DESCRIBED IN THE FINANCIAL STATEMENTS OR AS
OTHERWISE DISCLOSED TO THE BANKS IN SCHEDULE "3" ATTACHED HERETO, THERE IS NO
LITIGATION, LEGAL OR ADMINISTRATIVE PROCEEDING, INVESTIGATION OR OTHER ACTION OF
ANY NATURE PENDING OR, TO THE KNOWLEDGE OF THE OFFICERS OF BORROWER, THREATENED
AGAINST OR AFFECTING BORROWER OR GUARANTOR WHICH INVOLVES THE POSSIBILITY OF ANY
JUDGMENT OR LIABILITY NOT FULLY COVERED BY INSURANCE, AND WHICH IS REASONABLY
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.
(I)
TAXES; GOVERNMENTAL CHARGES.
BORROWER AND GUARANTOR HAVE FILED
ALL TAX RETURNS AND REPORTS REQUIRED TO BE FILED AND HAVE PAID ALL TAXES,
ASSESSMENTS, FEES AND OTHER GOVERNMENTAL CHARGES LEVIED UPON THEM OR THEIR
RESPECTIVE ASSETS, PROPERTIES OR INCOME WHICH ARE DUE AND PAYABLE, INCLUDING
INTEREST AND PENALTIES, OR HAVE PROVIDED ADEQUATE RESERVES, IF REQUIRED, IN
ACCORDANCE WITH GAAP FOR THE PAYMENT THEREOF, EXCEPT SUCH AS ARE BEING CONTESTED
IN GOOD FAITH BY APPROPRIATE PROCEEDINGS AND FOR WHICH ADEQUATE RESERVES FOR THE
PAYMENT THEREOF AS REQUIRED BY GAAP HAVE BEEN PROVIDED.
(J)
TITLES, ETC.
BORROWER AND GUARANTOR HAVE GOOD AND DEFENSIBLE
TITLE TO ALL OF THE COLLATERAL PLEDGED OR MORTGAGED BY THEM EXCEPT FOR DEFECTS
WHICH ARE NOT REASONABLY EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT, FREE AND
CLEAR OF ALL LIENS OR OTHER ENCUMBRANCES, EXCEPT PERMITTED LIENS; AND BORROWER
AND GUARANTOR, TO THE BEST OF THEIR KNOWLEDGE AFTER THE EXERCISE OF SUCH DUE
DILIGENCE AS A REASONABLE PERSON WOULD HAVE DONE UNDER THE SAME OR SIMILAR
CIRCUMSTANCES, HAVE GOOD AND DEFENSIBLE TITLE TO THEIR OTHER ASSETS AND
PROPERTIES (EXCEPT FOR (I) UNDEVELOPED OIL AND GAS PROPERTIES, AND (II) DEFECTS
WHICH ARE NOT REASONABLY EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT), FREE AND
CLEAR OF ALL LIENS OR OTHER ENCUMBRANCES, EXCEPT PERMITTED LIENS.
(K)
DEFAULTS.
NEITHER BORROWER NOR GUARANTOR IS IN DEFAULT AND NO
EVENT OR CIRCUMSTANCE HAS OCCURRED WHICH, BUT FOR THE PASSAGE OF TIME OR THE
GIVING OF NOTICE, OR BOTH, WOULD CONSTITUTE A DEFAULT UNDER ANY LOAN OR CREDIT
AGREEMENT, INDENTURE, MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT OR OTHER
AGREEMENT OR INSTRUMENT TO WHICH BORROWER OR GUARANTOR IS A PARTY IN ANY RESPECT
THAT WOULD BE REASONABLY EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.
NO EVENT
OF DEFAULT HEREUNDER HAS OCCURRED AND IS CONTINUING.
-25-
(L)
CASUALTIES; TAKING OF PROPERTIES.
SINCE THE DATES OF THE LATEST
FINANCIAL STATEMENTS DELIVERED TO BANKS, NEITHER THE BUSINESS NOR THE ASSETS OR
PROPERTIES OF BORROWER OR GUARANTOR HAVE BEEN AFFECTED AS A RESULT OF ANY FIRE,
EXPLOSION, EARTHQUAKE, FLOOD, DROUGHT, WINDSTORM, ACCIDENT, STRIKE OR OTHER
LABOR DISTURBANCE, EMBARGO, REQUISITION OR TAKING OF PROPERTY OR CANCELLATION OF
CONTRACTS, PERMITS OR CONCESSIONS BY ANY DOMESTIC OR FOREIGN GOVERNMENT OR ANY
AGENCY THEREOF, RIOT, ACTIVITIES OF ARMED FORCES OR ACTS OF GOD OR OF ANY PUBLIC
ENEMY THAT WOULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.
(M)
USE OF PROCEEDS; MARGIN STOCK.
THE PROCEEDS OF THE LOANS HEREUNDER
WILL BE USED BY BORROWER FOR WORKING CAPITAL, ACQUISITION, LETTERS OF CREDIT AND
GENERAL CORPORATE PURPOSES.
BORROWER IS NOT