or other loss-sharing arrangements. With respect to each insurance policy Contract and subject to the policy and expiration dates and any other termination rights of the insurer thereunder: (a) the Contract is Enforceable; (b) the Contract will continue to be Enforceable on identical terms following the consummation of the Transactions; (c) neither the Company nor any other party to the Contract is in Breach (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with notice or the lapse of time, would constitute such a Breach under the Contract; and (d) no party to the Contract has repudiated any provision thereof. The Company has been covered during the past nine years by insurance in scope and amount customary and reasonable for the businesses in which it has engaged during the aforementioned period. 3.22 Litigation. The Company (a) is not subject to any outstanding Order and (b) is not a party or, to any Seller's Knowledge, is Threatened to be made a party to any Action. 3.23 Product Warranty. Each product manufactured, sold, leased, or delivered by the Company has been in conformity with all applicable Law, Contracts, and all express and implied warranties, and the Company has not any Liability (and there is no Basis for any present or future Action against any of them giving rise to any Liability) for replacement or repair thereof or other Damages in connection therewith, subject only to the reserve for product warranty claims set forth on the face of the Interim Financial Statements (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the Company' past custom and practice. No product designed, manufactured, sold, leased, or delivered by the Company is subject to any guaranty, warranty, or other indemnity or similar Liability beyond the applicable standard terms and conditions of sale or lease. Schedule 3.23 includes copies of the 12 standard terms and conditions of sale or lease for the Company (containing applicable guaranty, warranty, and similar Liability indemnity provisions). 3.24 Product Liability. The Company has no Liability (and there is no Basis for any present or future Action against any of them giving rise to any Liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product designed, manufactured, sold, leased, or delivered by the Company. 3.25 Labor; Employees. To each Seller's Knowledge, no executive, key employee, or group of employees has any plans to terminate employment with the Company. The Company is not a party to or bound by any collective bargaining Contract, nor has any of them experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes. The Company has not committed any unfair labor practice. No Seller has any Knowledge of any organizational effort currently being made or Threatened by or on behalf of any labor union with respect to employees of the Company. 3.26 Employee Benefits. Schedule 3.26 lists each Employee Benefit Plan that the Company maintains or to which it contributes. With respect to any employee benefit plan, within the meaning of Section 3(3) of ERISA, which is subject to ERISA and which is sponsored, maintained or contributed to, or has been sponsored, maintained or contributed to within six years prior to the Closing Date, by the Company or any member of the Controlled Group of Corporations of which the Company is part, (a) no withdrawal Liability, within the meaning of Section 4201 of ERISA, has been incurred, which withdrawal Liability has not been satisfied, (b) no Liability to the PBGC has been incurred by the Company or any member of the Controlled Group of Corporations of which the Company is part, which Liability has not been satisfied, (c) no accumulated funding deficiency, whether or not waived, within the meaning of Section 302 of ERISA or Section 412 of the Code has been incurred, and (d) all contributions (including installments) to such plan required by Section 302 of ERISA and Section 412 of the Code have been timely made. With respect to any kind of employee benefit plan, such plan has been funded and maintained in compliance with all Laws applicable thereto and the requirements of such plan's governing documents. 3.27 Environmental, Health, and Safety Matters. (a) The Company has complied and is in compliance with all Environmental, Health, and Safety Requirements in all material respects. (b) Without limiting Section 3.29, the Company has obtained, has complied in all material respects with, and is in compliance with all Permits that are required pursuant to Environmental, Health, and Safety Requirements for the occupation of its facilities and the operation of its business. Except as set forth in Schedule 3.27(b), such Permits are in full force and effect, free from Breach, and will not be adversely affected by the Transactions. (c) The Company has not received any written or oral notice, report or other information regarding any actual or alleged violation of Environmental, Health, and Safety Requirements or any Liabilities, including any investigatory, remedial or 13 corrective Liabilities, relating to any of them or its facilities arising under Environmental, Health, and Safety Requirements. (d) Except as listed on Schedule 3.27(d), none of the following exists at any property or facility owned or operated by the Company: (i) under or above-ground storage tanks, (ii) asbestos containing material in any form or condition, (iii) materials or equipment containing polychlorinated biphenyls, or (iv) landfills, surface impoundments, or disposal areas. (e) The Company has not treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or Released any substance, including any hazardous substance, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to any Damages, including any Damages for response costs, corrective action costs, personal injury, property damage or natural resources damages, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Solid Waste Disposal Act, as amended, or any other Environmental, Health, and Safety Requirements. (f) The Transactions will not result in any Liabilities for site investigation or cleanup, or require the Consent of any Person, pursuant to any of the so-called "transaction-triggered" or "responsible property transfer" Environmental, Health, and Safety Requirements. (g) The Company has not, either expressly or by operation of Law, assumed or undertaken any Liability, including any obligation for corrective or remedial action, of any other Person relating to Environmental, Health, and Safety Requirements. (h) No facts, events or conditions relating to the past or present facilities, properties or operations of the Company will prevent, hinder or limit continued compliance with Environmental, Health, and Safety Requirements, give rise to any Damages pursuant to Environmental, Health, and Safety Requirements, or give rise to any other Liabilities pursuant to Environmental, Health, and Safety Requirements. 3.28 Customers and Suppliers. Schedule 3.28 lists the Company's (a) ten largest customers in terms of sales during (i) the twelve month period ended as of the Most Recent Year End and (ii) the eight-month period ended as of the Balance Sheet Date and states the approximate total sales by the Company to each such customer during such periods, respectively and (b) the ten largest suppliers during the 12 month period ended as of the Most Recent Year End and the eight-month period ended as of the Balance Sheet Date. Except as set forth in Schedule 3.28, no Seller has received or has Knowledge of any notice of termination or an intention to terminate the relationship with the Company from any such customer or supplier. 3.29 Permits. The Company possesses all Permits required to be obtained for its business and operations. Except as set forth in Schedule 3.29, such Permits are in full force and effect, free from Breach, and the Transactions will not adversely affect them. 14 3.30 Foreign Practices Act Compliance. No Seller Party has, directly or indirectly, in connection with the Company's business, made or agreed to make any payment to any Person connected with or related to any Governmental Authority, except payments or contributions required or allowed by applicable Law. The internal accounting controls and procedures of the Company are sufficient to cause the Company to comply with the Foreign Corrupt Practices Act. 3.31 Year 2000 Compliant. The Company has undertaken the program to become Year 2000 Compliant described in Schedule 3.31. 3.32 Certain Business Relationships with the Company. Except as disclosed in Schedule 3.18, none of Sellers and their Affiliates has been involved in any business arrangement or relationship with the Company within the past 12 months, except that the Company has sold or leased certain compressor units to Art Swanson. The sales and lease revenue from Art Swanson were $97,000 in 1998 and $87,000 in 1997. The rates charged to Art Swanson were, and are, the same as the rates for customers that are not Affiliates of the Company. None of Sellers and their Affiliates owns any asset that is used in the Company's business. 3.33 Accuracy of Information Furnished. No representation, statement, or information contained in this Agreement (including the Schedules) or any Contract or document executed in connection herewith or delivered pursuant hereto or thereto or made or furnished to Buyer or its representatives by any Seller contains or will contain any untrue statement of a material fact or omits or will omit any material fact necessary to make the information contained therein not misleading. The Sellers have provided Buyer with correct and complete copies of all documents listed or described in the Schedules. ARTICLE 4. PRE-CLOSING COVENANTS The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing: 4.1 General. Each Party will use its Best Efforts to take all actions and to do all things necessary, proper, or advisable to consummate, make effective, and comply with all of the terms of this Agreement and the Transactions (including satisfaction, but not waiver, of the Closing conditions set forth in Article 6). 4.2 Notices and Consents. Each Seller will give any notices to third parties, and will use its Best Efforts to obtain any third party Consents, that Buyer reasonably may request in connection with the matters referred to in Sections 2.1(c) and 3.3. 4.3 Operation of Business. The Company will not engage in any practice, take any action, or enter into any transaction outside the Ordinary Course of Business or engage in any practice, take any action, or enter into any transaction of the sort described in Section 3.9, outside the Ordinary Course of Business without prior written approval of Buyer. Subject to compliance with applicable Law, from the date hereof until the earlier to occur of Closing or the Termination Date, the Seller Parties will confer on a regular and frequent basis with one or more representatives of Buyer to report on operational matters and the general status of the Company' 15 ongoing business, operations and finances and will promptly provide to Buyer or its representatives copies of all filings they make with any Governmental Authority during such period. 4.4 Preservation of Business. The Company will use its Best Efforts to keep its business and properties substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors, licensors, suppliers, customers, and employees. 4.5 Full Access. The Company will permit representatives of Buyer (including financing providers) to have full access at all reasonable times, and in a manner so as not to interfere with the normal business operations of the Company, to all premises, properties, personnel, books, records, Contracts, and documents pertaining to the Company and will furnish copies of all such books, records, Contracts and documents and all financial, operating and other data and information as Buyer may reasonably request; provided, however, that no investigation pursuant to this Section 4.5 will affect any representations or warranties made herein or the conditions to the obligations of the Parties to consummate the Transactions. 4.6 Notice of Developments. Sellers will give prompt written notice to Buyer of any development occurring after the date of this Agreement which causes or reasonably could be expected to cause a Breach of any of the representations and warranties in Section 2.1 or Article 3. Buyer will give prompt written notice to Sellers of any development occurring after the date of this Agreement which causes or reasonably could be expected to cause a Breach of any of the representations and warranties in Section 2.2. No disclosure by any Party pursuant to this Section 4.6 shall be deemed to amend or supplement the Schedules or to prevent or cure any misrepresentation or Breach of warranty or covenant. 4.7 Affiliated Transactions. The Sellers will cause all Contracts and transactions by and between Sellers and any Affiliate of Sellers, on the one hand, and the Company, on the other hand (other than those referred to in Section 3.32), to be terminated effective as of the Closing, without any cost or continuing obligation to the Company, and will deliver to Buyer evidence of such terminations that is reasonably acceptable to Buyer. 4.8 Charges, Fees. Sellers will, prior to the Closing, take such steps as are necessary to ensure that no sums are owed or payable by the Company to any Person in the nature of a transfer charge or processing fee with respect to any Contracts of the Company 4.9 Site Inspections. Subject to compliance with applicable Law and applicable Environmental, Health, and Safety Requirements, from the date hereof until the earlier to occur of the Closing or the Termination Date, Buyer may undertake (at Buyer's sole cost and expense) an environmental assessment or assessments of the operations, business and/or properties of the Company. Such assessment may include a review of Permits, files and records, as well as visual and physical inspections and testing and, if testing is involved, will be performed pursuant to a separate agreement to be entered into containing normal terms as to liability for damage to property or persons and use of the test results. The Sellers will cooperate in good faith with Buyer's effort to conduct such an assessment. 16 ARTICLE 5. POST-CLOSING COVENANTS The Parties agree as follows with respect to the period following the Closing: 5.1 General. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each Party will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request to carry out the purpose of this Agreement, all at the requesting Party's sole cost and expense (unless the requesting Party is entitled to indemnification therefor under Article 8). Sellers acknowledge and agree that after the Closing Buyer will be entitled to possession of all documents, books, records, agreements, and financial data of the Company. 5.2 Litigation Support. So long as any Party actively is contesting or defending against any Action in connection with (a) the Transactions or (b) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving the Company, each other Party will cooperate with such Party and such Party's counsel in the contest or defense, make available their personnel, and provide such testimony and access to their books and records as shall be necessary in connection with the contest or defense, at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Article 8). 5.3 Transition. No Seller will take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of any of the Company from maintaining the same business relationships with the Company after the Closing as it maintained with the Company prior to the Closing. Each Seller will refer all customer inquiries relating to the Company to Buyer from and after the Closing. 5.4 Confidentiality. Each Seller will treat and hold as such all of the Confidential Information, refrain from using any of the Confidential Information except in connection with this Agreement, and deliver promptly to Buyer or destroy, at the request and option of Buyer, all tangible embodiments (and all copies) of the Confidential Information which are in Seller's possession. If any Seller is requested or required (by oral question or request for information or documents in any Action) to disclose any Confidential Information, that Seller will notify Buyer promptly of the request or requirement so that Buyer may seek an appropriate protective Order or waive compliance with this Section 5.4. If, in the absence of a protective Order or the receipt of a waiver hereunder, any Seller that is, on the written advice of counsel, compelled to disclose any Confidential Information to any Governmental Authority, arbitrator, or mediator or else stand Liable for contempt, that Seller may disclose the Confidential Information to the Governmental Authority, arbitrator, or mediator; provided, however; that the disclosing Seller shall use its Best Efforts to obtain, at the request of Buyer, an Order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as Buyer shall designate. 5.5 Restrictive Covenants. To assure that Buyer and the Company will realize the benefits of the Transactions, each Seller hereby agrees not to: 17 (a) From the Closing Date until the later of (i) three years after the Closing Date, and (ii) if Seller is an individual, two years after he is no longer employed by Buyer, the Company, or any of their Affiliates, directly or indirectly, alone or as a partner, joint venturer, officer, director, member, employee, consultant, agent, independent contractor or Equity Interest holder of, or lender to, any Person or business, engage in the kind of business currently conducted by the Company or conducted by the Company on the Closing Date (the "Relevant Business") in Oklahoma, Texas or any state that borders Oklahoma or Texas. (b) From the Closing Date until the later of (i) three years after the Closing Date, and (ii) if Seller is an individual, two years after he is no longer employed by Buyer, the Company, or any of their Affiliates, directly or indirectly, alone or as a partner, joint venturer, officer, director, member, employee, consultant, agent, independent contractor or Equity Interest holder of, or lender to, any Person or business, engage in the Relevant Business anywhere within a 200-mile radius of any location where Buyer, the Company, or any of their Affiliates engage in the Relevant Business. (c) From the Closing Date until the later of (i) three years after the Closing Date, and (ii) if Seller is an individual, two years after he is no longer employed by Buyer, the Company or any of their Affiliates, directly or indirectly, alone or as a partner, joint venturer, officer, director, member, employee, consultant, agent, independent contractor or Equity Interest holder of, or lender to, any Person or business, engage in any business that is in competition with any business in which Buyer, the Company or any of their Affiliates engage, and that is within a 50-mile radius of any location at which Buyer, the Company, or any of their Affiliates engages in such business at the time such Seller commences to engage in such competitive activity. (d) From the Closing Date until the later of (i) three years after the Closing Date, and (ii) if Seller is an individual, two years after he is no longer employed by Buyer, the Company or any of their Affiliates, directly or indirectly (A) induce any Person which is a customer of Buyer, the Company, or any of their Affiliates to patronize any business directly or indirectly in competition with the Relevant Business conducted by Buyer, the Company, or any of their Affiliates; (B) canvass, solicit, or accept from any Person who is a customer of Buyer, the Company, or any of their Affiliates, any such competitive business; or (C) request or advise any Person who is a customer or vendor of Buyer, the Company or any of their Affiliates, to withdraw, curtail, or cancel any such customer's or vendor's business with such Person. (e) From the Closing Date until the later of (i) six months after the Closing Date, and (ii) if Seller is an individual, six months after he is no longer employed by Buyer, the Company, or any of their Affiliates, directly or indirectly employ or knowingly permit such Seller to employ any person who was employed by Buyer, the Company, or any of their Affiliates within the prior six months. (f) From the Closing Date until the later of (i) three years after the Closing Date, and (ii) if Seller is an individual, two years after he is no longer employed by Buyer, the Company, or any of their Affiliates, directly or indirectly, (A) solicit for 18 employment by any such Seller or anyone else, any employee or then currently active independent contractor of Buyer, the Company, or any of their Affiliates, or any person who was an employee or then currently active independent contractor of Buyer, the Company, or any of their Affiliates, within the six-month period immediately preceding such solicitation of employment, other than such person (1) whose employment or independent contractor relationship was terminated by the applicable Person, or (2) who independently responded to a general solicitation for employment by such Seller; or (B) induce or attempt to induce, any employee or independent contractor of Buyer, the Company, or any of their Affiliates, to terminate such employee's employment or independent contractor's active contractual relationship with such Person. (g) Call on any Acquisition Candidate with the Knowledge of such Acquisition Candidate's status as such, for the purpose of acquiring, or arranging the acquisition of, that Acquisition Candidate by any Person other than Buyer, the Company or any of their Affiliates. Notwithstanding the foregoing, the beneficial ownership of less than 1% of the Equity Interests of any Person having a class of Equity Interest actively traded on a national securities exchange or over-the-counter market shall not be deemed, in and of itself, to Breach the prohibitions of this Section 5.5. Each Seller agrees and acknowledges that the restrictions in this Section 5.5 are reasonable in scope and duration and are necessary to protect Buyer and the Company after the Closing. If any Seller is found to have Breached this Section, then, in addition to all other remedies that may be available to Buyer, an amount of time equal to the period such Seller was found to be in Breach of this Section shall be added to the time periods contemplated by this Section. If any provision of this Section 5.5, as applied to any Party or to any circumstance, is adjudged by a Governmental Authority, arbitrator, or mediator not to be enforceable in accordance with its terms, the same will in no way affect any other circumstance or the enforceability of the remainder of this Agreement. If any such provision, or any part thereof, is held not to be enforceable in accordance with its terms because of the duration of such provision, the area covered thereby, or the scope of the activities covered, the Parties agree that the Governmental Authority, arbitrator, or mediator making such determination shall have the power to reduce the duration, area, and/or scope of activities of such provision, and/or to delete specific words or phrases, and in its reduced form, such provision shall then be Enforceable and shall be enforced. The Parties agree and acknowledge that the Breach of this Section 5.5 will cause irreparable Damage to Buyer and the Company and upon breach of any provision of this Section 5.5, Buyer and/or the Company shall be entitled to injunctive relief, specific performance, or other equitable relief without bond or other security; provided, however, that the foregoing remedies shall in no way limit any other remedies which Buyer and/or the Company may have. Further, each Seller agrees to the jurisdiction of an appropriate Governmental Authority, arbitrator and mediator in Oklahoma City, Oklahoma, for the enforcement of this Section. 19 ARTICLE 6. CLOSING CONDITIONS 6.1 Conditions Precedent to Obligation of Buyer. Buyer's obligation to consummate the Transactions contemplated to occur in connection with the Closing and thereafter is subject to the satisfaction of each condition precedent listed below. Unless expressly waived pursuant to this Agreement, no representation, warranty, covenant, right or remedy available to Buyer in connection with the Transactions will be deemed waived by any of the following actions or inactions by or on behalf of Buyer (regardless of whether any Seller is given notice of any such matter): (i) consummation by Buyer of the Transactions, (ii) any inspection or investigation, if any, of the Company or any Seller, (iii) the awareness of any fact or matter acquired (or capable or reasonably capable of being acquired) with respect to the Company or Sellers, or (iv) any other action, in each case at any time, whether before, on, or after the Closing Date; provided, however, that Buyer does not at the date of this Agreement have actual knowledge that any of Sellers' representations or warranties hereunder are inaccurate. (a) Accuracy of Representations and Warranties. Each representation and warranty set forth in Section 2.1 and Article 3 must have been accurate and complete as of the date of this Agreement, and must be accurate and complete as of the Closing Date, as if made on the Closing Date, without giving effect to any supplements to the Schedules. (b) Compliance with Obligations. Each Seller must have performed and complied with all of its covenants to be performed or complied with at or prior to Closing (singularly and in the aggregate). (c) No Material Adverse Change or Destruction of Property. Since the date of this Agreement there must have been no event, series of events or the lack of occurrence thereof which, singularly or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Company since the date of this Agreement, in particular, (i) there must have been no Material Adverse Change to any of the Company or their assets, (ii) there must not have been any action or inaction by a Governmental Authority, arbitrator or mediator which could reasonably be expected to cause a Material Adverse Change to the Company, and (iii) there must not have been any fire, flood, casualty, act of God or the public enemy or other cause (regardless of insurance coverage for such damage) which event could reasonably be expected to have a Material Adverse Effect on the Company. (d) Consents. The Seller and Buyer must have received Consents to the Transactions and waivers of rights to terminate or modify any rights or obligations of any Seller from any Person from whom such Consent is required, including under any Contract listed or required to be listed in Schedule 3.14(b), 3.15, 3.18, 3.21 and 3.26 or Law, or who as a result of the Transactions, would have such rights to terminate or modify such Contracts, either by their terms or as a matter of Law. (e) No Adverse Litigation. There must not be pending or Threatened any Action by or before any Governmental Authority, arbitrator, or mediator which shall seek 20 to restrain, prohibit, invalidate, or collect Damages arising out of, the Transactions, or which, in the reasonable judgment of Buyer, makes it inadvisable to proceed with the Transactions. (f) Liabilities. Prior to the Closing, the Sellers must have obtained and delivered to Buyer full satisfactions or releases of all Liabilities due to or from the Company which are due to be satisfied or released under this Agreement to or on behalf of (i) any Affiliate of the Company or (ii) Sellers or any Affiliate of Sellers, except the Liabilities of Art Swanson referred to in Section 3.32. (g) Reimbursement of Financial Advisory Fees. Prior to the Closing, Sellers shall have reimbursed the Company for all fees and expenses paid to Rauscher Pierce Refsnes, Inc. in connection with such firm's financial advisory services to the Company in connection with the Transactions or otherwise. (h) Receivables from Sellers. Prior to the Closing, Sellers shall have repaid all outstanding indebtedness of Sellers to the Company, together with accrued and unpaid interest, to the Company. 6.2 Conditions Precedent to Sellers' Obligation. Each Seller's obligation to consummate the Transactions contemplated to occur in connection with the Closing and thereafter is subject to the satisfaction of each condition precedent listed below. Unless expressly waived pursuant to this Agreement, no representation, warranty, covenant, right, or remedy available to any Seller in connection with the Transactions will be deemed waived by any of the following actions or inactions by or on behalf of any Seller (regardless of whether Buyer is given notice of any such matter): (i) consummation by Sellers of the Transactions, (ii) any inspection or investigation, if any, of Buyer, (iii) the awareness of any fact or matter acquired (or capable or reasonably capable of being acquired) with respect to Buyer, or (iv) any other action, in each case at any time, whether before, on, or after the Closing Date; provided, however, that none of the Sellers has, at the date of this Agreement, actual knowledge that any of Buyer's representations or warranties are inaccurate. (a) Accuracy of Representations and Warranties. Each representation and warranty set forth in Section 2.2 must have been accurate and complete as of the date of this Agreement, and must be accurate and complete as of the Closing Date, as if made on the Closing Date; (b) Compliance with Obligations. Buyer must have performed and complied with all its covenants and obligations required by this Agreement to be performed or complied with at or prior to Closing (singularly and in the aggregate); (c) No Order or Injunction. There must not be issued and in effect any Order restraining or prohibiting the Transactions. (d) No Adverse Litigation. There must not be pending or threatened any action by or before any Governmental Authority, arbitrator, or mediator which shall seek to restrain, prohibit, or invalidate, or collect Damages arising out of, the Transactions, or 21 which in the reasonable judgment of Sellers, makes it inadvisable to proceed with the Transactions. ARTICLE 7. TERMINATION 7.1 Termination of Agreement. The Parties may terminate this Agreement as provided below: (a) Buyer and the Requisite Sellers may terminate this Agreement as to all Parties by mutual written consent at any time prior to the Closing; (b) Buyer or the Requisite Sellers may terminate this Agreement upon delivery of notice if the Closing has not occurred prior to December 31, 1999, provided that the party delivering such notice shall not have caused such failure to close; (c) Buyer may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing if any Seller has Breached any representation, warranty, or covenant contained in this Agreement in any material respect (except with respect to materiality for any provisions including the word "material" or words of similar import and Section 4.8, in which case such termination rights will arise upon any Breach); and (d) The Sellers may terminate this Agreement by giving notice to Buyer at any time prior to the Closing if Buyer has Breached any representation, warranty, or covenant contained in this Agreement in any material respect (except with respect to materiality for any provisions including the word "material" or words of similar import, in which case such termination rights will arise upon any Breach). 7.2 Effect of Termination. (a) Each Party's termination right under this Agreement is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a termination right will not be an election of remedies. Except for the obligations under this Article 7 and Article 9, if this Agreement is terminated under Section 7.1, then, except as provided in this Section 7.2 all further obligations of the Parties under this Agreement will terminate. (b) If Buyer or the Sellers terminate this Agreement pursuant to Section 7.1(c) or (d), as the case may be, then the rights of the non-breaching Party(ies) to pursue all legal remedies for Damages such Party(ies) suffer will survive such termination unimpaired. 22 ARTICLE 8. INDEMNIFICATION 8.1 Survival of Representations and Warranties. (a) Each representation and warranty of Sellers contained in Section 2.1 (a "Seller's Personal Representation") and any certificate related to such representations and warranties will survive the Closing and will continue in full force and effect forever. Each representation and warranty of the Sellers contained in Article 3 (a "Seller's Company Representation") and any certificate related to such representations and warranties will survive the Closing and continue in full force and effect through December 31, 2000, except the representations and warranties set forth in Sections 3.1, 3.2, and 3.5 which will survive the Closing and will continue in full force and effect forever. (b) Each representation and warranty of Buyer contained in Section 2.2 and any certificate directly related to such representations and warranties will survive the Closing and continue in full force and effect forever. 8.2 Indemnification Provisions for Buyer's Benefit. Subject to Sections 8.5 and 8.6, each Seller, severally and not jointly, will indemnify and hold the Seller Indemnitees harmless from and pay any and all Damages, directly or indirectly, resulting from, relating to, arising out of, or attributable to any of the following: (a) any Breach of any representation or warranty such Seller has made in this Agreement, as if such representation or warranty was made on and as of the date of this Agreement (without giving effect to any supplement to the Schedules), or any other certificate or document such Seller or the Company has delivered pursuant to this Agreement; (b) any Breach of any representation or warranty such Seller has made in this Agreement as if such representation or warranty were made on and as of the Closing Date (without giving effect to any supplement to the Schedules), other than any such Breach that is disclosed in a supplement to the Schedules delivered under Article 3, as having caused a condition specified in Section 6.1 not to be satisfied; and (c) any Breach by such Seller of any covenant or obligation of such Seller in this Agreement. 8.3 Indemnification Provisions for Sellers' Benefit. Buyer will indemnify and hold the Buyer Indemnitees harmless from and pay any and all Damages, directly or indirectly, resulting from, relating to, arising out of, or attributable to any of the following: (a) any Breach of any representation or warranty Buyer has made in this Agreement or any other certificate Buyer has delivered to Sellers pursuant to this Agreement; and 23 (b) any Breach by Buyer of any covenant or obligation of Buyer in this Agreement. 8.4 Indemnification Claim Procedures. (a) If any Action is commenced in which any Indemnitee is a party which may give rise to a claim for indemnification against any Indemnitor then such Indemnitee shall promptly give notice to the Indemnitor. Failure to notify the Indemnitor will not relieve the Indemnitor of any Liability that it may have to the Indemnitee, except to the extent the defense of such Action is materially and irrevocably prejudiced by the Indemnitee's failure to give such notice. (b) An Indemnitor will have the right to defend against an Indemnification Claim with counsel of its choice reasonably satisfactory to the Indemnitee if (i) within 15 days following the receipt of notice of the Indemnification Claim the Indemnitor notifies the Indemnitee in writing that the Indemnitor will indemnify the Indemnitee subject to the provisions of this Article 8, (ii) the Indemnitor provides the Indemnitee with evidence reasonably acceptable to the Indemnitee that the Indemnitor will have the financial resources to defend against the Indemnification Claim and satisfy its indemnification obligations under this Article 8, and, subject to the provisions of this Article 8, pay, in cash, all Damages the Indemnitee may suffer resulting from, relating to, arising out of, or attributable to the Indemnification Claim, and (iii) the Indemnitor continuously conducts the defense of the Indemnification Claim actively and diligently. (c) So long as the Indemnitor is conducting the defense of the Indemnification Claim in accordance with Section 8.4(b), (i) the Indemnitee may retain separate co-counsel at its sole cost and expense and participate in the defense of the Indemnification Claim, (ii) the Indemnitee will not consent to the entry of any Order with respect to the Indemnification Claim without the prior written consent of the Indemnitor (not to be withheld unreasonably), and (iii) the Indemnitor will not consent to the entry of any Order with respect to the Indemnification Claim without the prior written consent of the Indemnitee (not to be withheld unreasonably, provided that it will not be deemed to be unreasonable for an Indemnitee to withhold its consent with respect to any finding of or admission (1) of any violation of any Law, Order or Permit, or (2) which Indemnitee believes could have a material adverse effect on any other Actions to which the Indemnitee or its Affiliates are party or to which Indemnitee has a good faith belief they may become party). (d) In connection with any Indemnification Claim for Taxes, or if any condition in Section 8.4(b) is or becomes unsatisfied, (i) the Indemnitee may defend against, and with the consent of the Indemnitor, which will not be unreasonably withheld, consent to the entry of any Order with respect to an Indemnification Claim (ii) each Indemnitor will reimburse the Indemnitee promptly and periodically for the Damages relating to defending against the Indemnification Claim, and (iii) each Indemnitor will remain Liable for any Damages the Indemnitee may suffer relating to the Indemnification Claim, in all the foregoing cases, to the fullest extent and subject to the limitations provided in this Article 8. 24 (e) In connection with third-party claims, each Party hereby consents to the non-exclusive jurisdiction of any Governmental Authority in which an Action is brought against any Indemnitee for purposes of any Indemnification Claim that an Indemnitee may have under this Agreement with respect to such Action or the matters alleged therein, and agrees that process may be served on such Party with respect to such claim anywhere in the world. 8.5 Limitations on Indemnification Liability. Claims for indemnification under this Article 8 will not be made for the first $10,000 of Damages. Each Seller's aggregate liability for indemnification under this Article 8 will not exceed an amount equal to the portion of the Purchase Price allocable to the Shares sold by such Seller (calculated based on the percentage of ownership of the Company of such Seller set forth on Exhibit A hereto); provided, however, that each Seller's aggregate Liability for Breaches of such Seller's Company Representations will not exceed such Seller's allocable portion of $500,000 (calculated based on the percentage of ownership of the Company of such Seller set forth on Exhibit A hereto). 8.6 Escrow; Set Off Rights. Indemnification obligations of any Seller may be satisfied by setting off all or any part of any Damages Buyer suffers if the Requisite Sellers in the case of Breaches of Seller's Company Representations, or such Seller in the case of Breaches of Seller's Personal Representations, and Buyer jointly instruct the Escrow Agent under the Escrow Agreement to pay over to Buyer a corresponding amount from the escrowed funds in the Escrow Account credited to the account of such Seller. ARTICLE 9. MISCELLANEOUS 9.1 Schedules. (a) The disclosures in the Schedules, and those in any supplement thereto, relate only to the representations and warranties in the Section or paragraph of the Agreement to which they expressly relate and not to any other representation or warranty in this Agreement. (b) Nothing in the Schedules will be deemed adequate to disclose an exception to a representation or warranty made herein, unless the Schedules identify the exception with reasonable particularity. 9.2 Entire Agreement. This Agreement, together with the Exhibits and Schedules hereto and the certificates, documents, instruments and writings that are delivered pursuant hereto, constitutes the entire agreement and understanding of the Parties in respect of its subject matters and supersedes all prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they relate in any way to the subject matter hereof or the Transactions. 9.3 Successors. All of the terms, agreements, covenants, representations, warranties, and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable by, the Parties and their respective successors. If a Seller is an entity and if the principal business, operations or a majority or substantial portion of the assets of such Seller are 25 assigned, conveyed, allocated or otherwise transferred, including, by sale, merger, consolidation, amalgamation, conversion or similar transactions, such receiving Person or Persons shall automatically become bound by and subject to the provisions of this Agreement, and such Seller shall cause the receiving Person or Persons to expressly assume its obligations hereunder. 9.4 Assignments. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of Buyer and Sellers'; provided, however, that Buyer may (a) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (b) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). 9.5 Notices. All notices, requests, demands, claims and other communications hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to Buyer and after Closing to the Company: Emerging Alpha Corporation 17571 Red Oak Drive Houston, Texas 77090 Attn: Jerry W. Jarrell Tel: (281) 537-9602 Fax: (281) 397-6319 Copy to (which shall not constitute notice): Akin, Gump, Strauss, Hauer & Feld, L.L.P. 711 Louisiana, Suite 1900 Houston, Texas 77002 Attn: Richard J. Wilkie Tel: (713) 220-5819 Fax: (713) 236-0822 If to Sellers and before Closing to the Company Gas Jack, Inc. 8224 SW 3rd Street Oklahoma City, OK 73128 Attn: Jeffrey E. Henderson Tel: (405) 787-2802 Fax: (405) 787-2404 26 For Discovery partnerships: Rockefeller & Co., Inc. 30 Rockefeller Plaza New York, New York 10112 Attn: Robert C. Paul Tel: (212) 649-1751 Fax: (212) 649-5977 For Citicap: 2 World Trade Center Suite 2248 New York, NY 10048 Attn: Chen Ding, Ph.D For Art L. Swanson and Estate of Ran Ricks: c/o Ricks Exploration Inc. 3000 Oklahoma Tower 210 Park Avenue Oklahoma City, OK 73102 Tel: (405) 516-1100 Fax: (405) 516-1101 For J.W. Waldrop: c/o Waldrop's Engine Service P.O. Box 589 Woodward, Oklahoma 73802 Tel: (580) 256-8961 Fax: (580) 254-3354 For Jeffrey E. Henderson: 8224 SW 3rd Street Oklahoma City, OK 73128 Attn: Jeffrey E. Henderson Tel: (405) 787-2808 Fax: (405) 787-2404 27 For Joseph D. Vaughn: 8224 SW 3rd Street Oklahoma City, OK 73128 Tel: (405) 787-2808 Fax: (405) 787-2404 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. 9.6 Specific Performance. Each Party acknowledges and agrees that the other Parties would be damaged irreparably if any provision of this Agreement is not performed in accordance with its specific terms or is otherwise Breached. Accordingly, each Party agrees that the other Parties will be entitled to an injunction or injunctions to prevent Beaches of the provisions of this Agreement and to enforce specifically this Agreement and its terms and provisions in any Action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at Law or in equity. 9.7 Time. Time is of the essence in the performance of this Agreement. 9.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. 9.9 Headings. The article and section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 9.10 Governing Law. This Agreement and the performance of the Transactions and obligations of the Parties hereunder will be governed by and construed in accordance with the laws of the State of Delaware. 9.11 Amendments and Waivers. No amendment, modification, replacement, termination or cancellation of any provision of this Agreement will be valid, unless the same shall be in writing and signed by Buyer and the Requisite Sellers. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation, or Breach of warranty or covenant hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence. 28 9.12 Expenses. Except as otherwise expressly provided in this Agreement, each Party will bear its own costs and expenses incurred in connection with the preparation, execution and performance of this Agreement and the Transactions including all fees and expenses of agents, representatives, financial advisors, legal counsel and accountants. Sellers agree that the Company has not borne or will bear any out-of-pocket costs and expenses (including any legal fees and expenses of any Seller Party) in connection with this Agreement or any of the Transactions. 9.13 Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party because of the authorship of any provision of this Agreement. Any reference to any federal, state, local, or foreign Law shall be deemed also to refer to Law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise. The word "including" means "including without limitation." The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty, or covenant. 9.14 Incorporation of Exhibits, Annexes, and Schedules. The Exhibits, Annexes, and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 9.15 Dispute Resolution. (a) If the Parties (for purposes of this Section, Sellers shall be considered one Party and Buyer shall be considered one Party) are unable to resolve any controversy, dispute, claim or other matter in question arising out of, or relating to, this Agreement, any provision hereof, the alleged breach hereof, or in any way relating to the subject matter of this Agreement, or the relationship between the parties created by this Agreement, including questions concerning the scope and applicability of this Section 9.15, whether sounding in contract, tort or otherwise, at law or in equity, under State or federal law, whether provided by statute or common law, for damages or any other relief (any such controversy, dispute, claim or other matter in question, a "Dispute"), on or before the 30th day following the receipt by Sellers or Buyer, as the case may be, of written notice of such Dispute from the other Party, which notice describes in reasonable detail the nature of the Dispute and the facts and circumstances relating thereto, Sellers or Buyer may, by delivery of written notice to the other Party), require that a representative of Sellers and of Buyer meet at a mutually agreeable time and place with an independent mediator in an attempt to resolve such Dispute. Such meeting shall take place on or before the 10th day following the date of the notice requiring such meeting, and if the Dispute has not been resolved within 10 days following such meeting, Sellers or Buyer may cause such Dispute to be resolved by binding arbitration in Oklahoma City, Oklahoma, by submitting such Dispute for arbitration within 10 days following the 29 expiration of such 10-day period. This agreement to arbitrate shall be specifically enforceable against the Parties. (b) It is the intention of the Parties that the arbitration shall be governed by and conducted pursuant to the Federal Arbitration Act, as such Act is modified by this Section 9.15. If it is determined the Federal Arbitration Act is not applicable to this Agreement (e.g., this Agreement does not evidence a transaction involving interstate commerce), this agreement to arbitrate shall nevertheless be enforceable pursuant to applicable State law. While the arbitrators may refer to the Commercial Arbitration Rules of the American Arbitration Association (the "Rules") for guidance with respect to procedural matters, the arbitration proceeding shall not be administered by the American Arbitration Association but instead shall be self-administered by the Parties until the arbitrators are selected and then the proceeding shall be administered by the arbitrators. (c) The validity, construction, and interpretation of this agreement to arbitrate, and all procedural aspects of the arbitration conducted pursuant to this agreement to arbitrate, including but not limited to, the determination of the issues that are subject to arbitration (i.e., arbitrability), the scope of the arbitrable issues, allegations of "fraud in the inducement" to enter into this Agreement or this arbitration provision, allegations of waiver, laches, delay or other defenses to arbitrability, and the rules governing the conduct of the arbitration (including the time for filing an answer, the time for the filing of counterclaims, the times for amending the pleadings, the specificity of the pleadings, the extent and scope of discovery, the issuance of subpoenas, the times for the designation of experts, whether the arbitration is to be stayed pending resolution of related litigation involving third parties not bound by this arbitration agreement, the receipt of evidence, and the like), shall be decided by the arbitrators. (d) The rules of arbitration of the Federal Arbitration Act, as modified by this Agreement, shall govern procedural aspects of the arbitration; to the extent the Federal Arbitration Act as modified by this Agreement does not address a procedural issue, the arbitrators may refer for guidance to the Commercial Arbitration Rules then in effect with the American Arbitration Association. The arbitrators may refer for guidance to the Federal Rules of Civil Procedure, the Federal Rules of Civil Evidence, and the federal law with respect to the discovery process, applicable legal privileges, and admissible evidence. In deciding the substance of the Parties' Dispute, the arbitrators shall refer to the substantive laws of the State of Delaware for guidance (excluding Delaware's conflict-of-law rules or principles that might call for the application of the law of another jurisdiction). The arbitrators shall have the authority to assess the costs and expenses of the arbitration proceeding (including the arbitrators' fees and expenses) against either or both parties. However, each party shall bear its own attorneys fees and the arbitrators shall have no authority to award attorneys fees. (e) When a Dispute has been submitted for arbitration, within 15 days of such submission, Sellers will choose an arbitrator, and Buyer will choose an arbitrator. While the third arbitrator shall be neutral, the two party-appointed arbitrators are not required to be neutral and it shall not be grounds for removal of either of the two party-appointed arbitrators or for vacating the arbitrators' award that either of such arbitrators has past or 30 present minimal relationships with the Party that appointed such arbitrator. Evident partiality on the part of an arbitrator exists only where the circumstances are such that a reasonable person would have to conclude there in fact existed actual bias and a mere appearance or impression of bias will not constitute evident partiality or otherwise disqualify an arbitrator. Minimal or trivial past or present relationships between the neutral arbitrator and the party selecting such arbitrator or any of the other arbitrators, or the failure to disclose such minimal or trivial past or present relationships, will not by themselves constitute evident partiality or otherwise disqualify any arbitrator. Upon selection of the third arbitrator, each of the three arbitrators shall agree in writing to abide faithfully by the terms of this agreement to arbitrate. The three arbitrators shall make all of their decisions by majority vote. If one of the party-appointed arbitrators refuses to participate in the proceedings or refuses to vote, the decision of the other two arbitrators shall be binding. If an arbitrator dies or becomes physically incapacitated and is unable to fulfill his or her duties as an arbitrator, the arbitration proceeding shall continue with a substitute arbitrator selected as follows: if the incapacitated arbitrator is a party-appointed arbitrator, the party shall promptly select a new arbitrator, and if the incapacitated arbitrator is the neutral arbitrator, the two-party appointed arbitrators shall select a substitute neutral arbitrator. (f) The final hearing shall be conducted within 60 days of the selection of the third arbitrator. The final hearing shall not exceed ten working days, with each party to be granted one-half of the allocated time to present its case to the arbitrators. There shall be a transcript of the hearing before the arbitrators. The arbitrators shall render their ultimate decision within 20 days of the completion of the final hearing completely resolving all of the Disputes between the parties that are the subject of the arbitration proceeding. The arbitrators' ultimate decision after final hearing shall be in writing, but shall be as brief as possible, and the arbitrators shall assign their reasons for their ultimate decision. In case the arbitrators award any monetary Damages in favor of either party, the arbitrators shall certify in their award that they have not included any Damages prohibited by Article 8. (g) The arbitrators' award shall, as between the Parties to this Agreement and those in privity with them, be final and entitled to all of the protections and benefits of a final judgment, e.g., res judicata (claim preclusion) and collateral estoppel (issue preclusion), as to all Disputes, including compulsory counterclaims, that were or could have been presented to the arbitrators. The arbitrators' award shall not be reviewable by or appealable to any court, except to the extent permitted by the Federal Arbitration Act. (h) It is the intent of the parties that the arbitration proceeding shall be conducted expeditiously, without initial recourse to the courts and without interlocutory appeals of the arbitrators' decisions to the courts. However, if a party refuses to honor its obligations under this agreement to arbitrate, the other Party may obtain appropriate relief compelling arbitration in any court having jurisdiction over the Parties; the order compelling arbitration shall require that the arbitration proceedings take place in Oklahoma City, Oklahoma, as specified above. The Parties may apply to any court for orders requiring witnesses to obey subpoenas issued by the arbitrators. Moreover, any and all of the arbitrators' orders and decisions may be enforced if necessary by any court. 31 The arbitrators' award may be confirmed in, and judgment upon the award entered by, any federal or State court having jurisdiction over the Parties. (i) To the fullest extent permitted by law, this arbitration proceeding and the arbitrators award shall be maintained in confidence by the parties. However, a violation of this covenant shall not affect the enforceability of this arbitration agreement or of the arbitrators' award. (j) A Party's breach of this Agreement shall not affect this agreement to arbitrate. Moreover, the parties' obligations under this arbitration provision are enforceable even after this Agreement has terminated. The invalidity or unenforceability of any provision of this arbitration agreement shall not affect the validity or enforceability of the Parties' obligation to submit their Disputes to binding arbitration or the other provisions of this agreement to arbitrate. 32 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written. Buyer Emerging Alpha Corporation By: /S/ JERRY W. JARRELL ----------------------------------- Name: Jerry W. Jarrell Title: Chief Financial Officer Sellers Ran Ricks, Jr. 1981 Revocable Trust, Roy W. Chandler and Art L. Swanson, Co-Trustees By: /S/ ART L. SWANSON ----------------------------------- Art L. Swanson Co-Trustee By: /S/ ART L. SWANSON ----------------------------------- Art L. Swanson Attorney-in-Fact for Roy W. Chandler, Co-Trustee /S/ ART L. SWANSON ----------------------------------- Art L. Swanson /S/ J. W. WALDROP ----------------------------------- J. W. Waldrop /S/ JEFFREY E. HENDERSON ----------------------------------- Jeffrey E. Henderson /S/ JOSEPH D. VAUGHN ----------------------------------- Joseph D. Vaughn S-1 DISCOVERY FUND I-90 LIMITED PARTNERSHIP DISCOVERY FUND II-90 LIMITED PARTNERSHIP DISCOVERY FUND III-90 LIMITED PARTNERSHIP By: Discovery Associates 90, L.P. as General Partner By: Rockefeller & Co., Inc. as Managing Partner By: /S/ JOHN T. LEYDEN ----------------------------------- Name: John T. Leyden Title: Vice President - Treasurer CITICAP, INC. By: /S/ CHEN DING ----------------------------------- Name: Chen Ding Title: President S-2 APPENDIX I DEFINITIONS "Action" means any action, appeal, petition, plea, charge, complaint, claim, suit, demand, litigation, arbitration, mediation, hearing, inquiry, investigation or similar event, occurrence, or proceeding. "Acquisition Candidate" means (i) any Person engaged in the Relevant Business, or (ii) any project with respect to the Relevant Business, and in either case (A) which was called on by Buyer, any Seller Party, or any of their Affiliates, in connection with the possible acquisition by Buyer, the Company, or any of their Affiliates of that Person or project, or (B) with respect which Buyer, any Seller Party, or any of their Affiliates has made an acquisition analysis. "Affiliate" with respect to any specified Person, means a Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such specified Person. "Ancillary Agreements" means the Escrow Agreement, the Employment Agreements and any other agreements or instruments entered into in connection with the Transactions. "Balance Sheet Date" is defined in Section 3.8. "Basis" means any past or current fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction about which the relevant Person has Knowledge that forms or could form the basis for any specified consequence. "Best Efforts" means the efforts, time, and costs that a prudent Person desirous of achieving a result would use, expend, or incur in similar circumstances to ensure that such result is achieved as expeditiously as possible; provided, however, that no such use, expenditure, or incurrence will be required if it would have a Material Adverse Effect on such Person. "Breach" means any breach, inaccuracy, failure to perform, failure to comply, conflict with, default, violation, acceleration, termination, cancellation, modification, or required notification. "Buyer" is defined in the preamble to this Agreement. "Buyer Indemnitees" means Sellers and their respective officers, directors, employees, agents, representatives, controlling Persons, stockholders, and Affiliates. "Closing" is defined in Section 1.3. "Closing Date" is defined in Section 1.3. "Commitment" with respect to any Person means (a) options, warrants, convertible securities, exchangeable securities, subscription rights, conversion rights, exchange rights, or 1 other Contracts that could require such Person to issue any of its Equity Interests, or any other securities convertible into, exchangeable or exercisable for, or representing the right to subscribe for any Equity Interest of such Person; (b) statutory pre-emptive rights or pre-emptive rights granted under the applicable Person's Organizational Documents; and (c) stock appreciation rights, phantom stock, profit participation, or other similar rights with respect to such Person. "Company" is defined in the preamble to this Agreement. "Confidential Information" means any non-public and proprietary information concerning the businesses and affairs of Buyer or the Company that, if disclosed to third parties, could cause Damage to Buyer or the Company. "Consent" means any consent, approval, notification, waiver, or other similar action that is necessary or convenient. "Contract" means any contract, agreement, arrangement, commitment, letter of intent, memorandum of understanding, heads of agreement, promise, obligation, right, instrument, document, or other similar understanding, whether written or oral. "Damages" means all damages (including incidental and consequential damages), losses (including any diminution in value), Liabilities, payments, amounts paid in settlement, obligations, fines, penalties, costs, expenses (including reasonable fees and expenses of outside attorneys, accountants and other professional advisors and of expert witnesses and other costs of investigation, preparation and litigation in connection with any Action or Threatened Action) of any kind or nature whatsoever; provided, however, Damages shall not include lost profits, expectancy, or consequential, punitive or exemplary damages unless such items are incurred by an Indemnitee or Indemnitees in connection with a third-party claim for Damages. "Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan or arrangement that is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement that is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement that is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit plan or program. "Employee Pension Benefit Plan" is defined in ERISA Section 3(2). "Employee Welfare Benefit Plan" is defined in ERISA Section 3(1). "Employment Agreements" means the employment Contracts between the Company and each of Jeffrey E. Henderson and Joseph D. Vaughn, in substantially the form of Exhibit C. "Encumbrance" means any Order, Security Interest, Contract, easement, covenant, community property interest, equitable interest, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or exercise of any other attribute of ownership. 2 "Enforceable" - a Contract is "Enforceable" if it is the legal, valid, and binding obligation of the applicable Person enforceable against such Person in accordance with its terms, except as such enforceability may be subject to the effects of bankruptcy, insolvency, reorganization, moratorium, or other Laws relating to or affecting the rights of creditors, and general principles of equity. "Environment" means soil, land surface or subsurface strata, waters (including, navigable ocean, stream, pond, reservoirs, drainage, basins, wetland, ground, and drinking), sediments, ambient air (including indoor), noise, plant life, animal life, and all other environmental media or natural resources. "Environmental, Health, and Safety Requirements" means all Orders, Contracts, Laws, and programs (including those promulgated or sponsored by industry associations, insurance companies, and risk management companies) concerning or relating to public health and safety, worker/occupational health and safety, and pollution or protection of the Environment, including those relating to the presence, use, manufacturing, refining, production, generation, handling, transportation, treatment, transfer, storage, disposal, distribution, importing, labeling, testing, processing, discharge, Release, Threatened Release, control, or other action or failure to act involving cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, or radiation, each as amended and as now in effect and in effect at Closing. "Equity Interest" means (a) with respect to a corporation, any and all shares of capital stock and any Commitments with respect thereto, (b) with respect to a partnership, limited liability company, trust or similar Person, any and all units, interests or other partnership/limited liability company interests, and any Commitments with respect thereto, and (c) any other direct or indirect equity ownership or participation in a Person. "ERISA" means the Employee Retirement Income Security Act of 1974. "Escrow Agent" means The Chase Manhattan Bank or its Affiliate. "Escrow Agreement" means the escrow agreement between Buyer, Sellers, and Escrow Agent, in substantially the form of Exhibit B. "Fiduciary" is defined in ERISA Section 3(21). "Financial Statements" is defined in Section 3.8. "Foreign Corrupt Practices Act" means the Foreign Corrupt Practices Act of 1977. "GAAP" means United States generally accepted accounting principles as in effect from time to time. "Governmental Authority" means any legislature, agency, bureau, branch, department, division, commission, court, tribunal, magistrate, justice, multi-national organization, quasi- 3 governmental body, or other similar recognized organization or body of any federal, state, county, municipal, local, or foreign government or other similar recognized organization or body exercising similar powers or authority. "Indemnification Claim" means any claim for indemnification by an Indemnitee against an Indemnitor under this Agreement. "Indemnitees" means, individually and as a group, the Buyer Indemnitees and the Seller Indemnitees. "Indemnitor" means any Person having any Liability to any Indemnitee under this Agreement. "Intellectual Property" means all (a) inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations relating thereto, (b) trademarks, service marks, trade dress, logos, trade names, and corporate names, and all goodwill associated therewith, together with all translations, adaptations, derivations, and combinations, applications, registrations, and renewals relating thereto, (c) copyrightable works, all copyrights, and all applications, registrations, and renewals relating thereto, (d) trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (e) computer software (including all data and related documentation), (f) other proprietary rights, and (g) copies and tangible embodiments of the foregoing (in whatever form or medium). "Interim Balance Sheet" means the balance sheet contained within the Interim Financial Statements. "Interim Financial Statements" is defined in Section 3.8. "Knowledge" - an individual will be deemed to have "Knowledge" of a particular fact or other matter if (a) such individual is actually aware of such fact or other matter; or (b) such individual would be aware of such fact or matter if he had inquired of the appropriate officers or employees of the Company. A Person other than an individual will be deemed to have "Knowledge" of a particular fact or other matter if (i) any individual who is serving as a director, officer, partner, member, executor, or trustee of such Person (or in any similar capacity) had actual Knowledge of such matter, or (ii) any employee of such Person who is charged with responsibility for a particular area of such Person's operations (e.g., an employee in charge of environmental matters with respect to knowledge of environmental matters), has, or at any time had, Knowledge of such fact or other matter. "Law" means any law (statutory, common, or otherwise), constitution, treaty, convention, ordinance, equitable principle, code, rule, regulation, executive order, or other similar authority 4 enacted, adopted, promulgated, or applied by any Governmental Authority, each as amended and now in effect or in effect at Closing. "Liability" means any liability or obligation, whether known or unknown, asserted or unasserted, absolute or contingent, matured or unmatured, conditional or unconditional, latent or patent, accrued or unaccrued, liquidated or unliquidated, or due or to become due. "Material Adverse Change (or Effect)" means a change (or effect) in the condition (financial or otherwise), properties, assets, Liabilities, rights, obligations, operations, business, or prospects which change (or effect), individually or in the aggregate, could reasonably be expected to be materially adverse to such condition, properties, assets, Liabilities, rights, obligations, operations, business, or prospects. "Most Recent Year End" is defined in Section 3.8. "Multiemployer Plan" is defined in ERISA Section 3(37). "Order" means any order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command, directive, consent, approval, award, judgment, injunction, or other similar determination or finding by, before, or under the supervision of any Governmental Authority, arbitrator, or mediator. "Ordinary Course of Business" means the ordinary course of business consistent with past custom and practice (including with respect to quantity, quality and frequency) of the Company or other relevant Person, as the case may be. "Organizational Documents" means the articles of incorporation, certificate of incorporation, charter, bylaws, articles of formation, regulations, operating agreement, certificate of limited partnership, partnership agreement, and all other similar documents, instruments or certificates executed, adopted, or filed in connection with the creation, formation, or organization of a Person, including any amendments thereto. "Parties" is defined in the preamble to this Agreement. "PBGC" means the Pension Benefit Guaranty Corporation. "Permit" means any permit, license, certificate, approval, consent, notice, waiver, franchise, registration, filing, accreditation, or other similar authorization required by any Law or Governmental Authority. "Person" means any individual, partnership, limited liability company, corporation, association, joint stock company, trust, joint venture, labor organization, unincorporated organization, or Governmental Authority. "Prohibited Transactions" is defined in ERISA Section 406 and Code Section 4975. "Purchase Price" is defined in Section 1.2. 5 "Receivables" means all receivables of the Company, including all Contracts in transit, manufacturers warranty receivables, notes, accounts receivable, trade account receivables, and insurance proceeds receivable. "Release" means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, or other release into the Environment. "Relevant Business" is defined in Section 5.5(a). "Reportable Event" is defined in ERISA Section 4043. "Requisite Sellers" means Sellers holding at least a majority in interest of the Shares as set forth in Exhibit A. "Schedules" is defined in the preamble to Article 3. "Seller" and "Sellers" are defined in the preamble to this Agreement. "Seller's Company Representation" is defined in Section 8.1(a). "Seller Indemnitees" means (i) Buyer and its officers, directors, employees, agents, representatives, controlling Persons, stockholders and (ii) if the Closing occurs, the Company and any Person who was an officer, director or employee of the Company if such Person at and after the date hereof and the time of Closing is not a Seller or an Affiliate thereof. "Sellers' Personal Representation" is defined in Section 8.1(a). "Share" means any share of the Common Stock, par value $0.10 per share, of the Company. "Subsidiary" is defined in the preamble to this Agreement. "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs, duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes required to be filed with any Governmental Authority, including any schedule or attachment thereto, and including any amendment thereof. "Threatened" means a demand or statement has been made (orally or in writing) or a notice has been given (orally or in writing), or any other event has occurred or any other circumstances exist that would lead a prudent Person to conclude that a cause of Action or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future. 6 "Threatened Release" means any event that has occurred or other circumstances that exist that could lead a prudent Person to conclude that any Release whether intentional or unintentional, is likely to occur now or in the future. "Threshold Amount" is defined in Section 8.5(c). "Transactions" means all of the transactions contemplated by this Agreement, including: (a) the sale of the Shares by Sellers to Buyer and Buyer's delivery of the Purchase Price therefor; (b) the execution, delivery, and performance of all of the documents, instruments and agreements to be executed, delivered, and performed in connection herewith, including each Ancillary Agreement; and (c) the performance by Buyer and Sellers of their respective covenants and obligations (pre- and post-Closing) under this Agreement. "Transaction Documents" means this Agreement and the Ancillary Agreements. "Year 2000 Compliant" means all computer programs, information systems and microchip and microprocessor technologies (imbedded or otherwise) owned, used, under Contract, or relied upon by a Person will accurately process information or other data before, as of, and after December 31, 1999. EX-10.2 3 LOAN AGREEMENT ================================================================================ LOAN AGREEMENT dated as of October 29, 1999 By and Between EMERGING ALPHA CORPORATION and HIBERNIA NATIONAL BANK ================================================================================ LOAN AGREEMENT THIS LOAN AGREEMENT dated as of October 29, 1999, by and among EMERGING ALPHA CORPORATION, a Delaware corporation ("Borrower"), and HIBERNIA NATIONAL BANK, a national banking association ("Bank"). W I T N E S S E T H: WHEREAS, Borrower has applied to Bank for a term loan in an amount of $2,800,000.00 to finance its acquisition of all outstanding and issued shares of stock of Gas Jack, Inc., and to refinance existing debt owed by Gas Jack, Inc. to certain of its creditors; and, WHEREAS, Bank has agreed to provide such requested credit facility to the Borrower pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein set forth, the Borrower and Bank do hereby covenant and agree as follows, to-wit: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.1. Defined Terms. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Agreement" shall mean this Loan Agreement, as the same may from time to time be amended, modified or supplemented and in effect. "Assignment of Leases" shall mean an assignment to be granted by Gas Jack to Bank of all right, title and interest in and to its leases of compressors to its customers, and all proceeds thereof, as the same may from time to time be amended, modified or supplemented and in effect. "Bank" shall mean Hibernia National Bank, a national banking association. "Borrower" shall mean Emerging Alpha Corporation, a Delaware corporation which intends to change its name to Compresco, Inc., together with its successors and assigns. "Business Day" shall mean a day other than a Saturday, Sunday or legal holiday for commercial banks under the laws of the State of Louisiana or a day on which national banks are authorized to be closed in New Orleans, Louisiana. "Cash Flow" shall mean, for any period, the earnings of such Person(s) before interest, taxes, depreciation and amortization. "Collateral" shall mean any interest in any kind of property or assets pledged, mortgaged or otherwise subject to an Encumbrance in favor of Bank pursuant to the Collateral Documents. "Collateral Documents" shall collectively refer to the Assignment of Leases, the Security Agreements, the Stock Pledge, the Securities Account Pledge, all related financing statements required by Bank, and any and all other documents in which an Encumbrance is created on any property of the Borrower or of any third person to secure payment of the Indebtedness of Borrower or any part thereof. "Consolidated Subsidiary" or "Consolidated Subsidiaries" shall mean a Subsidiary or Subsidiaries, respectively, of Borrower, whose financial statements are prepared on a consolidated basis with those of Borrower in accordance with GAAP, and shall specifically include Gas Jack. "Current Assets" shall mean the assets of Borrower and its Consolidated Subsidiaries treated as current assets in accordance with GAAP. "Current Liabilities" shall mean all liabilities of Borrower and its Consolidated Subsidiaries treated as current liabilities in accordance with GAAP, including without limitation, all obligations payable on demand or within one year after the date on which the determination is made, and final maturities and sinking funds payments required to be made within one year after the date on which the determination is made, but excluding all such liabilities or obligations which are renewable or extendible at the option of such Person to a date more than one year from the date of determination. "Current Ratio" shall mean, at any time, the ratio of Current Assets to Current Liabilities. "Debt" shall mean any and all amounts and/or liabilities owing from time to time by Borrower (and of its Consolidated Subsidiaries, if the context may so require) to any Person, including the Bank, direct or indirect, liquidated or contingent, now existing or hereafter arising, including without limitation (i) indebtedness for borrowed money; (ii) the amounts of all standby and commercial letters of credit and bankers acceptances, matured or unmatured, issued on behalf of such Person; (iii) guaranties by such Person of the obligations of any other Person, whether direct or indirect, whether by agreement to purchase the indebtedness of any other Person or by agreement for the furnishing of funds to any other Person through the purchase or lease of goods, supplies or services (or by way of stock purchase, capital contribution, advance or loan) for the purpose of paying or discharging the indebtedness of any other Person, or otherwise; (iv) the present value of all obligations of such Person for the payment of rent or hire of property of any kind (real or personal) under leases or lease agreements required to be capitalized under GAAP, and 2 (v) trade payables incurred in the ordinary course of business or otherwise by such Person. "Debt Service Coverage Ratio" shall mean, for any twelve-month period ending on the date of determination of same, the ratio of (1) the earnings of Borrower and its Consolidated Subsidiaries before interest, taxes, depreciation and amortization during such period to (2) the amount of interest expense and current maturities of long-term indebtedness of Borrower and its Consolidated Subsidiaries during such period. "Default" shall mean an event which with the giving of notice or the lapse of time (or both) would constitute an Event of Default hereunder. "Dollars" and "$" shall mean lawful money of the United States of America. "Encumbrances" shall mean individually, collectively and interchangeably any and all presently existing and/or future mortgages, liens, privileges, servitudes, rights-of-way and other contractual and/or statutory security interests and rights of every nature and kind that, now and/or in the future may affect the property of Borrower or any Collateral or any part or parts thereof. "Environmental Laws" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., the Louisiana Environmental Affairs Act, La. R.S. 30:2001 et seq., or other applicable Governmental Requirements or regulations adopted pursuant to any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "Equipment" shall mean all machinery, equipment, furniture and fixtures, now owned or hereafter acquired by Borrower and/or Gas Jack, or in which Borrower and/or Gas Jack now has or hereafter may acquire any right, title or interest, and any and all additions, substitutions and replacements thereof, wherever located, together with all attachments, components, parts, products, equipment and accessories installed therein or affixed thereto, including, but not limited to, all equipment as defined in ss. 9-109(2) of the UCC, and all fixtures as defined in ss. 9-313(1)(a) of the UCC. "Event of Default" shall mean individually, collectively and interchangeably any of the Events of Default set forth below in Section 10.1 hereof. "Funded Debt" shall mean, at any time, the sum of all interest-bearing Debt of Borrower and its Consolidated Subsidiaries. 3 "Funded Debt to Cash Flow Ratio" shall mean, as of the end of each fiscal quarter of Borrower and its Consolidated Subsidiaries, the ratio of (1) the amount of Funded Debt of Borrower and its Consolidated Subsidiaries at the end of such fiscal quarter, to (2) the amount of Cash Flow of Borrower and its Consolidated Subsidiaries for the immediately preceding twelve-month period ending as of the end of the such fiscal quarter. "GAAP" shall mean, at any time, accounting principles generally accepted in the United States as then in effect. "Gas Jack" shall mean Gas Jack, Inc., an Oklahoma corporation, together with its successors and assigns. "General Intangibles" shall mean all general intangibles, as defined in ss.9-106 of the UCC, of the Borrower and/or Gas Jack, whether now owned or hereafter acquired, and shall include, without limitation (i) all contractual rights and obligations or indebtedness owing to Borrower and/or Gas Jack (other than Receivables) from whatever source; (ii) all things and actions, rights represented by judgments and claims arising out of tort and other claims related to the Collateral, including the right to assert and otherwise be the proper party of interest to commence and prosecute actions; (iii) all goodwill, patents, patent licenses, trademarks, trademark licenses, trade names, service marks, trade secrets, rights and intellectual property, copyrights, permits and licenses; (iv) all rights or claims in respect of refunds for taxes paid; and (v) all deposit accounts of Borrower and/or Gas Jack. "Governmental Requirement" shall mean any applicable state, federal or local law, statute, ordinance, code, rule, regulation, order or decree. "Guaranties" shall mean that certain Commercial Guaranty of Brooks Mims Talton, III, dated of even date herewith, that certain unlimited in solido guaranty to be provided by Gas Jack pursuant to the terms of Section 6.2 hereof, and any other guaranties of any Person which guarantee payment of any part of the Indebtedness, as any of such guaranties may be amended and from time to time in effect. "Guarantors" shall mean Brooks Mims Talton, III, Gas Jack, and any other Persons who may from time to time guarantee payment of any part of the Indebtedness. "Indebtedness" shall mean, at any time, the indebtedness of Borrower evidenced by the Term Note executed by Borrower pursuant to this Agreement, in principal, interest, costs, expenses and reasonable attorneys' fees and all other fees and charges, together with all commitment fees and other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents. In addition, the word "Indebtedness" also includes any and all other loans, extensions of credit, obligations, debts and liabilities, plus interest thereon, of Borrower that may now and in the future be owed to or incurred in favor of Bank, as well as all claims by Bank against Borrower, whether existing now or later; whether they are voluntary or involuntary, due or to become due, direct or indirect or by way of assignment, determined or 4 undetermined, absolute or contingent, liquidated or unliquidated; whether Borrower may be liable individually or jointly with others, of every nature and kind whatsoever, in principal, interest, costs, expenses and reasonable attorneys' fees and all other fees and charges; whether Borrower may be obligated as principal obligor, guarantor, surety, accommodation party or otherwise. "Inventory" shall mean all inventory, as defined in ss.9-109(4) of the UCC, of Borrower and/or Gas Jack, whether now owned or hereafter acquired by Borrower and/or Gas Jack, wherever located, and shall include all of Borrower's and Gas Jack's raw materials, work in process, finished goods, merchandise, parts and supplies, of every kind and description, and goods held for sale or lease or furnished under contracts of service in which Borrower and/or Gas Jack now has or hereafter acquires any right, whether held by Borrower and/or Gas Jack or others, and all documents of title, warehouse receipts, bills of lading, and all other documents of every type covering all or any part of the foregoing. Inventory includes inventory temporarily out of the custody or possession of Borrower or Gas Jack and all returns on Receivables. "Investment Property" shall all investment property of Borrower and/or Gas Jack, whether now owned or hereafter acquired, consisting of certificated and uncertificated securities, securities entitlements, securities accounts, commodity contracts and commodity accounts (as each of said items are defined in ss. 9-115 of the UCC and in La. R. S. 10:8-102). "Keenan" shall mean Burt H. Keenan (Social Security No. ###-##-####), his successors, heirs, legatees and assigns. "Loan Documents" shall mean this Agreement, the Term Note, the Collateral Documents and any other Related Documents. "Lockbox Account" shall have the meaning ascribed to such term in Section 8.15 hereof. "Material Adverse Change" shall mean, with respect to Borrower or Gas Jack, an event which causes a material adverse effect on the business, assets, operations or condition (financial or otherwise) of either such entities, or which otherwise changes in a materially adverse way any other facts, circumstances or conditions which Bank has relied upon or utilized in making the Term Loan Commitment hereunder. "Maturity Date" shall mean the earlier to occur of (a) October 29, 2004, or (b) the date of the earlier acceleration of the Term Loan by Bank pursuant to Article X hereof. "Permitted Encumbrances" shall have the meaning ascribed to such term in Section 9.4 hereof. 5 "Person" shall mean an individual or a corporation, partnership, trust, joint venture, incorporated or unincorporated association, joint stock company, government, or an agency or political subdivision thereof, or other entity of any kind. "Purchase Agreement" shall mean that certain Stock Purchase Agreement dated as of October 29, 1999, by and among Borrower and the Estate of Ran Ricks, Jr., Art L. Swanson, J.W. Waldrop, Jeffrey E. Henderson, Joseph D. Vaughn, Discovery Fund I-90 Limited Partnership, Discovery Fund II-90 Limited Partnership, Discovery Fund III-90 Limited Partnership, and Citicap, Inc. "Receivables" shall mean, with respect to Borrower and/or Gas Jack, all accounts (as such term is defined in ss.9-106 of the UCC) of Borrower and/or Gas Jack, and shall include all trade accounts, other receivables, or other rights to payment for goods sold or leased by or services rendered by Borrower and/or Gas Jack(or a third party grantor acceptable to Bank). "Related Documents" shall mean and include individually, collectively, interchangeably and without limitation all promissory notes, credit agreements, loan agreements, guaranties, security agreements, mortgages, collateral mortgages, deeds of trust, and all other instruments and documents, whether now or hereafter existing, executed in connection with the Indebtedness. "Security Agreements" shall mean, collectively, (i) that certain Commercial Security Agreement dated of even date herewith by Borrower in favor of Bank, affecting, without limitation, all of Borrower's Receivables, Inventory, Investment Property, Equipment, General Intangibles and deposit accounts and other funds on deposit with Bank, as the same may be amended or modified from time to time, and (ii) that certain Commercial Security Agreement to be executed by Gas Jack in favor of Bank pursuant to the terms hereof, affecting, without limitation, all of Gas Jack's Receivables, Inventory, Investment Property, Equipment, General Intangibles and deposit accounts and other funds on deposit with Bank, as the same may be amended or modified from time to time. "Securities Account Pledge" shall mean that certain Investment Property Security Agreement October 8, 1999, by Keenan in favor of Bank affecting, among other property described therein, all of Keenan's rights in and to that certain investment account no. 5AL005694 maintained by Keenan with Hibernia Investment Securities, Inc., as the same may be amended or modified from time to time. "Solvent" shall mean, when used with respect to any Person on a particular day, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including without limitation, contingent liabilities, of such person, (ii) the present fair salable value of the assets of such person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business, (iv) such Person does not intend to, and does not believe that 6 it will, incur debts and liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all of the facts and circumstances existing at such time, represents the amount that can be reasonably expected to become an actual or matured liability. "Subsidiaries" shall mean at any date, with respect to any Person, all the corporations of which such Person at such date, directly or indirectly, owns 50% or more of the outstanding capital stock (excluding directors' qualifying shares), and "Subsidiary" means any one of the Subsidiaries. "Stock Pledge" shall mean that certain pledge and security agreement to be executed and delivered by Borrower in favor of Bank pursuant to the terms hereof, affecting all outstanding shares of stock of Gas Jack acquired pursuant to the Purchase Agreement, as the same may be amended or modified from time to time. "Tangible Net Worth" shall mean, at any time, the amount of the total assets of Borrower and its Consolidated Subsidiaries, determined on a consolidated basis, excluding intangible assets (i.e., patents, copyrights, trademarks, trade names, franchises, goodwill, organizational expenses, and similar intangible expenses, but including leaseholds and leasehold improvements), less the amount of the total liabilities of Borrower and its Consolidated Subsidiaries, determined on a consolidated basis. "Term Loan Commitment" means the agreement by Bank to make the Term Loan in accordance with the provisions of Article II hereof. "Term Loan" shall mean the loan made by Bank under the Term Note to Borrower in accordance with and subject to the terms of the Term Loan Commitment. "Term Note" shall mean that certain promissory note made by Borrower dated of even date herewith, payable to the order of Bank in principal amount of $2,800,000.00, as said Term Note is more fully described in Section 2.2 hereof, together with any and all extensions, renewals, modifications and substitutions therefor. "UCC" shall mean the Uniform Commercial Code, Commercial Laws-Secured Transactions (La. R.S. 10:9-101 et seq.) in the State of Louisiana, as amended from time to time, provided that if by reason of mandatory provisions of law, the perfection or effect of perfection or non-perfection of the Bank's Encumbrances against the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Louisiana, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction. 7 Section 1.2. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with GAAP. ARTICLE II THE TERM LOAN Section 2.1. The Term Loan. Subject to the terms, conditions and provisions of this Agreement, Bank agrees to make a term loan to Borrower in an amount of $2,800,000.00 (the "Term Loan"), the proceeds of which shall be used exclusively by Borrower to finance part of its cost of the acquisition of all outstanding and issued shares of stock of Gas Jack pursuant to the terms of the Purchase Agreement, and to refinance existing indebtedness of Gas Jack owed to UMB Oklahoma Bank. Section 2.2. The Term Note. Borrower's indebtedness to Bank pursuant to the Term Loan shall be evidenced by the Term Note. The Term Note shall bear interest at a fixed rate of 8.8% per annum from its date until paid in full, with interest payable monthly on the last day of each month commencing November 30, 1999, and on the day of each month thereafter this Note is paid in full. The principal amount outstanding under the Term Note shall be payable in 59 installments in the amount of $46,666.67 each, commencing November 30, 1999, and continuing on the same day of each month thereafter through and including September 30, 2004, plus a final installment due on the Maturity Date, at which time all outstanding principal and accrued interest under the Term Note shall be due and payable in full Section 2.3. Prepayment of Term Loan. Borrower may prepay the Term Loan in whole or in part at any time provided that any prepayment of principal be accompanied by the payment of accrued simple interest and any unpaid late charges due under the Term Note through the date of prepayment. All prepayments of principal shall be applied to installments of principal due in an inverse order of maturity. Any partial prepayments under the Term Loan will not relieve the Borrower of its obligation to make regularly scheduled payments under the above payment schedule. Such prepayments will instead reduce the principal balance due, and the Borrower may be required to make fewer payments under the Term Note. Amounts prepaid under the Term Note may not be reborrowed. Section 2.4. Use of Proceeds. Borrower shall use the proceeds of the Term Loan solely for the purposes described in Section 2.1 hereof. ARTICLE III [Intentionally left blank] 8 ARTICLE IV CERTAIN GENERAL PROVISIONS Section 4.1. Payments to Bank. All payments of principal, interest, commitment fees and any other amounts due hereunder or under any of the other Related Documents shall be made to the Bank at the Bank's office at 313 Carondelet Street, New Orleans, Louisiana 70130, or at such other location that the Bank may from time to time designate in writing to Borrower, in each case in immediately available funds. Section 4.2. No Offset, etc. All payments by Borrower hereunder and under any of the other Related Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, Borrower will pay to the Bank, on the date on which such amount is due and payable hereunder or under such other Related Document, such additional amount as shall be necessary to enable the Bank to receive the same net amount which Bank would have received on such due date had no such obligation been imposed upon Borrower. Borrower will deliver promptly to the Bank certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by Borrower hereunder or under such other Loan Documents. Section 4.3. Computations. All computations of interest on the Term Loan and of commitment or other fees shall be assessed utilizing a 360-day daily interest factor over the number of days in an actual calendar year (365 days or 366 days in a leap year). Bank shall determine each interest rate applicable to the Term Loans in accordance with this Agreement, and Bank's determination of same shall be conclusive in the absence of manifest error. Except as otherwise provided herein, whenever a payment hereunder or under any of the other Related Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Term Loan as reflected on the Bank's books and records from time to time shall be prima facie evidence of the amounts so outstanding. Section 4.4. Additional Costs, etc. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to the Bank 9 by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (1) subject the Bank to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Related Documents or the Indebtedness (other than taxes based upon or measured by the revenue, income or profits of the Bank), or (2) materially change the basis of taxation (except for changes in taxes on revenue, income or profits) of payments to the Bank of the principal of or the interest on the Indebtedness of any other amounts payable to the Bank under this Agreement or the other Related Documents, or (3) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of the Bank, or (4) impose on the Bank any other conditions or requirements with respect to this Loan Agreement, the other Related Documents, the Indebtedness, or any class of loans of which the Indebtedness forms a part, and the result of any of the foregoing is (i) to increase the cost to the Bank of making, funding, issuing, renewing, extending or maintaining the Indebtedness, or (ii) to reduce the amount of principal, interest or other amount payable to the Bank hereunder on account of such the Indebtedness, or (iii) to require the Bank to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by the Bank from Borrower hereunder, then, and in each such case, Borrower will, upon demand made by the Bank at any time and from time to time and as often as the occasion therefor may arise, pay to the Bank such additional amounts as will be sufficient to compensate the Bank for such additional cost, reduction, payment or foregoing interest or others sum. Section 4.5. Capital Adequacy. If after the date hereof the Bank reasonably determines that (a) the adoption of or change in any law, governmental rule, regulations, policy guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (b) compliance by the Bank or any corporation controlling the Bank with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding 10 capital adequacy, has the effect of reducing the return on the Bank's Term Loan to a level below that which the Bank could have achieved but for such adoption, change or compliance (taking into consideration the Bank's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by the Bank to be material, then the Bank may notify Borrower of such fact. Borrower agrees to pay the Bank for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by the Bank of a certification in accordance with paragraph Section 4.6. Section 4.6. Certificate; Optional Right of Prepayment. Bank shall provide Borrower with a certificate setting forth any additional amounts which it declares to be payable pursuant to Sections 4.4 and 4.5 hereof, and a complete explanation of such amounts which are due, and each such certificate shall be conclusive, absent manifest error, that such amounts are due and owing. Borrower shall have the right, at any time within 90 days of receipt of any such certificate, to prepay the Term Loan (subject to any and all prepayment penalties, if any, under the terms of this Agreement) without being obligated to pay any such additional costs set forth in such certificate, after which Bank shall promptly terminate, discharge and release of record (at Borrower's expense) all of its Encumbrances affecting the Collateral and return all Collateral to Borrower. Section 4.7. Commitment Fee for the Term Loan. In addition to the other fees and expenses described in Section 11.4 hereof, the Borrower has paid or shall pay upon the execution of this Agreement the remaining balance due on the Bank's total commitment fee in the amount of $28,000.00 for the Term Loan Commitment. ARTICLE V SECURITY FOR THE INDEBTEDNESS Section 5.1. Security. The Indebtedness shall be secured by the following: (a) the Assignment of Leases; (b) the Security Agreements; (c) the Guaranties; (d) the Stock Pledge; (e) the Securities Account Pledge; and, (f) such other Collateral Documents now or hereafter granted by any Person as security for any part of the Indebtedness. 11 Section 5.2. Agreement to Release Securities Account Pledge. Bank hereby agrees that in the event that the shareholders of Borrower contribute an additional $1 million in equity subsequent to the date hereof, and Borrower thereafter applies as much of such additional equity as may be required to pay all then outstanding revolving loans which Bank has committed to extend to Borrower and Gas Jack as co-borrowers, Bank agrees, provided no Default or Event of Default then exists, to release the Securities Accounts Pledge and any claim or Encumbrance to the funds and/or securities contained therein. ARTICLE VI CONDITIONS PRECEDENT Section 6.1. Conditions Precedent to the Term Loan. The obligation of Bank to make the Term Loan hereunder shall be subject to the satisfaction and the continued satisfaction of the following conditions precedent: (a) Borrower shall have executed and delivered to Bank this Agreement, the Collateral Documents, the Term Note and all other documents required by this Agreement, all in form and substance and in such number of counterparts as may be required by Bank; (b) Brooks Mims Talton, III, shall have executed and delivered to Bank his unlimited in solido Guaranty of the Indebtedness and all other present and future Debt of Borrower to Bank; (c) The representations and warranties of Borrower and Guarantors as set forth herein, or any Related Document furnished to Bank in connection herewith, shall be and remain true and correct; (d) Bank shall have received a favorable legal opinion of counsel to Borrower and Guarantors, in scope and substance satisfactory to Bank; (e) Bank shall have received certified resolutions of Borrower authorizing the Term Loan and the execution and delivery of all documents contemplated hereby; (f) Bank shall have received all fees, charges and expenses which are due and payable as specified in this Agreement or any Related Document; (g) No Default or Event of Default shall exist or shall result from the making of the Term Loan; (h) Borrower shall have provided Bank with all financial statements, reports and certificates required by this Agreement; 12 (i) Bank's counsel shall have reviewed the corporate structure and articles of incorporation of Borrower, and shall be satisfied with the validity, due authorization and enforceability of all Related Documents; (j) There shall have been no change to the corporate structure and ownership of Borrower than from what has been previously represented to Bank; (k) Bank shall have received evidence acceptable to Bank and its counsel that its Encumbrances affecting the Collateral shall have a first priority position, subject only to Permitted Encumbrances, upon the funding of the Term Loan and the cancellation of certain liens held by UMB Oklahoma Bank against assets of Gas Jack contemporaneously with the payment of the loans of Gas Jack from the proceeds of the Term Loan; (l) Bank shall have received evidence that all other policies of insurance required by this Agreement and the Collateral Documents are in full force and effect; (m) Bank, at its option and for its sole benefit, shall have conducted an audit of each Borrower's payment records, ledger sheets, and computer tapes or disks kept to record payment information, and of Borrower's other books, records, and operations, and Bank shall be satisfied as to their condition; (n) Keenan shall have granted the Securities Account Pledge to Bank, the securities account affected by the Securities Account Pledge shall have been established by Keenan with the purchase or deposit of securities or cash therein with an aggregate market value of not less than $1 million, and Keenan, Hibernia Investment Securities, Inc., and Bank shall have entered into an account control agreement on terms and conditions acceptable to Bank which provide Bank with "control" over such securities account within the meaning of the UCC; and, (o) There shall have occurred no Material Adverse Change. Section 6.2. Conditions Subsequent to the Term Loan. The obligation of Bank to allow the Term Loan hereunder to remain outstanding shall be subject to the satisfaction of the following conditions within two (2) Business Days of the funding of the Term Loan: (a) Gas Jack shall have executed and delivered to Bank its unlimited in solido Guaranty of the Indebtedness, and all other present and future Debt of Borrower to Bank, as well as its Security Agreement affecting all of its present and future Receivables, Inventory, Investment Property, Equipment, General Intangibles and deposit accounts and other funds on deposit with Bank and the Assignment of Leases in form and substance satisfactory to Bank; (b) Bank shall have received certified resolutions of Gas Jack authorizing its Guaranty, Assignment of Leases and Security Agreement; (c) Bank shall have received a favorable legal opinion of counsel to Gas Jack with respect to the enforceability and binding effect of Gas Jack's Guaranty, Assignment of Leases and Security Agreement, in scope and substance satisfactory to Bank; 13 (d) Bank shall have received evidence acceptable to Bank and its counsel that its Encumbrances affecting the Collateral owned by Gas Jack shall have a first priority position, subject only to Permitted Encumbrances; and, (e) Borrower shall have executed and delivered the Stock Pledge and shall have delivered all outstanding and issued shares of stock of Gas Jack acquired pursuant to the Purchase Agreement to Bank, together with stock powers and Reg U statements which Bank may reasonably require. ARTICLE VII REPRESENTATIONS AND WARRANTIES Borrower represents and warrants to Bank as follows: Section 7.1. Corporate Authority. Borrower is a corporation duly created, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified and in good standing as a foreign corporation in all other jurisdictions where the failure to qualify would have an adverse effect upon its ability to perform its obligations under this Agreement and all Related Documents. Borrower has the power to enter into this Agreement, issue the Term Note, mortgage and grant security interests in the Collateral in the manner and for the purpose contemplated by the Collateral Documents. Borrower has the corporate power to perform their obligations hereunder and under this Agreement and of the Related Documents. The making and performance by Borrower of this Agreement and of the Related Documents have been duly authorized by all necessary corporate action (including all necessary shareholder action), and do not and will not violate any provision of any law, rule, regulation, order, writ, judgment, decree, determination or award presently in effect having applicability to Borrower or the articles of incorporation of Borrower. The making and performance by Borrower of this Agreement and the Related Documents do not and will not result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement or instrument to which Borrower is a party or by which it may be bound or affected, or result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance of any nature (other than as contemplated this Agreement and by the Related Documents) upon or with respect to any of the properties now owned or hereafter acquired by Borrower, and Borrower is not in default under or in violation of any such order, writ, judgment, decree, determination, award, indenture, agreement or instrument. This Agreement and each of the Related Documents to which Borrower is a party constitutes legal, valid and binding obligations of Borrower, enforceable in accordance with its terms, except to the extent that the enforceability of such instruments may be subject to the effect of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, or the effect of general equity principles. 14 Section 7.2. Financial Statements. The balance sheet of Borrower at the date thereof, and the related statements of income and retained earnings for the periods covered thereby, copies of which have been delivered to Bank, are complete and correct and fairly present the financial condition of Borrower as of the date or dates thereof. Each of said financial statements were prepared in conformity with GAAP applied on a basis consistent with the preceding year. No Material Adverse Change has occurred since said dates in the financial position or in the results of operations of Borrower in its business taken as a whole. Section 7.3. Title to Collateral. Borrower has good and marketable title to the Collateral in which it has or shall grant Bank an Encumbrance as security for the Indebtedness, free and clear of all Encumbrances other than Permitted Encumbrances. The Collateral Documents constitute legal, valid and perfected first Encumbrances on the property interests covered thereby, subject only to Permitted Encumbrances. Section 7.4. Litigation. Other than as has been disclosed previously to Bank in writing, there are no material legal actions, suits or proceedings pending or, to the best of Borrower's knowledge, threatened against or affecting Borrower or any of its properties before any court or administrative agency (federal, state or local), which, if determined adversely to Borrower, would constitute a Material Adverse Change, and there are no judgments or decrees affecting Borrower or its properties (including, without limitation, the Collateral) which are or may become an Encumbrance against such properties. Section 7.5. Approvals. No authorization, consent, approval or formal exemption of, nor any filing or registration with, any governmental body or regulatory authority (federal, state or local), and no vote, consent or approval of the shareholders of Borrower is or will be required in connection with the execution and delivery by Borrower of the Related Documents or the performance by Borrower of its obligations hereunder and under the other Related Documents. Section 7.6. Licenses. Borrower possesses adequate franchises, licenses and permits to own its properties and to carry on its business as presently conducted. Section 7.7. Adverse Agreements. Borrower is not a party to any agreement or instrument, or subject to any charter or other restriction, materially and adversely affecting its business, properties, assets, or operations or its condition (financial or otherwise), and Borrower is not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party, which default would constitute a Material Adverse Change. Section 7.8. Default or Event of Default. No Default or Event of Default hereunder has occurred or is continuing or will occur as a result of the giving effect hereto. Section 7.9. Employee Benefit Plans. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event (as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower has not withdrawn from any such plan or initiated steps to do so, and (iii) no steps have been taken to terminate any such plan. 15 Section 7.10. Investment Company Act. Borrower is not an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Section 7.11. Public Utility Holding Company Act. Borrower is not a "holding company," or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 7.12. Regulations G, T and U. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, T and U of the Board of Governors of the Federal Reserve System), and none of the proceeds of the Term Loan will be used for the purpose of purchasing or carrying such margin stock. Section 7.13. Location of Borrower's Offices, Records and Inventory and Equipment. The chief place of business of Borrower, and the office where Borrower keeps its records concerning the Collateral, and the present locations of Borrower's Inventory (other than Inventory out on lease) and Equipment, are as follows: Place of Business/Records Location Inventory and Equipment Locations - ---------------------------------- --------------------------------- Borrower - 17571 Red Oak Drive 17571 Red Oak Drive Houston, TX 77090 Houston, TX 77090 (no presently owned Inventory) Section 7.14. Information. All information heretofore or contemporaneously herewith furnished by Borrower to Bank for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all information hereafter furnished by or on behalf of Borrower to Bank will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. Section 7.15. Environmental Matters. Except as may have been disclosed in writing to Bank prior to the date hereof, no properties of Borrower has ever been, and ever will be so long as this Agreement remains in effect, used for the generation, manufacture, storage, treatment, disposal, release or threatened release of any hazardous waste or substance, as those terms are defined in the Environmental Laws, except in compliance with such Environmental Laws. Except as may have been disclosed in writing by Borrower to Bank, Borrower represents and warrants that it is in compliance with all Environmental Laws affecting it and its properties. Section 7.16. Solvency of Borrower. Borrower is, and after consummation of the transactions contemplated by this Agreement (including the making of the Term Loan), and after giving effect to all obligations incurred by Borrower in connection herewith, will be, Solvent. 16 Section 7.17. Year 2000 Compliance. Borrower represents and warrants that all material systems used in the conduct of its business will have appropriate capabilities and compatibility to handle calendar dates falling on or after January 1, 2000, and all information pertaining to such calendar dates. Upon reasonable request, Borrower agrees to provide to Bank documentation satisfactory to Bank to establish that its systems and software are year 2000 compliant, or that Borrower is in the process of implementing a plan to ensure that its systems and software will be 2000 compliant before December 31, 1999. Section 7.18. Survival of Representations and Warranties. Borrower understands and agrees that Bank is relying upon the above representations and warranties in making the Term Loan to Borrower. Borrower further agrees that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as the Indebtedness shall be paid in full, or until this Agreement shall be terminated, whichever is the last to occur. ARTICLE VIII AFFIRMATIVE COVENANTS In addition to the covenants contained in the Collateral Documents, which covenants are hereby ratified and confirmed by Borrower, Borrower covenants and agrees as follows: Section 8.1. Financial Statements. Borrower will furnish or cause to be furnished to Bank: (a) within forty-five (45) days following the end of each fiscal quarter of Borrower, financial statements consisting of a balance sheet of Borrower and Gas Jack as of the end of such fiscal quarter, and statements of income and statements of cash flow of Borrower and Gas Jack for such fiscal quarter and for the fiscal year through such fiscal quarter, all certified by the chief financial officer of Borrower or Gas Jack, as the case may be, as having been prepared in accordance with GAAP consistently applied; (b) within forty-five (45) days following the end of each fiscal quarter of Borrower, the consolidated and consolidating financial statements of Borrower and its Consolidated Subsidiaries consisting of a balance sheet as of the end of such fiscal quarter, and statements of income and statements of cash flow of Borrower and its Consolidated Subsidiaries for such fiscal quarter and for the fiscal year through such fiscal quarter, all certified by the chief financial officer of Borrower as having been prepared in accordance with GAAP consistently applied, together with the 10-Q or equivalent report submitted by Borrower to the Securities and Exchange Commission for such period; 17 (c) as soon as available and in any event within ninety (90) days following the close of each fiscal year of Borrower, unqualified audited consolidated and consolidating financial statements of Borrower and its Consolidated Subsidiaries consisting of a balance sheet as of the end of such fiscal year and statements of income, and statement of cash flow for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, certified by independent public accountants of recognized standing acceptable to Bank, together with the 10-K or equivalent report submitted by Borrower to the Securities and Exchange Commission for such period; (d) within fifteen days (15) of the filing of same, copies of all Forms 1120 and all schedules and attachments thereto as submitted annually to the Internal Revenue Service by Borrower and its Consolidated Subsidiaries; (e) with each set of quarterly financial reports submitted in accordance with paragraph (a) above, a compliance certificate signed by the chief financial officer of each Borrower, certifying that said officer has reviewed this Agreement and to the best of his or her knowledge no Default or Event of Default has occurred, or if such Default or Event of Default has occurred, specifying the nature and extent thereof, and that all financial covenants in this Agreement have been met, and providing a computation of all financial covenants contained herein; (f) as soon as available and in any event within thirty (30) days following the end of each calendar year, the personal financial statements of Brooks Mims Talton, III, signed by Mr. Talton and submitted pursuant to fully completed forms of personal financial statements provided by Bank, together with his federal tax returns and all schedules thereto, within fifteen (15) days of the filing of same; (g) on a bi-annual basis, commencing on the second anniversary date of the date of this Agreement, a third-party collateral appraisal prepared by MB Valuation Services or other reputable appraisal service firm approved by Bank, which is addressed to Bank; (h) within 15 days of receipt of same, copies of all statements received by Keenan from Hibernia Investment Securities, Inc. regarding the securities account subject to the Securities Account Pledge; and, (i) such other necessary financial information concerning Borrower and Guarantors as Bank may reasonably request from time to time. Section 8.2. Notice of Default; Litigation; ERISA Matters. Borrower will give written notice to Bank as soon as reasonably possible and in no event more than five (5) Business Days of (i) the occurrence of any Default or Event of Default hereunder of which it has knowledge, (ii) the filing of any actions, suits or proceedings against Borrower in any court or before any governmental authority or tribunal of which it has knowledge which could cause a Material Adverse Change with respect to Borrower, (iii) the occurrence of a reportable event 18 under, or the institution of steps by Borrower to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which Borrower may have liability, or (iv) the occurrence of any other action, event or condition of any nature of which Borrower has knowledge which may cause, or lead to, or result in, any Material Adverse Change. Section 8.3. Maintenance of Corporate Existence, Properties and Liens. Borrower will (i) continue to engage in the business presently being operated by it; (ii) maintain its corporate existence and good standing in each jurisdiction in which it is required to be qualified; (iii) keep and maintain all franchises, licenses and properties necessary in the conduct of its business in good order and condition; (iv) duly observe and conform to all material requirements of any governmental authorities relative to the conduct of its business or the operation of its properties or assets; and, (v) maintain in favor of Bank a first perfected lien and security interest in the Collateral, subject only to other Permitted Encumbrances. Section 8.4. Collateral Schedules and Locations. As often as Bank shall reasonably require, Borrower shall deliver to Bank schedules of such Collateral, including such information as Bank may require, including without limitation names and addresses of account debtors and agings of Receivables and General Intangibles and the location of all Inventory. Section 8.5. Taxes. Borrower shall pay or cause to be paid when due, all taxes, local and special assessments, and governmental and other charges of every type and description, that may from time to time be imposed, assessed and levied against it and its properties. Borrower further agree to furnish Bank with evidence that such taxes, assessments, and governmental and other charges due by the Borrower have been paid in full and in a timely manner. Borrower may withhold any such payment or elect to contest any lien if Borrower is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Bank's interest in the Collateral is not jeopardized. Section 8.6. Required Insurance. Borrower shall maintain insurance with insurance companies in such amounts and against such risks as is usually carried by owners of similar businesses and properties in the same general areas in which each of them operates, and as shall be reasonably satisfactory to Bank, such insurance to include appropriate liability, hazard, business interruption, workmens' compensation coverages as Bank may require, naming Bank as loss payee and/or additional insured, as appropriate. With respect to the Collateral, Borrower agrees to provide Bank with the types of insurance coverages required by the Collateral Documents affecting such Collateral. Borrower agrees to provide Bank with originals or certified copies of such policies of insurance. Borrower further agrees to promptly furnish Bank with copies of all renewal notices and, if requested by Bank, with copies of receipts for paid premium. Borrower shall provide Bank with originals or certified copies of all renewal or replacement policies of insurance no later than fifteen (15) days before any such existing policy or policies should expire. If Borrower's insurance policies required hereunder and renewals thereof are held by another person, Borrower agree to supply original or certified copies of the same to Bank within the time periods required above. 19 Section 8.7. Performance of Loan Documents. Borrower shall duly and punctually pay and perform its obligations under the Term Note, under this Agreement and under each of the Related Documents, in accordance with the terms hereof and thereof. Section 8.8. Compliance with Environmental Laws. Borrower shall comply with and shall cause all of its employees, agents, invitees or sublessees to comply with all Environmental Laws with respect to the disposal of industrial refuse or waste, and/or the discharge, procession, treatment, removal, transportation, storage and handling of hazardous or toxic wastes and substances, and pay immediately when due the cost of removal of any such waste or substances from, and keep its properties free of any lien imposed pursuant to any such laws, rules, regulations or orders. Borrower shall give notice to Bank as soon as reasonably possible and in no event more than five (5) days after it receives any compliance orders, environmental citations, or other notices from any governmental entity relating to any environmental condition relating to its properties or elsewhere for which it may have legal responsibility with a full description thereof. Borrower agrees to take any and all reasonable steps, and to perform any and all reasonable actions necessary or appropriate to promptly comply with any such citations, compliance orders or Environmental Laws requiring Borrower to remove, treat or dispose of such hazardous materials, wastes or conditions at the sole expense of Borrower, to provide Bank with satisfactory evidence of such compliance; provided, however, that nothing contained herein shall preclude Borrower from contesting any such compliance orders or citations if such contest is made in good faith, appropriate reserves are established for the payment for the cost of compliance therewith, and Bank's security interest in any such property affected thereby (or the priority thereof) is not jeopardized. Regardless of whether any Event of Default hereunder shall have occurred and be continuing, Borrower (i) releases and waives any present or future claims against Bank for indemnity or contribution in the event Borrower becomes liable for remediation costs under and Environmental Laws, and (ii) agrees to defend, indemnify and hold harmless Bank from any and all liabilities (including strict liability), actions, demands, penalties, losses, costs or expenses (including, without limitation, reasonable attorneys fees and remedial costs), suits, administrative orders, agency demand letters, costs of any settlement or judgment and claims of any and every kind whatsoever which may now or in the future (whether before or after the termination of this Agreement) be paid, incurred, or suffered by, or asserted against Bank by any person or entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, or release from or onto the property of Borrower of any hazardous materials, wastes or conditions regulated by any Environmental Laws, contamination resulting therefrom, or arising out of, or resulting from, the environmental condition of such property or the applicability of any Environmental Laws relating to hazardous materials (including, without limitation, CERCLA or any so called federal, state or local "super fund" or "super lien" laws, statute, ordinance, code, rule, regulation, order or decree) regardless of whether or not caused by or within the control of Bank. The covenants and indemnities contained in this Section 8.8 shall survive termination of this Agreement. 20 Section 8.9. Further Assurances. Borrower will, at any time and from time to time, execute and deliver such further instruments and take such further action as may reasonably be requested by Bank, in order to cure any defects in the execution and delivery of, or to comply with or accomplish the covenants and agreements contained in this Agreement or the Collateral Documents. Section 8.10. Financial Covenants. Borrower shall comply with the following covenants and ratios: (a) Borrower and its Consolidated Subsidiaries shall maintain a ratio of Current Ratio of not less than 1.10 to 1.00 as of the end of each fiscal quarter. (b) Borrower and its Consolidated Subsidiaries shall maintain a Tangible Net Worth of not less than $2,750,447.00 plus 50% of the net income of Borrower and its Consolidated Subsidiaries (with no deduction for net losses) derived after 12/31/98. (c) Borrower and its Consolidated Subsidiaries shall maintain a Funded Debt to Cash Flow Ratio of (i) less than or equal to 4.0 to 1.0 as of the end of each fiscal quarter through 12/31/00, (ii) less than or equal to 3.5 to 1.0 as of the end of each fiscal quarter thereafter through 12/31/01, and (iii) less than or equal to 3.0 to 1.0 as of the end of each fiscal quarter thereafter. (d) Borrower and its Consolidated Subsidiaries shall maintain a Debt Service Coverage Ratio of (i) greater than 1.0 to 1.0 as of the end of each fiscal quarter through 12/31/00 (provided, however, that for the period ending 12/31/00 only, the Debt Service Coverage Ratio shall be based on the current quarter's annualized interest expense), (ii) greater than or equal to 1.2 to 1.0 as of the end of each fiscal quarter thereafter through 12/31/01, and (iii) greater than or equal to 1.50 to 1.0 as of the end of each fiscal quarter thereafter. Section 8.11. Operations. Borrower shall conduct its business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting its properties, charters, businesses and operations, including compliance with all minimum funding standards and other requirements of ERISA of 1974, and other laws applicable to any employee benefit plans which it may have, and at all time shall remain a "going concern" as defined by its auditors. Section 8.12. Change of Location. Borrower shall, within ten (10) Business Days prior to any such addition or change, notify Bank in writing of any proposed additions to or changes in the location of the Collateral (other than leased Inventory) or of the location of its chief executive office. Section 8.13. Employee Benefit Plans. So long as this Agreement remains in effect, Borrower will maintain each employee benefit plan as to which it may have any liability, in compliance with all applicable requirements of law and regulations. 21 Section 8.14. Field Audits; Other Information. Borrower shall allow Bank's employees and agents access to its books and records and properties during normal business hours to perform field audits from time to time. Borrower will provide Bank with such other information as Bank may reasonably request from time to time. Section 8.15 Pledged Securities Account. Borrower shall cause Keenan to at all time maintain sufficient cash or securities in the securities account subject to the Securities Account Pledge so as to maintain the account with a market value of not less than $1 million. Section 8.16. Deposit and Operating Accounts. Borrower shall maintain all of its primary deposit and operating accounts with Bank so long as any of the Indebtedness remains outstanding. ARTICLE IX NEGATIVE COVENANTS In addition to the negative covenants contained in the Collateral Documents, which covenants are hereby ratified and confirmed by Borrower, Borrower covenants and agrees as follows: Section 9.1. Limitations on Fundamental Changes. Borrower shall not change the nature of its business or its name (other than the presently anticipated name change of Borrower to Compresco, Inc.), grant credit terms to its customers on terms different than those presently granted to customers, or form any subsidiary without the prior written consent of the Bank, nor shall it enter into any transaction of merger or consolidation, nor liquidate or dissolve itself (nor suffer any liquidation or dissolution). Section 9.2. Disposition of Assets. Borrower shall not convey, sell, lease, assign, transfer or otherwise dispose of, any of its property, business or assets whether now owned or hereafter acquired except for (i) inventory and compressors sold to customers in the ordinary course of business, (ii) property disposed of in the ordinary course of business, provided that, if such property is to be replaced, the net cash proceeds of each such transaction are applied to obtain a replacement item or items within 30 days of the disposition thereof, or (iii) other dispositions of property whose fair market value does not exceed $50,000.00 in the aggregate during each fiscal year. Section 9.3. Restricted Payments. Borrower shall not declare or pay (or set aside reserves for payment of) any dividends or distributions or redeem, retire, or repurchase any shares of its capital stock, make any shareholder/affiliate loans, pay excessive shareholder compensation or enter into any similar transactions with the shareholders of Borrower and their related interests without the prior written consent of the Bank. 22 Section 9.4. Encumbrances. Borrower shall not create, incur, assume or permit to exist any Encumbrances on any of its property now owned or hereafter acquired, except for the following (hereinafter referred to as the "Permitted Encumbrances"): (a) Encumbrances for taxes, assessments, or other governmental charges not yet due or which are being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserves as shall be required by GAAP shall have been made therefor. (b) Encumbrances of landlords, vendors, carriers, warehousemen, mechanics, laborers and materialmen arising by law in the ordinary course of business for sums either not yet due or being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as shall be required by generally accepted accounting principles shall have been made therefor. (c) Inchoate liens arising under ERISA to secure the contingent liabilities, if any, permitted by this Agreement. (d) The pledge of the Collateral and any other liens in favor of the Bank to secure the Indebtedness of the Borrower to the Bank. (e) Liens which, as of the date hereof, have been disclosed to and approved by Bank in writing. Section 9.5. Debts, Guaranties and Other Obligations. Borrower will not incur, create, assume or in any manner become or be liable in respect of any indebtedness, direct or contingent, except for: (a) The Indebtedness to the Bank under this Agreement; (b) Trade payables or non-material operating leases from time to time incurred in the ordinary course of business; and, (c) Taxes, assessments or other government charges which are not yet due or are being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as shall be required by generally accepted accounting principles shall have been made therefor. Section 9.6. Changes in Control and Management. Borrower shall not allow any change in the control of the Borrowers ("control" for the purposes hereof shall mean the power, direct or indirect, (i) to vote 51% or more of the securities having ordinary voting power for the election of directors of Borrower, or (ii) to direct or cause the direction of the management and policies of Borrower whether by contract or otherwise) from the ownership structure of Borrower which exists as of the date hereof (which ownership is as has been represented to Bank by Borrower), nor shall it allow any change in its executive management which exists as of the date hereof without the prior written consent of Bank. 23 Section 9.7. Other Agreements. Borrower will not enter into any agreement containing any provision which would be violated or breached by the performance of their obligations hereunder or under any instrument or document delivered or to be delivered by them hereunder or in connection herewith. Section 9.8. Transactions with Affiliates. Borrower will not enter into any agreement with any affiliate except to the extent that such agreements are commercially reasonable which provide for terms which would normally be obtainable in an arm's length transaction with an unrelated third party. To the extent any inter-company loans are permitted hereunder, they shall be subordinated in payment to the Indebtedness. ARTICLE X EVENTS OF DEFAULT Section 10.1. Events of Default. The occurrence of any one or more of the following shall constitute an Event of Default: Default under the Indebtedness. Should Borrower default in the payment of principal or interest under the Indebtedness. Default under this Agreement. Should Borrower violate or fail to comply fully with any of the terms and conditions of, or default under, this Agreement, and such default not be cured within thirty days of the occurrence thereof (provided, however, that no cure period shall be available for a default in the obligation to comply with negative covenants contained herein or to maintain insurance coverages required hereby). Default Under Other Agreements. Should any event of default occur or exist under any of the Related Documents or should Borrower, any Guarantor or Keenan violate, or fail to comply fully with, any terms and conditions of any of the Collateral Documents or Related Documents, and such default not be cured within thirty days of the occurrence thereof (provided, however, that no cure period shall be available for a default in the obligation to comply with negative covenants contained therein or to maintain insurance coverages affecting the Collateral required thereby). Other Defaults in Favor of Bank. Should Borrower or any Guarantor default under any other loan, extension of credit, security agreement, or other obligation in favor of Bank and fail to cure same in accordance with any applicable cure periods. Default in Favor of Third Parties. Should Borrower or any Guarantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of the Collateral, or the ability of Borrower or any such Guarantor to perform its obligations under this 24 Agreement, or any Related Document, or pertaining to the Indebtedness and fail to cure same in accordance with any applicable cure periods. Insolvency. The following occurrences, in addition to the failure or suspension of Borrower or any corporate Guarantor, shall constitute an Event of Default hereunder: (a) Filing by Borrower or any Guarantor of a voluntary petition or any answer seeking reorganization, arrangement, readjustment of its debts or for any other relief under any applicable bankruptcy act or law, or under any other insolvency act or law, now or hereafter existing, or any action by Borrower or any Guarantor consenting to, approving of, or acquiescing in, any such petition or proceeding; the application by Borrower or any Guarantor for, or the appointment by consent or acquiescence of, a receiver or trustee of Borrower or of any Guarantor for all or a substantial part of its property; the making by Borrower or by any Guarantor of an assignment for the benefit of creditors; the inability of Borrower or any Guarantor or the admission by Borrower or any Guarantor in writing, of its inability to pay its debts as they mature (the term "acquiescence" means the failure to file a petition or motion in opposition to such petition or proceeding or to vacate or discharge any order, judgment or decree providing for such appointment within sixty (60) days after the appointment of a receiver or trustee); or (b) Filing of an involuntary petition against Borrower or any Guarantor in bankruptcy or seeking reorganization, arrangement, readjustment of its debts or for any other relief under any applicable bankruptcy act or law, or under any other insolvency act or law, now or hereafter existing and such petition remains undismissed or unanswered for a period of sixty (60) days from such filing; or the insolvency appointment of a receiver or trustee of Borrower or of any Guarantor for all or a substantial part of its property and such appointment remains unvacated or unopposed for a period of sixty (60) days from such appointment, execution or similar process against any substantial part of the property of Borrower or of any Guarantor and such warrant remains unbonded or undismissed for a period of sixty (60) days from notice to Borrower or such Guarantor of its issuance. Dissolution Proceedings. Should proceedings for the dissolution or appointment of a liquidator of Borrower or any corporate Guarantor be commenced. Death or Incapacity of Individual Guarantors. Should any individual Guarantor die or become incapacitated or interdicted. False Statements. Should any representation or warranty of Borrower or any Guarantor made in connection with the Indebtedness prove to be incorrect or misleading in any material respect when made or reaffirmed. Material Adverse Change. Should a Material Adverse Change with respect to Borrower or any Guarantor occur at any time and not be cured within ten days of the occurrence thereof. 25 Upon the occurrence of an Event of Default, all commitments of Bank under this Agreement will terminate immediately, and, at Bank's option, the Term Note and all Indebtedness of Borrower will become immediately due and payable, all without notice of any kind to Borrower, except that in the case of type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. Upon the occurrence of an Event of Default, Bank may proceed to realize upon the Collateral under the terms of the Collateral Documents and exercise any other rights which it has by law or contract (which rights shall be cumulative in nature). Section 10.2. Waivers by Borrower. Except as otherwise provided for in this Agreement and by applicable law, Borrower waives (i) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Bank on which Borrower may in any way be liable and hereby ratifies and confirms whatever Bank may do in this regard, (ii) all rights to notice and a hearing prior to Bank's taking possession or control of, or to Bank's replevy, attachment or levy upon, the Collateral or any bond or security which might be required by any court prior to allowing Bank to exercise any of its remedies, and (iii) the benefit of all valuation, appraisal and exemption laws. Each Borrower acknowledges that it has been advised by counsel of its choice with respect to this Agreement, the other Collateral Documents, and the transactions evidenced by this Agreement and other Collateral Documents. ARTICLE XI MISCELLANEOUS Section 11.1. No Waiver; Modification in Writing. No failure or delay on the part of Bank in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. No amendment, modification or waiver of any provision of this Agreement or of the Term Note, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing signed by or on behalf of Bank and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances. Section 11.2. Payment on Non-Business Day. Whenever any payment to be made hereunder or on account of the Term Note shall be scheduled to become due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and such 26 extension of time shall in such case be included in computing interest and fees payable hereunder or on account of the Term Note. Section 11.3. Addresses for Notices. All notices and communications provided for hereunder shall be in writing and, shall be mailed, by certified mail, return receipt requested, or delivered as set forth below unless any person named below shall notify the others in writing of another address, in which case notices and communications shall be mailed, by certified mail, return receipt requested, or delivered to such other address. If to Bank: Hibernia National Bank P. O. Box 61540 New Orleans, LA 70161 Attention: Manager-Energy/Maritime Department If to Borrower: Emerging Alpha Corporation 17571 Red Oak Drive Houston, TX 77090 Attention: Mr. Jerry W. Jarrell Section 11.4. Fees and Expenses. Borrower agrees to pay all fees, costs and expenses of Bank in connection with the preparation, execution and delivery of this Agreement, and all Related Documents to be executed in connection herewith and subsequent modifications or amendments to any of the foregoing, including without limitation, the reasonable fees and disbursements of counsel to Bank, and to pay all costs and expenses of Bank in connection with the enforcement of this Agreement, the Term Note or the other Related Documents, including reasonable legal fees and disbursements arising in connection therewith. Borrower agrees to pay all costs associated with the issuance of any insurance coverages, appraisals and field examinations of Borrower's property which may be required by this Agreement and any of the Related Documents. Borrower also agrees to pay, and to save Bank harmless from any delay in paying stamp and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of this Agreement, the Term Note, the other Related Documents, or any modification thereof. Section 11.5. Security Interest and Right of Set-off. Bank shall have a continuing security interest in, as well as the right to set-off the obligations of Borrower hereunder against, all funds which Borrower may maintain on deposit with Bank (with the exception of funds deposited in Borrower's accounts in trust for third parties or funds deposited in pension accounts, IRA's, Keogh accounts and All Saver Certificates), and Bank shall have a lien upon and a security interest in all property of Borrower in Bank's possession or control which shall secure the Indebtedness of Borrower. 27 Section 11.6. Waiver of Marshaling. Borrower shall not at any time hereafter assert any right under any law pertaining to marshaling (whether of assets or liens) and Borrower expressly agrees that Bank may execute or foreclose upon the Collateral in such order and manner as Bank, in its sole discretion, deems appropriate. Section 11.7. Governing Law. This Agreement and the Term Note shall be deemed to be contracts made under the laws of the State of Louisiana and for all purposes shall be construed in accordance with the laws of said State. Section 11.8. Consent to Loan Participation. Borrower agrees and consents to Bank's sale or transfer, whether now or later, of one or more participation interests in the Indebtedness of the Borrower arising pursuant to this Agreement to one or more purchasers, whether related or unrelated to Bank. Bank may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Bank may have about Borrower or about any other matter relating to such Indebtedness, and Borrower hereby waives any rights to privacy it may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interest will be considered as the absolute owners of such interests in such Indebtedness. Section 11.9. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION. (a) BORROWER AND BANK HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND BANK MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (i) THE TERM NOTE, (ii) THIS AGREEMENT, (iii) THE COLLATERAL DOCUMENTS OR (iv) THE COLLATERAL. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER AND THE BANK, AND THE BORROWER AND THE BANK HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER AND THE BANK EACH FURTHER REPRESENTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. (b) BORROWER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE COURTS OF LOUISIANA AND THE FEDERAL COURTS IN LOUISIANA AND AGREES THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO ENFORCE THE PROVISIONS OF THE TERM NOTE, THIS AGREEMENT AND/OR THE COLLATERAL DOCUMENTS MAY BE BROUGHT IN ANY COURT HAVING SUBJECT MATTER JURISDICTION. 28 Section 11.10. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. Section 11.11. Headings. Article and Section headings used in this Agreement are for convenience only and shall not affect the construction of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. EMERGING ALPHA CORPORATION By: /S/ JERRY W. JARRELL ----------------------------------------- Jerry W. Jarrell, Chief Financial Officer HIBERNIA NATIONAL BANK By: /S/ NANCY MORAGAS ----------------------------------------- Printed Name: Nancy Moragas Title: Assistant Vice President 29 EX-10.3 4 LOAN AGREEMENT ================================================================================ LOAN AGREEMENT dated as of October 29, 1999 By and Among EMERGING ALPHA CORPORATION, GAS JACK, INC., and HIBERNIA NATIONAL BANK ================================================================================ LOAN AGREEMENT THIS LOAN AGREEMENT dated as of October 29, 1999, by and among EMERGING ALPHA CORPORATION, a Delaware corporation ("Emerging Alpha"), GAS JACK, INC., an Oklahoma corporation ("Gas Jack"), and HIBERNIA NATIONAL BANK, a national banking association ("Bank"). W I T N E S S E T H: WHEREAS, Emerging Alpha and Gas Jack (collectively, the "Borrowers") have applied to Bank for a $1,000,000.00 revolving line of credit; and, WHEREAS, Bank has agreed to provide such requested credit facility to the Borrowers pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein set forth, the Borrowers and Bank do hereby covenant and agree as follows, to-wit: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS Section 1.1. Defined Terms. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "Account Debtor" shall mean a Person obligated upon a Receivable owed to either of the Borrowers. "Assignment of Leases" shall mean that certain Collateral Assignment of Leases dated of even date herewith granted by Gas Jack to Bank affecting all right, title and interest in and to its leases of compressors to its customers, and all proceeds thereof, as the same may from time to time be amended, modified or supplemented and in effect. "Agreement" shall mean this Loan Agreement, as the same may from time to time be amended, modified or supplemented and in effect. "Bank" shall mean Hibernia National Bank, a national banking association. "Bank's Current Revolving Loan Commitment Exposure" shall have the meaning ascribed to such term in Section 2.1 hereof. "Base Rate" shall mean the per annum rate of interest published from time to time in the Wall Street Journal as the "prime rate" or the base rate of interest on corporate loans posted by at least 75% of the nation's 30 largest banks, such rate to be adjusted automatically on and as of the effective date of any change in such rate. "Borrowers" shall mean, collectively, Emerging Alpha Corporation, a Delaware corporation which intends to change its name to Compresco, Inc., together with its successors and assigns, and Gas Jack, Inc., an Oklahoma corporation, together with its successors and assigns, and "Borrower" shall refer to either of them, as the context may require. "Borrowing Base Amount" shall mean, as determined by Bank from time to time, the lesser of (a) $1,000,000.00; or (b) the sum of (i) 80% of the aggregate amount of Eligible Receivables (or such lesser percentage as Bank deems appropriate, in its sole discretion, exercising reasonable credit judgment), plus (ii) the lesser of (1) 50% of the aggregate amount of Eligible Inventory (or such lesser percentage as Bank deems appropriate, in its sole discretion, exercising reasonable credit judgment), or (2) an amount equal to the amount determined at any time pursuant to clause (b)(i) hereof. Bank shall have the right to make adjustments to advance rates and as to the eligibility of Inventory and Receivables as a result of field examinations of Borrowers' Collateral (using reasonable lending discretion) which Bank shall perform from time to time as deemed necessary by Bank at any time while any Revolving Loans remain outstanding. "Business Day" shall mean a day other than a Saturday, Sunday or legal holiday for commercial banks under the laws of the State of Louisiana or a day on which national banks are authorized to be closed in New Orleans, Louisiana. "Cash Flow" shall mean, for any period, the earnings of such Person(s) before interest, taxes, depreciation and amortization. "Collateral" shall mean any interest in any kind of property or assets pledged, mortgaged or otherwise subject to an Encumbrance in favor of Bank pursuant to the Collateral Documents. "Collateral Documents" shall collectively refer to the Assignment of Leases, the Security Agreements, the Stock Pledge, the Securities Account Pledge, all related financing statements required by Bank, and any and all other documents in which an Encumbrance is created on any property of the Borrowers or of any third person to secure payment of the Indebtedness of Borrowers or any part thereof. "Consolidated Subsidiary" or "Consolidated Subsidiaries" shall mean a Subsidiary or Subsidiaries, respectively, of Emerging Alpha, whose financial statements are prepared on a consolidated basis with those of Emerging Alpha in accordance with GAAP, and shall specifically include Gas Jack. 2 "Current Assets" shall mean the assets of Emerging Alpha and its Consolidated Subsidiaries treated as current assets in accordance with GAAP. "Current Liabilities" shall mean all liabilities of Emerging Alpha and its Consolidated Subsidiaries treated as current liabilities in accordance with GAAP, including without limitation, all obligations payable on demand or within one year after the date on which the determination is made, and final maturities and sinking funds payments required to be made within one year after the date on which the determination is made, but excluding all such liabilities or obligations which are renewable or extendible at the option of such Person to a date more than one year from the date of determination. "Current Ratio" shall mean, at any time, the ratio of Current Assets to Current Liabilities. "Debt" shall mean any and all amounts and/or liabilities owing from time to time by Borrowers (or any one or more of them) to any Person, including the Bank, direct or indirect, liquidated or contingent, now existing or hereafter arising, including without limitation (i) indebtedness for borrowed money; (ii) the amounts of all standby and commercial letters of credit and bankers acceptances, matured or unmatured, issued on behalf of Borrowers (or any one or more of them); (iii) guaranties by the Borrowers (or of any one or more of them) of the obligations of any other Person, whether direct or indirect, whether by agreement to purchase the indebtedness of any other Person or by agreement for the furnishing of funds to any other Person through the purchase or lease of goods, supplies or services (or by way of stock purchase, capital contribution, advance or loan) for the purpose of paying or discharging the indebtedness of any other Person, or otherwise; (iv) the present value of all obligations of the Borrowers (or any one or more of them) for the payment of rent or hire of property of any kind (real or personal) under leases or lease agreements required to be capitalized under GAAP, and (v) trade payables incurred in the ordinary course of business or otherwise by Borrowers (or any one or more of them). "Debt Service Coverage Ratio" shall mean, for any twelve-month period ending on the date of determination of same, the ratio of (1) the earnings of Emerging Alpha and its Consolidated Subsidiaries before interest, taxes, depreciation and amortization during such period to (2) the amount of interest expense and current maturities of long-term indebtedness of Emerging Alpha and its Consolidated Subsidiaries during such period. "Default" shall mean an event which with the giving of notice or the lapse of time (or both) would constitute an Event of Default hereunder. "Dollars" and "$" shall mean lawful money of the United States of America. "Eligible Inventory" shall mean all of the Inventory of Borrowers except: 3 (a) Inventory that is not encumbered by a first priority perfected Encumbrance granted in favor of Bank, where first priority perfection is confirmed by evidence or opinions acceptable to Bank. (b) Inventory that is not owned by Borrowers free and clear of all Encumbrances and claims of third parties except for Permitted Encumbrances. (c) Inventory that Bank, in its sole discretion, deems obsolete, unsalable, damaged, defective, or unfit for sale or lease or further processing. (d) Inventory which Bank, exercising reasonable credit judgment, deems to be unqualified or ineligible. (e) Inventory located at a leased location unless a subordination of the landlord's lien has been provided to Bank in form and substance which is satisfactory to Bank. "Eligible Receivables" shall mean, at any time, all Receivables which contain selling terms and conditions acceptable to Bank. The net amount of any Eligible Receivables against which Borrowers may borrow shall exclude all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Bank in writing, Eligible Receivables do not include: (a) Receivables that are not encumbered by a first priority perfected Encumbrance granted in favor of Bank, where first priority perfection is confirmed by evidence or opinions acceptable to Bank. (b) Receivables that are not free and clear of all Encumbrances and claims of third parties, except for Permitted Encumbrances. (c) Receivables that have not been paid in full within the earlier of (i) three (3) times ordinary invoice terms from the invoice date, or (ii) ninety (90) days from the invoice date. (d) Receivables of any Account Debtor with more than twenty-five percent (25%) aggregate Receivables owed being due and payable for more than the lesser of (i) three (3) times ordinary invoice terms from the invoice date, or (ii) ninety (90) days from the invoice date, unless Bank, upon request of Borrowers and in its sole discretion, agrees to allow inclusion of the Receivables from any particular Account Debtor for a particular month as Eligible Receivables. (e) Receivables due from any single Account Debtor (including all subsidiaries and affiliates of an Account Debtor) in excess of fifty percent (50%) of either Borrower's total otherwise Eligible Receivables, unless 4 Bank, upon request of Borrowers and in its sole discretion, agrees to allow inclusion of the excess Receivables (or a portion thereof) from any such Account Debtor for a particular month as Eligible Receivables. (f) Receivables with respect to which the Account Debtor is a shareholder, a director, an officer, an employee, or an agent of either Borrower. (g) Receivables with respect to which the Account Debtor is a Subsidiary of, or affiliated with or related to either Borrower or its shareholders, directors, or officers. (h) Receivables with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment by the Account Debtor may be conditional. (i) Receivables with respect to which the Account Debtor is a resident of, or incorporated in, a jurisdiction located outside of the United States, except to the extent such Receivables are supported by insurance, bonds or other assurances satisfactory to Bank. (j) Receivables with respect to which either Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to such Borrower. (k) Receivables which are subject to dispute, counterclaim, or setoff. (l) Receivables with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor. (m) Receivables which Bank, exercising reasonable credit judgment, deems to be ineligible for any reasonable reason. (n) Receivables of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had appointed a trustee, custodian, or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or fails generally to pay its debts (including its payrolls) as such debts become due. (o) Receivables with respect to which the Account Debtor is the United States government or any department or agency of the United States, unless encumbered by a first priority perfected Security Interest granted in favor of Bank, acknowledged by the appropriate governmental agency and where first priority perfection is confirmed by evidence or opinions acceptable to Bank. 5 (p) Receivables arising pursuant to a bonded contract. "Emerging Alpha" shall mean Emerging Alpha Corporation, a Delaware corporation which intends to change its name to Compresco, Inc., together with its successors and assigns. "Encumbrances" shall mean individually, collectively and interchangeably any and all presently existing and/or future mortgages, liens, privileges, servitudes, rights-of-way and other contractual and/or statutory security interests and rights of every nature and kind that, now and/or in the future may affect the property of either Borrower or any part or parts thereof. "Environmental Laws" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., the Louisiana Environmental Affairs Act, La. R.S. 30:2001 et seq., or other applicable Governmental Requirements or regulations adopted pursuant to any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "Equipment" shall mean all machinery, equipment, furniture and fixtures, now owned or hereafter acquired by either Borrower, or in which either Borrower now has or hereafter may acquire any right, title or interest, and any and all additions, substitutions and replacements thereof, wherever located, together with all attachments, components, parts, products, equipment and accessories installed therein or affixed thereto, including, but not limited to, all equipment as defined in ss. 9-109(2) of the UCC, and all fixtures as defined in ss. 9-313(1)(a) of the UCC. "Event of Default" shall mean individually, collectively and interchangeably any of the Events of Default set forth below in Section 10.1 hereof. "Funded Debt" shall mean, at any time, the sum of all interest-bearing Debt of Emerging Alpha and its Consolidated Subsidiaries. "Funded Debt to Cash Flow Ratio" shall mean, as of the end of each fiscal quarter of Emerging Alpha and its Consolidated Subsidiaries (including Gas Jack), the ratio of (1) the amount of Funded Debt of Emerging Alpha and its Consolidated Subsidiaries at the end of such fiscal quarter, to (2) the amount of Cash Flow of Emerging Alpha and its Consolidated Subsidiaries for the immediately preceding twelve-month period ending as of the end of the such fiscal quarter. "GAAP" shall mean, at any time, accounting principles generally accepted in the United States as then in effect. 6 "Gas Jack" shall mean Gas Jack, Inc., an Oklahoma corporation, together with its successors and assigns. "General Intangibles" shall mean all general intangibles, as defined in ss.9-106 of the UCC, of the Borrowers, whether now owned or hereafter acquired, and shall include, without limitation (i) all contractual rights and obligations or indebtedness owing to Borrowers (other than Receivables) from whatever source arising (including, without limitation, all rights of the Borrowers under leases of compressors or other Inventory or Equipment of Borrowers to third parties); (ii) all things and actions, rights represented by judgments and claims arising out of tort and other claims related to the Collateral, including the right to assert and otherwise be the proper party of interest to commence and prosecute actions; (iii) all goodwill, patents, patent licenses, trademarks, trademark licenses, trade names, service marks, trade secrets, rights and intellectual property, copyrights, permits and licenses; (iv) all rights or claims in respect of refunds for taxes paid; and (v) all deposit accounts of Borrowers. "Governmental Requirement" shall mean any applicable state, federal or local law, statute, ordinance, code, rule, regulation, order or decree. "Guaranties" shall mean that certain Commercial Guaranty of Brooks Mims Talton, III, dated of even date herewith, together with any other guaranties of any Person which guarantee payment of any part of the Indebtedness, as any of such guaranties may be amended and from time to time in effect. "Guarantors" shall mean Brooks Mims Talton, III, together with any other Persons who may from time to time guarantee payment of any part of the Indebtedness. "Indebtedness" shall mean, at any time, the indebtedness of Borrowers evidenced by the Revolving Note executed by Borrowers pursuant to this Agreement, in principal, interest, costs, expenses and reasonable attorneys' fees and all other fees and charges, together with all commitment fees and other indebtedness and costs and expenses for which Borrowers are responsible under this Agreement or under any of the Related Documents. In addition, the word "Indebtedness" also includes any and all other loans, extensions of credit, obligations, debts and liabilities, plus interest thereon, of Borrowers (or either one of them) that may now and in the future be owed to or incurred in favor of Bank, as well as all claims by Bank against Borrowers, whether existing now or later; whether they are voluntary or involuntary, due or to become due, direct or indirect or by way of assignment, determined or undetermined, absolute or contingent, liquidated or unliquidated; whether Borrowers may be liable individually or jointly with others, of every nature and kind whatsoever, in principal, interest, costs, expenses and reasonable attorneys' fees and all other fees and charges; whether Borrowers may be obligated as principal obligor, guarantor, surety, accommodation party or otherwise. "Inventory" shall mean all inventory, as defined in ss.9-109(4) of the UCC, of Borrowers, whether now owned or hereafter acquired by Borrowers, wherever located, and shall include all of Borrowers' raw materials, work in process, finished goods, merchandise, 7 parts and supplies, of every kind and description, and goods held for sale or lease or furnished under contracts of service in which Borrowers now have or hereafter acquire any right, whether held by Borrowers or others, and all documents of title, warehouse receipts, bills of lading, and all other documents of every type covering all or any part of the foregoing. Inventory includes inventory temporarily out of the custody or possession of Borrowers and all returns on Receivables. "Investment Property" shall all investment property of Borrowers, whether now owned or hereafter acquired, consisting of certificated and uncertificated securities, securities entitlements, securities accounts, commodity contracts and commodity accounts (as each of said items are defined in ss. 9-115 of the UCC and in La. R. S. 10:8-102). "Keenan" shall mean Burt H. Keenan (Social Security No. ###-##-####), his successors, heirs, legatees and assigns. "Loan Documents" shall mean this Agreement, the Revolving Note, the Collateral Documents and any other Related Documents. "Lockbox Account" shall have the meaning ascribed to such term in Section 8.15 hereof. "Material Adverse Change" shall mean, with respect to either of the Borrowers, an event which causes a material adverse effect on the business, assets, operations or condition (financial or otherwise) of either such Borrower, or which otherwise changes in a materially adverse way any other facts, circumstances or conditions which Bank has relied upon or utilized in making the Revolving Loan Commitment hereunder. "Permitted Encumbrances" shall have the meaning ascribed to such term in Section 9.4 hereof. "Person" shall mean an individual or a corporation, partnership, trust, joint venture, incorporated or unincorporated association, joint stock company, government, or an agency or political subdivision thereof, or other entity of any kind. "Receivables" shall mean, with respect to Borrowers, all accounts (as such term is defined in ss.9-106 of the UCC) of Borrowers, and shall include all trade accounts, other receivables, or other rights to payment for goods sold or leased by or services rendered by Borrowers (or a third party grantor acceptable to Bank). "Related Documents" shall mean and include individually, collectively, interchangeably and without limitation all promissory notes, credit agreements, loan agreements, guaranties, security agreements, mortgages, collateral mortgages, deeds of trust, and all other instruments and documents, whether now or hereafter existing, executed in connection with the Indebtedness. 8 "Revolving Loan Commitment" means the agreement by Bank to Borrowers to make Revolving Loans in accordance with the provisions of Article II hereof. "Revolving Loans" shall mean loans made by Bank under the Revolving Note to Borrowers in accordance with and subject to the terms of the Revolving Loan Commitment. "Revolving Note" shall mean that certain promissory note made by Borrowers, as co-makers, dated of even date herewith, payable to the order of Bank in principal amount of $1,000,000.00, as said Revolving Note is more fully described in Section 2.1 hereof, together with any and all extensions, renewals, modifications and substitutions therefor. "Security Agreements" shall mean, collectively, (i) that certain Commercial Security Agreement dated of even date herewith by Emerging Alpha in favor of Bank, affecting, without limitation, all of Emerging Alpha's Receivables, Inventory, Investment Property, Equipment, General Intangibles and deposit accounts and other funds on deposit with Bank, as the same may be amended or modified from time to time, and (ii) that certain Commercial Security Agreement dated of even date herewith by Gas Jack in favor of Bank, affecting, without limitation, all of Gas Jack's Receivables, Inventory, Investment Property, Equipment, General Intangibles and deposit accounts and other funds on deposit with Bank, as the same may be amended or modified from time to time. "Securities Account Pledge" shall mean that certain Investment Property Security Agreement dated October 8, 1999, by Keenan in favor of Bank affecting, among other property described therein, all of Keenan's rights in and to that certain investment account no. 5AL005694 maintained by Keenan with Hibernia Investment Securities, Inc., as the same may be amended or modified from time to time. "Solvent" shall mean, when used with respect to any Person on a particular day, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including without limitation, contingent liabilities, of such person, (ii) the present fair salable value of the assets of such person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts and liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (v) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all of the facts and circumstances existing at such time, represents the amount that can be reasonably expected to become an actual or matured liability. 9 "Subsidiaries" shall mean at any date, with respect to any Person, all the corporations of which such Person at such date, directly or indirectly, owns 50% or more of the outstanding capital stock (excluding directors' qualifying shares), and "Subsidiary" means any one of the Subsidiaries. "Stock Pledge" shall mean that certain Pledge and Security Agreement dated October 29, 1999, by Emerging Alpha in favor of Bank, affecting all outstanding shares of stock of Gas Jack and certain other collateral more fully described therein, as the same may be amended or modified from time to time. "Tangible Net Worth" shall mean, at any time, the amount of the total assets of Emerging Alpha and its Consolidated Subsidiaries, determined on a consolidated basis, excluding intangible assets (i.e., patents, copyrights, trademarks, trade names, franchises, goodwill, organizational expenses, and similar intangible expenses, but including leaseholds and leasehold improvements), less the amount of the total liabilities of Emerging Alpha and its Consolidated Subsidiaries, determined on a consolidated basis. "Termination Date" shall mean, with respect to Bank's Revolving Loan Commitment, the earlier to occur of (a) October 29, 2001, or (b) the earlier date of termination of the Revolving Loan Commitment pursuant to Article X hereof. "UCC" shall mean the Uniform Commercial Code, Commercial Laws-Secured Transactions (La. R.S. 10:9-101 et seq.) in the State of Louisiana, as amended from time to time, provided that if by reason of mandatory provisions of law, the perfection or effect of perfection or non-perfection of the Bank's Encumbrances against the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Louisiana, "UCC" means the Uniform Commercial Code as in effect in such other jurisdiction. Section 1.2. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, and all financial data submitted pursuant to this Agreement shall be prepared in accordance with GAAP. ARTICLE II REVOLVING LOANS Section 2.1. The Revolving Loan Commitment. Subject to the terms and conditions of this Agreement, Bank agrees to extend credit to Borrowers during the period from the date hereof until the Termination Date by making Revolving Loans to Borrowers from time to time; provided, however, that at no time shall the sum of the aggregate principal amount of Revolving Loans to Borrowers at such time outstanding (said sum, at any time, being hereinafter referred to as the "Bank's Current Revolving Loan Commitment Exposure"), exceed the Borrowing Base Amount then in effect. In the event, at any time, and from time to time, the Bank's Current 10 Revolving Loan Commitment Exposure exceeds the Borrowing Base Amount then in effect, Borrowers shall immediately prepay the Revolving Loans by such an amount to cause the Bank's Current Revolving Loan Commitment Exposure to equal the Borrowing Base Amount (or, at the option of Bank, Borrowers may post cash collateral or other collateral acceptable to Bank in its sole discretion to secure such deficiency in the Borrowing Base Amount). Within the limits set forth herein, Borrowers may borrow from Bank hereunder, repay any and all such Revolving Loans as hereinafter provided and reborrow hereunder. Borrowers' obligation to repay the Revolving Loans made by Bank shall be evidenced by a master promissory note made by Borrowers as co-makers (the "Revolving Note") payable to the order of Bank in the principal sum of $1,000,000.00, dated the date of this Agreement, with a final maturity of October 29, 2001, and bearing interest at the Base Rate from time to time in effect, adjusted daily. The Borrowers shall be solidarily liable for all Revolving Loans and other obligations to Bank arising pursuant to this Agreement or the Revolving Note. Section 2.2. Manner and Notice of Borrowing Under the Revolving Loan Commitment. Requests for advances under the Revolving Loan Commitment may be made by Borrowers in person, in writing or through telephone calls to Bank and such requests shall be fully authorized by Borrowers if made by any one of the persons designated by Borrowers in writing to Bank. Bank shall have the right, but not the obligation, to verify any telephone requests by calling the person who made the request at the telephone number designated by Borrowers in writing to Bank. Requests for advances must be received by not later than 11:00 a.m. (Central Time) on the date of the proposed advance. Section 2.3. Payment of the Revolving Note Under the Revolving Loan Commitment. Interest on the unpaid principal balance of the Revolving Note shall be payable monthly on the last day of each month, commencing November 30, 1999, and on the last day of each month thereafter until the Revolving Note is paid in full. All principal shall be payable in a single installment due on the Termination Date; subject to, however, the mandatory prepayment requirement set forth above in Section 2.1 hereof which requires Borrowers to prepay the Revolving Loans under the Revolving Note in the event, at any time and from time to time, the Bank's Current Revolving Loan Commitment Exposure exceeds the Borrowing Base Amount then in effect (or which, at the option of Bank, requires that Borrowers post cash collateral or other collateral acceptable to Bank in its sole discretion, to secure such deficiency in its Borrowing Base Amount). Borrowers hereby authorize Bank to debit their checking accounts maintained with Bank to pay interest due on the Revolving Note on each interest payment date and to credit all proceeds of their Receivables received in the Lockbox Account when collected (or earlier, if Bank in its sole discretion allows such funds to be available to Borrowers prior to the date on which any checks or other instruments given in payment of Receivables are actually collected) towards payment of the Revolving Loans outstanding under the Revolving Note. Section 2.4. Proceeds of Lockbox Account. Borrowers have executed (or shall, within 90 days of the date hereof, execute) a lockbox agreement with Bank, pursuant to which all checks, drafts and other instruments evidencing payment of Borrowers' Receivables shall be delivered to Bank and deposited into Borrowers' Lockbox Account more fully described in Section 8.15 hereof. Borrowers authorize Bank to apply, from time to time, at Borrower's 11 request, the proceeds of their Receivables actually collected (or, at the sole discretion of Bank, amounts which have been received but not yet collected) by the Bank from the Lockbox Account to reduce in whole or in part the outstanding principal balance of the Revolving Loans due under the Revolving Note. Such payments will adjust availability immediately for purposes of loan availability and on the next day for bookkeeping and interest purposes. Section 2.5. Overlines and Overadvances. In the event the unpaid principal amount of the outstanding Revolving Loans under the Revolving Loan Commitment ever exceeds the maximum Borrowing Base Amount), Borrowers agree to pay the excess amount (an "overline") immediately upon demand by Bank. In the event the unpaid principal amount of the outstanding Revolving Loans under the Revolving Loan Commitment ever exceeds the current Borrowing Base Amount then in effect, Borrowers agree to pay the excess amount (an "overadvance") immediately upon demand by Bank. Overlines and overadvances shall bear interest at the rate stated in the Note. If not sooner paid, interest on overlines and overadvances shall be paid on the last day of each month, until the Termination Date. Upon request of Bank, Borrowers shall execute a promissory note, payable to the order of Bank, to represent the amount of any overline and any overadvance; however, Borrowers acknowledge and agree that the records of Bank and this Agreement shall constitute conclusive evidence of any overline or overadvance and the obligation of Borrowers to repay any overline or overadvance, with interest. All overlines and overadvances for which Bank has not demanded payment earlier, and all unpaid and accrued interest on overlines and overadvances not due and payable earlier, shall be due and payable on the Termination Date. Borrowers acknowledge and agree that Bank is not obligated to Borrowers to make any Revolving Loan that would create an overline or an overadvance. Section 2.6. Early Termination. Bank agrees that Borrowers shall have the right to terminate this Agreement prior to the Termination Date upon Borrowers (a) giving Lender ninety (90) days' written notice of termination and designating a termination effective date, and (b) paying to Bank on the designated termination effective date, the aggregate unpaid principal amount of all Revolving Loans then outstanding and all accrued unpaid interest, together with all other applicable fees, costs and charges, if any, not yet paid. Section 2.7. Use of Proceeds. Borrowers shall use the proceeds of the Revolving Loans for general corporate purposes (but not for the purchase of any producing oil and gas properties). ARTICLE III [Intentionally left blank] 12 ARTICLE IV CERTAIN GENERAL PROVISIONS Section 4.1. Payments to Bank. All payments of principal, interest, commitment fees and any other amounts due hereunder or under any of the other Related Documents shall be made to the Bank at the Bank's office at 313 Carondelet Street, New Orleans, Louisiana 70130, or at such other location that the Bank may from time to time designate in writing to Borrowers, in each case in immediately available funds. Section 4.2. No Offset, etc. All payments by Borrowers hereunder and under any of the other Related Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless Borrowers are compelled by law to make such deduction or withholding. If any such obligation is imposed upon Borrowers with respect to any amount payable by them hereunder or under any of the other Loan Documents, Borrowers will pay to the Bank, on the date on which such amount is due and payable hereunder or under such other Related Document, such additional amount as shall be necessary to enable the Bank to receive the same net amount which Bank would have received on such due date had no such obligation been imposed upon Borrowers. Borrowers will deliver promptly to the Bank certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by Borrowers hereunder or under such other Loan Documents. Section 4.3. Computations. All computations of interest on the Revolving Loans and of commitment or other fees shall be assessed utilizing a 360-day daily interest factor over the number of days in an actual calendar year (365 days or 366 days in a leap year). Bank shall determine each interest rate applicable to the Revolving Loans in accordance with this Agreement, and Bank's determination of same shall be conclusive in the absence of manifest error. Except as otherwise provided herein, whenever a payment hereunder or under any of the other Related Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Revolving Loans as reflected on the Bank's books and records from time to time shall be prima facie evidence of the amounts so outstanding. Section 4.4. Additional Costs, etc. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to the Bank 13 by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (1) subject the Bank to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Related Documents or the Indebtedness (other than taxes based upon or measured by the revenue, income or profits of the Bank), or (2) materially change the basis of taxation (except for changes in taxes on revenue, income or profits) of payments to the Bank of the principal of or the interest on the Indebtedness of any other amounts payable to the Bank under this Agreement or the other Related Documents, or (3) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or commitments of an office of the Bank, or (4) impose on the Bank any other conditions or requirements with respect to this Loan Agreement, the other Related Documents, the Indebtedness, or any class of loans of which the Indebtedness forms a part, and the result of any of the foregoing is (i) to increase the cost to the Bank of making, funding, issuing, renewing, extending or maintaining the Indebtedness, or (ii) to reduce the amount of principal, interest or other amount payable to the Bank hereunder on account of such the Indebtedness, or (iii) to require the Bank to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by the Bank from Borrowers hereunder, then, and in each such case, Borrowers will, upon demand made by the Bank at any time and from time to time and as often as the occasion therefor may arise, pay to the Bank such additional amounts as will be sufficient to compensate the Bank for such additional cost, reduction, payment or foregoing interest or others sum. Section 4.5. Capital Adequacy. If after the date hereof the Bank reasonably determines that (a) the adoption of or change in any law, governmental rule, regulations, policy guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (b) compliance by the Bank or any corporation controlling the Bank with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding 14 capital adequacy, has the effect of reducing the return on the Bank's Revolving Loans to a level below that which the Bank could have achieved but for such adoption, change or compliance (taking into consideration the Bank's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by the Bank to be material, then the Bank may notify Borrowers of such fact. Borrowers agree to pay the Bank for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by the Bank of a certification in accordance with paragraph Section 4.6. Section 4.6. Certificate; Optional Right of Prepayment. Bank shall provide Borrowers with a certificate setting forth any additional amounts which it declares to be payable pursuant to Sections 4.4 and 4.5 hereof, and a complete explanation of such amounts which are due, and each such certificate shall be conclusive, absent manifest error, that such amounts are due and owing. Borrowers shall have the right, at any time within 90 days of receipt of any such certificate, to prepay all the Revolving Loans (subject to any and all prepayment penalties, if any, under the terms of this Agreement) without being obligated to pay any such additional costs set forth in such certificate, after which Bank shall promptly terminate, discharge and release of record (at Borrowers' expense) all of its Encumbrances affecting the Collateral and return all Collateral to Borrowers. Section 4.7. Fees for the Revolving Loans. In addition to the other fees and expenses described in Section 11.4 hereof, the Borrowers have paid or shall pay Bank the following fees: (a) Borrowers shall pay Bank upon the execution of this Agreement the remaining balance due on the Bank's total commitment fee in the amount of $10,000.00 for the Revolving Loan Commitment, which fee has been fully earned by Bank regardless of whether the Revolving Loans are ever funded. (b) Borrowers shall pay Bank for the costs (including hourly rates of personnel and out-of-pocket expenses) of performing field examinations of the Collateral not more than twice per year. (c) Borrowers shall pay to Bank an unused facility fee on the daily average unused portion of the Revolving Loan Commitment [the "unused portion" being the amount by which the maximum dollar amount of the Revolving Note ($1,000,000.00) exceeds the outstanding principal balance due under the Revolving Note] from the date of this Agreement through the Termination Date, at the rate of 0.375% per annum, payable for each three (3) calendar month period (each calendar quarter), in arrears, fifteen (15) days after last day of each calendar quarter. The first unused facility fee payment is due on January 15, 2000, covering the period beginning on the date of this Agreement through December 31, 1999. 15 ARTICLE V SECURITY FOR THE INDEBTEDNESS Section 5.1. Security. The Indebtedness shall be secured by the following: (a) the Assignment of Leases; (b) the Security Agreements; (c) the Guaranties; (d) the Stock Pledge; (e) the Securities Account Pledge; and, (f) such other Collateral Documents now or hereafter granted by any Person as security for any part of the Indebtedness. Section 5.2. Agreement to Release Securities Account Pledge. Bank hereby agrees that in the event that the shareholders of Emerging Alpha contribute an additional $1 million in equity subsequent to the date hereof, and Emerging Alpha thereafter applies as much of such additional equity as may be required to pay all then outstanding Revolving Loans, Bank agrees, provided no Default or Event of Default then exists, to release the Securities Accounts Pledge and any claim or Encumbrance to the funds and/or securities contained therein. ARTICLE VI CONDITIONS PRECEDENT Section 6.1. Conditions Precedent to All Revolving Loans. The obligation of Bank to make any Revolving Loans hereunder shall be subject to the satisfaction and the continued satisfaction of the following conditions precedent: (a) Borrowers shall have executed and delivered to Bank this Agreement, the Collateral Documents, the Revolving Note and all other documents required by this Agreement, all in form and substance and in such number of counterparts as may be required by Bank; (b) Brooks Mims Talton, III, shall have executed and delivered to Bank his unlimited in solido Guaranty of the Indebtedness and all other present and future Debt of Borrowers to Bank. 16 (c) The representations and warranties of Borrowers and Guarantors as set forth herein, or any Related Document furnished to Bank in connection herewith, shall be and remain true and correct; (d) Bank shall have received a favorable legal opinion of counsel to Borrowers and Guarantors, in scope and substance satisfactory to Bank; (e) Bank shall have received certified resolutions of Borrowers authorizing the Revolving Loans and the execution and delivery of all documents contemplated hereby; (f) Bank shall have received all fees, charges and expenses which are due and payable as specified in this Agreement or any Related Document; (g) No Default or Event of Default shall exist or shall result from the making of a Revolving Loan; (h) Borrowers shall have each provided Bank with all financial statements, reports and certificates required by this Agreement (including an initial borrowing base certificate of Borrowers); (i) Bank's counsel shall have reviewed the corporate structure and articles of incorporation of Borrowers, and shall be satisfied with the validity, due authorization and enforceability of all Related Documents; (j) There shall have been no change to the corporate structure and ownership of Borrowers than from what has been previously represented to Bank; (k) Bank shall have received evidence acceptable to Bank and its counsel that its Encumbrances affecting the Collateral shall have a first priority position, subject only to Permitted Encumbrances; (l) Bank shall have received evidence that all other policies of insurance required by this Agreement and the Collateral Documents are in full force and effect, (m) Bank, at its option and for its sole benefit, shall have conducted an audit of each Borrowers' payment records, ledger sheets, and computer tapes or disks kept to record payment information, and of Borrowers' other books, records, and operations, and Bank shall be satisfied as to their condition. (n) Keenan shall have granted the Securities Account Pledge to Bank, the securities account affected by the Securities Account Pledge shall have been established by Keenan with the purchase or deposit of securities or cash therein with an aggregate market value of not less than $1 million, and Keenan, Hibernia Investment Securities Corporation, and Bank shall have entered into an account control agreement on terms and conditions acceptable to Bank which provide Bank with "control" over such securities account within the meaning of Section 9-115 of the UCC. 17 (o) Emerging Alpha shall have delivered all outstanding and issued shares of stock of Gas Jack to Bank, together with stock powers and Reg U statements which Bank may reasonably require, pursuant to the terms of the Stock Pledge. (n) There shall have occurred no Material Adverse Change. ARTICLE VII REPRESENTATIONS AND WARRANTIES Borrowers represent and warrant to Bank as follows: Section 7.1. Corporate Authority. Emerging Alpha is a corporation duly created, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified and in good standing as a foreign corporation in all other jurisdictions where the failure to qualify would have an adverse effect upon its ability to perform its obligations under this Agreement and all Related Documents. Gas Jack is a corporation duly created, validly existing and in good standing under the laws of the State of Oklahoma, and is duly qualified and in good standing as a foreign corporation in all other jurisdictions where the failure to qualify would have an adverse effect upon its ability to perform its obligations under this Agreement and all Related Documents. Borrowers have the power to enter into this Agreement, issue the Revolving Note, mortgage and grant security interests in the Collateral in the manner and for the purpose contemplated by the Collateral Documents. Borrowers have the corporate power to perform their obligations hereunder and under this Agreement and of the Related Documents. The making and performance by Borrowers of this Agreement and of the Related Documents have been duly authorized by all necessary corporate action (including all necessary shareholder action), and do not and will not violate any provision of any law, rule, regulation, order, writ, judgment, decree, determination or award presently in effect having applicability to Borrowers or the articles of incorporation of Borrowers. The making and performance by Borrowers of this Agreement and the Related Documents do not and will not result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement or instrument to which either Borrower is a party or by which it may be bound or affected, or result in, or require, the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance of any nature (other than as contemplated this Agreement and by the Related Documents) upon or with respect to any of the properties now owned or hereafter acquired by such Borrower, and neither Borrower is in default under or in violation of any such order, writ, judgment, decree, determination, award, indenture, agreement or instrument. This Agreement and each of the Related Documents to which either Borrower is a party constitutes legal, valid and binding obligations of each such Borrower, enforceable in accordance with its terms, except to the extent that the enforceability of such instruments may be subject to the effect of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, or the effect of general equity principles. 18 Section 7.2. Financial Statements. The balance sheet of Borrowers at the date thereof, and the related statements of income and retained earnings for the periods covered thereby, copies of which have been delivered to Bank, are complete and correct and fairly present the financial condition of Borrowers as of the date or dates thereof. Each of said financial statements were prepared in conformity with GAAP applied on a basis consistent with the preceding year. No Material Adverse Change has occurred since said dates in the financial position or in the results of operations of Borrowers in their businesses taken as a whole. Section 7.3. Title to Collateral. Each Borrower has good and marketable title to the Collateral in which it has or shall grant Bank an Encumbrance as security for the Indebtedness, free and clear of all Encumbrances other than Permitted Encumbrances. The Collateral Documents constitute legal, valid and perfected first Encumbrances on the property interests covered thereby, subject only to Permitted Encumbrances. Section 7.4. Litigation. Other than as has been disclosed previously to Bank in writing, there are no material legal actions, suits or proceedings pending or, to the best of each Borrower's knowledge, threatened against or affecting such Borrower or any of its properties before any court or administrative agency (federal, state or local), which, if determined adversely to such Borrower, would constitute a Material Adverse Change, and there are no judgments or decrees affecting Borrowers or their properties (including, without limitation, the Collateral) which are or may become an Encumbrance against such properties. Section 7.5. Approvals. No authorization, consent, approval or formal exemption of, nor any filing or registration with, any governmental body or regulatory authority (federal, state or local), and no vote, consent or approval of the shareholders of Borrowers is or will be required in connection with the execution and delivery by Borrowers of the Related Documents or the performance by Borrowers of their obligations hereunder and under the other Related Documents. Section 7.6. Licenses. Each Borrower possesses adequate franchises, licenses and permits to own its properties and to carry on its business as presently conducted. Section 7.7. Adverse Agreements. Neither Borrower is a party to any agreement or instrument, or subject to any charter or other restriction, materially and adversely affecting its business, properties, assets, or operations or its condition (financial or otherwise), and neither Borrower is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party, which default would constitute a Material Adverse Change. Section 7.8. Default or Event of Default. No Default or Event of Default hereunder has occurred or is continuing or will occur as a result of the giving effect hereto. Section 7.9. Employee Benefit Plans. Each employee benefit plan as to which Borrowers may have any liability complies in all material respects with all applicable requirements of law and regulations, and (i) no Reportable Event (as defined in ERISA) has 19 occurred with respect to any such plan, (ii) neither Borrower has withdrawn from any such plan or initiated steps to do so, and (iii) no steps have been taken to terminate any such plan. Section 7.10. Investment Company Act. Neither Borrower is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Section 7.11. Public Utility Holding Company Act. Neither Borrower is a "holding company," or a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 7.12. Regulations G, T and U. Neither Borrower is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, T and U of the Board of Governors of the Federal Reserve System), and none of the proceeds of the Revolving Loans will be used for the purpose of purchasing or carrying such margin stock. Section 7.13. Location of Borrowers' Offices, Records and Inventory and Equipment. The chief place of business of Borrowers, and the office where Borrowers keeps their records concerning the Collateral, and the present locations of Borrowers' Inventory (other than Inventory out on lease) and Equipment, are as follows: Place of Business/Records Location Inventory and Equipment Locations - ---------------------------------- --------------------------------- Emerging Alpha - 17571 Red Oak Drive 17571 Red Oak Drive Houston, TX 77090 Houston, TX 77090 (no presently owned Inventory) Gas Jack - 17571 Red Oak Drive 17571 Red Oak Drive Houston, TX 77090 Houston, TX 77090 8224 SW 3rd 8224 SW 3rd Oklahoma City, OK 73128 Oklahoma City, OK 73128 Section 7.14. Information. All information heretofore or contemporaneously herewith furnished by Borrowers to Bank for the purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all information hereafter furnished by or on behalf of Borrowers to Bank will be, true and accurate in every material respect on the date as of which such information is dated or certified; and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading. 20 Section 7.15. Environmental Matters. Except as may have been disclosed in writing to Bank prior to the date hereof, no properties of Borrowers has ever been, and ever will be so long as this Agreement remains in effect, used for the generation, manufacture, storage, treatment, disposal, release or threatened release of any hazardous waste or substance, as those terms are defined in the Environmental Laws, except in compliance with such Environmental Laws. Except as may have been disclosed in writing by Borrowers to Bank, Borrowers represent and warrant that they are in compliance with all Environmental Laws affecting them and their properties. Section 7.16. Solvency of Borrowers. Each Borrower is, and after consummation of the transactions contemplated by this Agreement (including the making of the Revolving Loans), and after giving effect to all obligations incurred by each such Borrower in connection herewith, will be, Solvent. Section 7.17. Year 2000 Compliance. Borrowers represent and warrant that all material systems used in the conduct of their respective businesses will have appropriate capabilities and compatibility to handle calendar dates falling on or after January 1, 2000, and all information pertaining to such calendar dates. Upon reasonable request, Borrowers agree to provide to Bank documentation satisfactory to Bank to establish that its systems and software are year 2000 compliant, or that Borrowers are in the process of implementing a plan to ensure that their systems and software will be 2000 compliant before December 31, 1999. Section 7.18. Survival of Representations and Warranties. Borrowers understand and agree that Bank is relying upon the above representations and warranties in making the Revolving Loans to Borrowers. Borrowers further agree that the foregoing representations and warranties shall be continuing in nature and shall remain in full force and effect until such time as the Indebtedness shall be paid in full, or until this Agreement shall be terminated, whichever is the last to occur. ARTICLE VIII AFFIRMATIVE COVENANTS In addition to the covenants contained in the Collateral Documents, which covenants are hereby ratified and confirmed by Borrowers, Borrowers covenant and agree as follows: Section 8.1. Financial Statements. Borrowers will furnish or cause to be furnished to Bank: (a) within forty-five (45) days following the end of each fiscal quarter of Borrowers, financial statements consisting of a balance sheet of each Borrower as of the end of such fiscal quarter, and statements of income and statements of cash flow of 21 each Borrower for such fiscal quarter and for the fiscal year through such fiscal quarter, all certified by the chief financial officer of each Borrower as having been prepared in accordance with GAAP consistently applied; (b) within forty-five (45) days following the end of each fiscal quarter of Borrowers, the consolidated and consolidating financial statements of Emerging Alpha and its Consolidated Subsidiaries consisting of a balance sheet as of the end of such fiscal quarter, and statements of income and statements of cash flow of Emerging Alpha and its Consolidated Subsidiaries for such fiscal quarter and for the fiscal year through such fiscal quarter, all certified by the chief financial officer of Emerging Alpha as having been prepared in accordance with GAAP consistently applied, together with the 10-Q or equivalent report submitted by Emerging Alpha to the Securities and Exchange Commission for such period; (c) as soon as available and in any event within ninety (90) days following the close of each fiscal year of Borrowers, unqualified audited consolidated and consolidating financial statements of Emerging Alpha and its Consolidated Subsidiaries consisting of a balance sheet as of the end of such fiscal year and statements of income, and statement of cash flow for such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, certified by independent public accountants of recognized standing acceptable to Bank, together with the 10-K or equivalent report submitted by Emerging Alpha to the Securities and Exchange Commission for such period; (d) within fifteen days (15) of the filing of same, copies of all Forms 1120 and all schedules and attachments thereto as submitted annually to the Internal Revenue Service by Emerging Alpha and its Consolidated Subsidiaries; (e) with each set of quarterly financial reports submitted in accordance with paragraph (a) above, a compliance certificate signed by the chief financial officer of each Borrower, certifying that said officer has reviewed this Agreement and to the best of his or her knowledge no Default or Event of Default has occurred, or if such Default or Event of Default has occurred, specifying the nature and extent thereof, and that all financial covenants in this Agreement have been met, and providing a computation of all financial covenants contained herein; (f) within fifteen (15) days following the end of each calendar month, a borrowing base certificate showing each Borrower's total Receivables and Inventory, minus ineligibles, total Eligible Receivables and Eligible Inventory, usage and availability, in form and substance acceptable to Bank, with such borrowing base certificate to be certified by the chief financial officers of Borrowers; (g) within fifteen (15) days following the end of each calendar month, an aging of each Borrower's Receivables and accounts, together with a certificate executed by the chief financial officer of each Borrower, identifying the amount of Eligible Receivables and Eligible Inventory of each such Borrower as of the end of such 22 month, together with a collateral location report and a lease status report relating to leased Inventory of Borrowers as of the end of such quarter, all in such form and containing such representations and warranties as Bank may reasonably require; (h) as soon as available and in any event within thirty (30) days following the end of each calendar year, the personal financial statements of Brooks Mims Talton, III, signed by Mr. Talton and submitted pursuant to fully completed forms of personal financial statements provided by Bank, together with his federal tax returns and all schedules thereto, within fifteen (15) days of the filing of same; (i) on a bi-annual basis, commencing on the second anniversary date of the date of this Agreement, a third-party collateral appraisal prepared by MB Valuation Services or other reputable appraisal service firm approved by Bank, which is addressed to Bank; (j) within 15 days of receipt of same, copies of all statements received by Keenan from Hibernia Investment Securities, Inc. regarding the securities account subject to the Securities Account Pledge; and, (k) such other necessary financial information concerning Borrowers and Guarantors as Bank may reasonably request from time to time. Section 8.2. Notice of Default; Litigation; ERISA Matters. Borrowers will give written notice to Bank as soon as reasonably possible and in no event more than five (5) Business Days of (i) the occurrence of any Default or Event of Default hereunder of which either of them has knowledge, (ii) the filing of any actions, suits or proceedings against either Borrower in any court or before any governmental authority or tribunal of which it has knowledge which could cause a Material Adverse Change with respect to such Borrower, (iii) the occurrence of a reportable event under, or the institution of steps by either Borrower to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which such Borrower may have liability, or (iv) the occurrence of any other action, event or condition of any nature of which either Borrower has knowledge which may cause, or lead to, or result in, any Material Adverse Change. Section 8.3. Maintenance of Corporate Existence, Properties and Liens. Each Borrower will (i) continue to engage in the business presently being operated by it; (ii) maintain its corporate existence and good standing in each jurisdiction in which it is required to be qualified; (iii) keep and maintain all franchises, licenses and properties necessary in the conduct of its business in good order and condition; (iv) duly observe and conform to all material requirements of any governmental authorities relative to the conduct of its business or the operation of its properties or assets; and, (v) maintain in favor of Bank a first perfected lien and security interest in the Collateral, subject only to other Permitted Encumbrances. Section 8.4. Collateral Schedules and Locations. As often as Bank shall reasonably require, Borrowers shall deliver to Bank schedules of such Collateral, including such information 23 as Bank may require, including without limitation names and addresses of account debtors and agings of Receivables and General Intangibles and the location of all Inventory. Section 8.5. Taxes. Each Borrower shall pay or cause to be paid when due, all taxes, local and special assessments, and governmental and other charges of every type and description, that may from time to time be imposed, assessed and levied against it and its properties. Borrowers further agree to furnish Bank with evidence that such taxes, assessments, and governmental and other charges due by the Borrowers have been paid in full and in a timely manner. Borrowers may withhold any such payment or elect to contest any lien if either such Borrower is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Bank's interest in the Collateral is not jeopardized. Section 8.6. Required Insurance. Borrowers shall maintain insurance with insurance companies in such amounts and against such risks as is usually carried by owners of similar businesses and properties in the same general areas in which each of them operates, and as shall be reasonably satisfactory to Bank, such insurance to include appropriate liability, hazard, business interruption, workmens' compensation coverages as Bank may require, naming Bank as loss payee and/or additional insured, as appropriate. With respect to the Collateral of Borrowers, Borrowers agree to provide Bank with the types of insurance coverages required by the Collateral Documents affecting such Collateral. Borrowers agree to provide Bank with originals or certified copies of such policies of insurance. Borrowers further agree to promptly furnish Bank with copies of all renewal notices and, if requested by Bank, with copies of receipts for paid premium. Borrowers shall provide Bank with originals or certified copies of all renewal or replacement policies of insurance no later than fifteen (15) days before any such existing policy or policies should expire. If Borrowers' insurance policies required hereunder and renewals thereof are held by another person, Borrowers agrees to supply original or certified copies of the same to Bank within the time periods required above. Section 8.7. Performance of Loan Documents. Borrowers shall duly and punctually pay and perform their obligations under the Revolving Note, under this Agreement and under each of the Related Documents, in accordance with the terms hereof and thereof. Section 8.8. Compliance with Environmental Laws. Borrowers shall comply with and shall cause all of their respective employees, agents, invitees or sublessees to comply with all Environmental Laws with respect to the disposal of industrial refuse or waste, and/or the discharge, procession, treatment, removal, transportation, storage and handling of hazardous or toxic wastes and substances, and pay immediately when due the cost of removal of any such waste or substances from, and keep its properties free of any lien imposed pursuant to any such laws, rules, regulations or orders. Each Borrower shall give notice to Bank as soon as reasonably possible and in no event more than five (5) days after it receives any compliance orders, environmental citations, or other notices from any governmental entity relating to any environmental condition relating to its properties or elsewhere for which it may have legal responsibility with a full description thereof. 24 Each Borrower agrees to take any and all reasonable steps, and to perform any and all reasonable actions necessary or appropriate to promptly comply with any such citations, compliance orders or Environmental Laws requiring either such Borrower to remove, treat or dispose of such hazardous materials, wastes or conditions at the sole expense of such Borrower, to provide Bank with satisfactory evidence of such compliance; provided, however, that nothing contained herein shall preclude Borrowers from contesting any such compliance orders or citations if such contest is made in good faith, appropriate reserves are established for the payment for the cost of compliance therewith, and Bank's security interest in any such property affected thereby (or the priority thereof) is not jeopardized. Regardless of whether any Event of Default hereunder shall have occurred and be continuing, Borrowers (i) release and waive any present or future claims against Bank for indemnity or contribution in the event either Borrower becomes liable for remediation costs under and Environmental Laws, and (ii) agree to defend, indemnify and hold harmless Bank from any and all liabilities (including strict liability), actions, demands, penalties, losses, costs or expenses (including, without limitation, reasonable attorneys fees and remedial costs), suits, administrative orders, agency demand letters, costs of any settlement or judgment and claims of any and every kind whatsoever which may now or in the future (whether before or after the termination of this Agreement) be paid, incurred, or suffered by, or asserted against Bank by any person or entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, or release from or onto the property of Borrowers of any hazardous materials, wastes or conditions regulated by any Environmental Laws, contamination resulting therefrom, or arising out of, or resulting from, the environmental condition of such property or the applicability of any Environmental Laws relating to hazardous materials (including, without limitation, CERCLA or any so called federal, state or local "super fund" or "super lien" laws, statute, ordinance, code, rule, regulation, order or decree) regardless of whether or not caused by or within the control of Bank. The covenants and indemnities contained in this Section 8.8 shall survive termination of this Agreement. Section 8.9. Further Assurances. Borrowers will, at any time and from time to time, execute and deliver such further instruments and take such further action as may reasonably be requested by Bank, in order to cure any defects in the execution and delivery of, or to comply with or accomplish the covenants and agreements contained in this Agreement or the Collateral Documents. Section 8.10. Financial Covenants. Borrowers shall comply with the following covenants and ratios: (a) Emerging Alpha and its Consolidated Subsidiaries shall maintain a ratio of Current Ratio of not less than 1.10 to 1.00 as of the end of each fiscal quarter. (b) Emerging Alpha and its Consolidated Subsidiaries shall maintain a Tangible Net Worth of not less than $2,750,447.00 plus 50% of the net income of Emerging 25 Alpha and its Consolidated Subsidiaries (with no deduction for net losses) derived after 12/31/98. (c) Emerging Alpha and its Consolidated Subsidiaries shall maintain a Funded Debt to Cash Flow Ratio of (i) less than or equal to 4.0 to 1.0 as of the end of each fiscal quarter through 12/31/00, (ii) less than or equal to 3.5 to 1.0 as of the end of each fiscal quarter thereafter through 12/31/01, and (iii) less than or equal to 3.0 to 1.0 as of the end of each fiscal quarter thereafter. (d) Emerging Alpha and its Consolidated Subsidiaries shall maintain a Debt Service Coverage Ratio of (i) greater than 1.0 to 1.0 as of the end of each fiscal quarter through 12/31/00 (provided, however, that for the period ending 12/31/00 only, the Debt Service Coverage Ratio shall be based on the current quarter's annualized interest expense), (ii) greater than or equal to 1.2 to 1.0 as of the end of each fiscal quarter thereafter through 12/31/01, and (iii) greater than or equal to 1.50 to 1.0 as of the end of each fiscal quarter thereafter. Section 8.11. Operations. Each Borrower shall conduct its business affairs in a reasonable and prudent manner and in compliance with all applicable federal, state and municipal laws, ordinances, rules and regulations respecting its properties, charters, businesses and operations, including compliance with all minimum funding standards and other requirements of ERISA of 1974, and other laws applicable to any employee benefit plans which it may have, and at all time shall remain a "going concern" as defined by its auditors. Section 8.12. Change of Location. Each Borrower shall, within ten (10) Business Days prior to any such addition or change, notify Bank in writing of any proposed additions to or changes in the location of the Collateral (other than leased Inventory) or of the location of its chief executive office. Section 8.13. Employee Benefit Plans. So long as this Agreement remains in effect, each Borrower will maintain each employee benefit plan as to which it may have any liability, in compliance with all applicable requirements of law and regulations. Section 8.14. Field Audits; Other Information. Each Borrower shall allow Bank's employees and agents access to its books and records and properties during normal business hours to perform field audits from time to time, including an asset based field audit to be conducted to determine the initial Borrowing Base Amount hereunder, on not less than a semiannual basis. Based upon the information provided by such audits, Bank shall have the right to make adjustments to the advance rates for the and/or eligibility definitions used in determining the Borrowing Base Amount and the level of monitoring required. Borrowers will provide Bank with such other information as Bank may reasonably request from time to time. Section 8.15. Lockbox Account. Borrowers shall establish, not later than 90 days from the date of this Agreement, a lockbox account with Bank into which all proceeds of Receivables of Borrowers shall be deposited. Upon the establishment of such account, each Borrower will promptly direct its customers to remit payments of all of their accounts receivable to such 26 lockbox. Remittances received under the lockbox arrangement will be deposited by the Bank to the demand deposit account to be established and maintained by Borrowers with the Bank (the "Lockbox Account"). Borrowers shall deposit all payments of accounts receivable which are not remitted by customers directly to the Lockbox Account into the Lockbox Account on the date such remittance is received. Borrowers will have no access to any funds in the Lockbox Account for so long as any Event of Default exists hereunder. Section 8.16 Pledged Securities Account. Borrowers shall cause Keenan to at all time maintain sufficient cash or securities in the securities account subject to the Securities Account Pledge so as to maintain the account with a market value of not less than $1 million. Section 8.17. Deposit and Operating Accounts. Borrowers shall maintain all of their primary deposit and operating accounts with Bank (it being understood that Gas Jack will be allowed to maintain local banking accounts in Oklahoma City to use in connection with its trade payables and payroll) so long as any of the Revolving Loans remain outstanding. ARTICLE IX NEGATIVE COVENANTS In addition to the negative covenants contained in the Collateral Documents, which covenants are hereby ratified and confirmed by Borrowers, Borrowers covenant and agree as follows: Section 9.1. Limitations on Fundamental Changes. Borrowers shall not change the nature of their respective businesses or their names (other than the presently anticipated name change of Emerging Alpha to Compresco, Inc.), grant credit terms to its customers on terms different than those presently granted to customers, or form any subsidiary without the prior written consent of the Bank, nor shall it enter into any transaction of merger or consolidation, nor liquidate or dissolve itself (nor suffer any liquidation or dissolution). Section 9.2. Disposition of Assets. Borrowers shall not convey, sell, lease, assign, transfer or otherwise dispose of, any of their property, business or assets whether now owned or hereafter acquired except for (i) inventory and compressors sold to customers in the normal course of business, (ii) property disposed of in the ordinary course of business, provided that, if such property is to be replaced, the net cash proceeds of each such transaction are applied to obtain a replacement item or items within 30 days of the disposition thereof, or (iii) other dispositions of property whose fair market value does not exceed $50,000.00 in the aggregate during each fiscal year. Section 9.3. Restricted Payments. Borrowers shall not declare or pay (or set aside reserves for payment of) any dividends or distributions or redeem, retire, or repurchase any shares of its capital stock, make any shareholder/affiliate loans, pay excessive shareholder 27 compensation or enter into any similar transactions with the shareholders of Borrowers and their related interests without the prior written consent of the Bank. Section 9.4. Encumbrances. Borrowers shall not create, incur, assume or permit to exist any Encumbrances on any of their property now owned or hereafter acquired, except for the following (hereinafter referred to as the "Permitted Encumbrances"): (a) Encumbrances for taxes, assessments, or other governmental charges not yet due or which are being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserves as shall be required by GAAP shall have been made therefor. (b) Encumbrances of landlords, vendors, carriers, warehousemen, mechanics, laborers and materialmen arising by law in the ordinary course of business for sums either not yet due or being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as shall be required by generally accepted accounting principles shall have been made therefor. (c) Inchoate liens arising under ERISA to secure the contingent liabilities, if any, permitted by this Agreement. (d) The pledge of the Collateral and any other liens in favor of the Bank to secure the Indebtedness of the Borrowers to the Bank. (e) Liens which, as of the date hereof, have been disclosed to and approved by Bank in writing. Section 9.5. Debts, Guaranties and Other Obligations. Borrowers will not incur, create, assume or in any manner become or be liable in respect of any indebtedness, direct or contingent, except for: (a) The Indebtedness to the Bank under this Agreement; (b) Trade payables or non-material operating leases from time to time incurred in the ordinary course of business; and, (c) Taxes, assessments or other government charges which are not yet due or are being contested in good faith by appropriate action promptly initiated and diligently conducted, if such reserve as shall be required by generally accepted accounting principles shall have been made therefor. Section 9.6. Changes in Control and Management. Borrowers shall not allow any change in the control of the Borrowers ("control" for the purposes hereof shall mean the power, direct or indirect, (i) to vote 51% or more of the securities having ordinary voting power for the election of directors of such Borrower, or (ii) to direct or cause the direction of the management and policies of such Borrower whether by contract or otherwise) from the ownership structure of 28 the Borrowers which exists as of the date hereof (which ownership is as has been represented to Bank by Borrowers), nor shall it allow any change in its executive management which exists as of the date hereof without the prior written consent of Bank. Section 9.7. Other Agreements. Borrowers will not enter into any agreement containing any provision which would be violated or breached by the performance of their obligations hereunder or under any instrument or document delivered or to be delivered by them hereunder or in connection herewith. Section 9.8. Transactions with Affiliates. Borrowers will not enter into any agreement with any affiliate except to the extent that such agreements are commercially reasonable which provide for terms which would normally be obtainable in an arm's length transaction with an unrelated third party. To the extent any inter-company loans are permitted hereunder, they shall be subordinated in payment to the Indebtedness. ARTICLE X EVENTS OF DEFAULT Section 10.1. Events of Default. The occurrence of any one or more of the following shall constitute an Event of Default: Default under the Indebtedness. Should Borrowers default in the payment of principal or interest under the Indebtedness. Default under this Agreement. Should Borrowers violate or fail to comply fully with any of the terms and conditions of, or default under, this Agreement, and such default not be cured within thirty days of the occurrence thereof (provided, however, that no cure period shall be available for a default in the obligation to comply with negative covenants contained herein or to maintain insurance coverages required hereby). Default Under Other Agreements. Should any event of default occur or exist under any of the Related Documents or should either Borrower, any Guarantor or Keenan violate, or fail to comply fully with, any terms and conditions of any of the Collateral Documents or Related Documents, and such default not be cured within thirty days of the occurrence thereof (provided, however, that no cure period shall be available for a default in the obligation to comply with negative covenants contained therein or to maintain insurance coverages affecting the Collateral required thereby). Other Defaults in Favor of Bank. Should either Borrower or any Guarantor default under any other loan, extension of credit, security agreement, or other obligation in favor of Bank and fail to cure same in accordance with any applicable cure periods, or should there occur an 29 "Event of Default" as defined in that certain Loan Agreement dated as of October 29, 1999, between Emerging Alpha and Bank, as said agreement may be amended from time to time. Default in Favor of Third Parties. Should either Borrower or any Guarantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of the Collateral, or the ability of either such Borrower or any such Guarantor to perform its obligations under this Agreement, or any Related Document, or pertaining to the Indebtedness and fail to cure same in accordance with any applicable cure periods. Insolvency. The following occurrences, in addition to the failure or suspension of either Borrower or any corporate Guarantor, shall constitute an Event of Default hereunder: (a) Filing by either Borrower or any Guarantor of a voluntary petition or any answer seeking reorganization, arrangement, readjustment of its debts or for any other relief under any applicable bankruptcy act or law, or under any other insolvency act or law, now or hereafter existing, or any action by either Borrower or any Guarantor consenting to, approving of, or acquiescing in, any such petition or proceeding; the application by either Borrower or any Guarantor for, or the appointment by consent or acquiescence of, a receiver or trustee of either Borrower or of any Guarantor for all or a substantial part of its property; the making by either Borrower or by any Guarantor of an assignment for the benefit of creditors; the inability of either Borrower or any Guarantor or the admission by either Borrower or any Guarantor in writing, of its inability to pay its debts as they mature (the term "acquiescence" means the failure to file a petition or motion in opposition to such petition or proceeding or to vacate or discharge any order, judgment or decree providing for such appointment within sixty (60) days after the appointment of a receiver or trustee); or (b) Filing of an involuntary petition against either Borrower or any Guarantor in bankruptcy or seeking reorganization, arrangement, readjustment of its debts or for any other relief under any applicable bankruptcy act or law, or under any other insolvency act or law, now or hereafter existing and such petition remains undismissed or unanswered for a period of sixty (60) days from such filing; or the insolvency appointment of a receiver or trustee of either Borrower or of any Guarantor for all or a substantial part of its property and such appointment remains unvacated or unopposed for a period of sixty (60) days from such appointment, execution or similar process against any substantial part of the property of either Borrower or of any Guarantor and such warrant remains unbonded or undismissed for a period of sixty (60) days from notice to such Borrower or such Guarantor of its issuance. Dissolution Proceedings. Should proceedings for the dissolution or appointment of a liquidator of either Borrower or any corporate Guarantor be commenced. 30 Death or Incapacity of Individual Guarantors. Should any individual Guarantor die or become incapacitated or interdicted. False Statements. Should any representation or warranty of either Borrower or any Guarantor made in connection with the Indebtedness prove to be incorrect or misleading in any material respect when made or reaffirmed. Material Adverse Change. Should a Material Adverse Change with respect to either Borrower or any Guarantor occur at any time and not be cured within ten days of the occurrence thereof. Upon the occurrence of an Event of Default, all commitments of Bank under this Agreement will terminate immediately (including any obligation to make any further Revolving Loans), and, at Bank's option, the Revolving Note and all Indebtedness of Borrowers will become immediately due and payable, all without notice of any kind to Borrowers, except that in the case of type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. Upon the occurrence of an Event of Default, Bank may increase the rate of interest borne by the Revolving Note to the default rate of interest provided for under the Revolving Note, proceed to realize upon the Collateral under the terms of the Collateral Documents, and/or exercise any other rights which it has by law or contract (which rights shall be cumulative in nature). Section 10.2. Waivers by Borrowers. Except as otherwise provided for in this Agreement and by applicable law, Borrowers waive (i) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Bank on which Borrowers may in any way be liable and hereby ratifies and confirms whatever Bank may do in this regard, (ii) all rights to notice and a hearing prior to Bank's taking possession or control of, or to Bank's replevy, attachment or levy upon, the Collateral or any bond or security which might be required by any court prior to allowing Bank to exercise any of its remedies, and (iii) the benefit of all valuation, appraisal and exemption laws. Each Borrower acknowledges that it has been advised by counsel of its choice with respect to this Agreement, the other Collateral Documents, and the transactions evidenced by this Agreement and other Collateral Documents. ARTICLE XI MISCELLANEOUS Section 11.1. No Waiver; Modification in Writing. No failure or delay on the part of Bank in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor 31 shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. No amendment, modification or waiver of any provision of this Agreement or of the Revolving Note, nor consent to any departure by either Borrower therefrom, shall in any event be effective unless the same shall be in writing signed by or on behalf of Bank and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on either Borrower in any case shall entitle either Borrower to any other or further notice or demand in similar or other circumstances. Section 11.2. Payment on Non-Business Day. Whenever any payment to be made hereunder or on account of the Revolving Note shall be scheduled to become due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in computing interest and fees payable hereunder or on account of the Revolving Note. Section 11.3. Addresses for Notices. All notices and communications provided for hereunder shall be in writing and, shall be mailed, by certified mail, return receipt requested, or delivered as set forth below unless any person named below shall notify the others in writing of another address, in which case notices and communications shall be mailed, by certified mail, return receipt requested, or delivered to such other address. If to Bank: Hibernia National Bank P. O. Box 61540 New Orleans, LA 70161 Attention: Manager-Energy/Maritime Department If to Borrowers: Emerging Alpha Corporation 1751 Red Oak Drive Houston, TX 77090 Attention: Mr. Jerry W. Jarrell Section 11.4. Fees and Expenses. Borrowers agree to pay all fees, costs and expenses of Bank in connection with the preparation, execution and delivery of this Agreement, and all Related Documents to be executed in connection herewith and subsequent modifications or amendments to any of the foregoing, including without limitation, the reasonable fees and disbursements of counsel to Bank, and to pay all costs and expenses of Bank in connection with the enforcement of this Agreement, the Revolving Note or the other Related Documents, including reasonable legal fees and disbursements arising in connection therewith. Borrowers agree to pay all costs associated with the issuance of any insurance coverages, appraisals and field examinations of Borrowers' property which may be required by this Agreement and any of 32 the Related Documents. Borrowers also agree to pay, and to save Bank harmless from any delay in paying stamp and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of this Agreement, the Revolving Note, the other Related Documents, or any modification thereof. Section 11.5. Security Interest and Right of Set-off. Bank shall have a continuing security interest in, as well as the right to set-off the obligations of Borrowers hereunder against, all funds which either Borrower may maintain on deposit with Bank (with the exception of funds deposited in Borrowers' accounts in trust for third parties or funds deposited in pension accounts, IRA's, Keogh accounts and All Saver Certificates), and Bank shall have a lien upon and a security interest in all property of either Borrower in Bank's possession or control which shall secure the Indebtedness of Borrowers. Section 11.6. Waiver of Marshaling. Borrowers shall not at any time hereafter assert any right under any law pertaining to marshaling (whether of assets or liens) and Borrowers expressly agree that Bank may execute or foreclose upon the Collateral in such order and manner as Bank, in its sole discretion, deems appropriate. Section 11.7. Governing Law. This Agreement and the Revolving Note shall be deemed to be contracts made under the laws of the State of Louisiana and for all purposes shall be construed in accordance with the laws of said State. Section 11.8. Consent to Loan Participation. Borrowers agree and consent to Bank's sale or transfer, whether now or later, of one or more participation interests in the Indebtedness of the Borrowers arising pursuant to this Agreement to one or more purchasers, whether related or unrelated to Bank. Bank may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Bank may have about Borrowers or about any other matter relating to such Indebtedness, and Borrowers hereby waive any rights to privacy it may have with respect to such matters. Borrowers additionally waive any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrowers also agree that the purchasers of any such participation interest will be considered as the absolute owners of such interests in such Indebtedness. Section 11.9. WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION. (a) BORROWERS AND BANK HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWERS AND BANK MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (i) THE REVOLVING NOTE, (ii) THIS AGREEMENT, (iii) THE COLLATERAL DOCUMENTS OR (iv) THE COLLATERAL. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWERS AND THE BANK, AND THE BORROWERS AND THE BANK HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS 33 WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH OF THE BORROWERS AND THE BANK EACH FURTHER REPRESENTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. (b) EACH BORROWER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE COURTS OF LOUISIANA AND THE FEDERAL COURTS IN LOUISIANA AND AGREES THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO ENFORCE THE PROVISIONS OF THE REVOLVING NOTE, THIS AGREEMENT AND/OR THE COLLATERAL DOCUMENTS MAY BE BROUGHT IN ANY COURT HAVING SUBJECT MATTER JURISDICTION. Section 11.10. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable. Section 11.11. Headings. Article and Section headings used in this Agreement are for convenience only and shall not affect the construction of this Agreement. 34 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. EMERGING ALPHA CORPORATION By: /S/ JERRY W. JARRELL ---------------------------------------------- Jerry W. Jarrell, Chief Financial Officer GAS JACK, INC. By: /S/ JERRY W. JARRELL ---------------------------------------------- Jerry W. Jarrell, Chief Financial Officer HIBERNIA NATIONAL BANK By: /S/ NANCY MORAGAS ---------------------------------------------- Printed Name: Nancy Moragas Title: Assistant Vice President -----END PRIVACY-ENHANCED MESSAGE-----