P R O M I S S O R Y N O T E
$10,000,000.00 July 17, 1997
FOR VALUE RECEIVED, after date, without grace, in the manner, on the
dates and in the amounts so herein stipulated, the undersigned, TEXSTAR
PETROLEUM, INC., a Texas corporation ("Borrower"), PROMISES TO PAY TO THE
ORDER OF BANK ONE, TEXAS, N.A., a national banking association ("Lender"), in
Houston, Xxxxxx County, Texas, the sum of TEN MILLION AND NO/100 DOLLARS
($10,000,000.00) or, if less, the aggregate unpaid principal amount of
advances made by Xxxxxx to Borrower pursuant to this Promissory Note (this
"Note"), in lawful money of the United States of America, which shall be
legal tender in payment of all debts and dues, public and private, at the
time of payment, and to pay interest on the advanced and unpaid principal
amount from date until maturity at a rate equal to the Base Rate (hereinafter
defined) plus two percent (2%) per annum ("Stated Rate"), not to exceed the
maximum non-usurious interest rate permitted by applicable law from time to
time in effect as such law may be interpreted, amended, revised, supplemented
or enacted ("Maximum Rate"), provided that if at any time the Stated Rate
exceeds the Maximum Rate then interest hereon shall accrue at the Maximum
Rate. In the event the Stated Rate subsequently decreases to a level less
than the Maximum Rate or if the Maximum Rate applicable to this Note should
subsequently be increased to a level greater than the Stated Rate, then, in
either case, interest hereon shall thereafter accrue at a rate equal to the
applicable Maximum Rate until the aggregate amount of interest accrued
through the term of this Note equals the aggregate amount of interest which
would have accrued at the Stated Rate without regard to any usury limit, at
which time interest hereon shall again accrue at the Stated Rate.
This Note is payable as follows:
1. Accrued and unpaid interest shall be due and
payable on the first day of each month, commencing
August 1, 1997.
2. All accrued and unpaid interest and unpaid
principal shall be due and payable on June 30, 2000.
All payments under this Note shall be applied first against the accrued and
unpaid interest hereon and the remainder against the principal balance hereof.
This Note is subject to mandatory prepayments, as set forth in the
Loan Agreement (hereinafter defined). In addition, Borrower may prepay this
Note, in whole or in part, at any time prior to maturity without penalty, and
interest shall cease on any amount
--------
Initials
prepaid. Any partial prepayment shall be applied toward the payment of the
principal installments last maturing on the Note, that is, in the inverse
order of maturity, without reducing the amount or time of payment of the
remaining installments.
Any check, draft, money order or other instrument given in payment
of all or any part hereof may be accepted by Lender and handled in collection
in a customary manner, but same shall not constitute payment hereof or
diminish any rights of Lender except to the extent that actual cash proceeds
of such instrument are unconditionally received by Xxxxxx.
It is agreed that time is of the essence of this agreement. In the
event of default in the payment of any installment of principal or interest
when due or in the event of any other default hereunder, Xxxxxx may
accelerate and declare this Note immediately due and payable without notice.
Any failure to exercise this option shall not constitute a waiver by Lender
of the right to exercise the same at any other time.
In the event of default in the making of any payment herein
provided, either of principal or interest, or in the event this Note is
declared due, interest hereunder shall accrue at the Maximum Rate.
Borrower hereby agrees to pay all expenses, including reasonable
attorneys' fees, all of which shall become a part of the principal hereof,
incurred by Xxxxxx if this Note is placed in the hands of an attorney for
collection or if collected by suit or through any probate, bankruptcy or any
other legal proceedings.
Interest charges will be calculated on amounts advanced hereunder on
the actual number of days the amounts are outstanding on the basis of a
365-day or 366-day year, as is applicable.
It is expressly stipulated and agreed to be the intent of Borrower
and Lender to comply with applicable Texas law governing the maximum
non-usurious rate or amount of interest payable on or in connection with this
Note (or applicable United States federal law to the extent that it permits
Lender to contract for, charge, take, reserve or receive a greater amount of
interest than under Texas law). Accordingly, it is agreed that
notwithstanding any provision to the contrary in this Note, or in any of the
documents securing payment hereof or otherwise relating hereto, no such
provision shall require the payment or permit the collection of interest at a
rate in excess of the Maximum Rate. If any excess of interest in such respect
is provided for, or shall be judicially interpreted to be so provided for, in
this Note or in any of the documents securing payment hereof or otherwise
relating hereto, or if the acceleration of the maturity of this Note or any
prepayment by Borrower results in Borrower's having paid any interest in
excess of that permitted by applicable law, then in any such event,
--------
Initials
-2-
it is the express intent of Borrower and Lender that (1) the provisions of
this paragraph shall govern and control, (2) neither Borrower nor any other
person primarily liable on this Note, nor their respective heirs, legal
representatives, successors or assigns, shall be obligated to pay the amount
of such interest to the extent that it is in excess of the Maximum Rate, (3)
any such excess which may have been collected shall be either applied as a
credit against the then unpaid amount hereof or refunded to Borrower, and (4)
the provisions of this Note and any documents securing payment of this Note
shall be automatically deemed reformed and the amounts thereafter collectible
thereunder reduced, without the necessity of the execution of any new
document, so that the effective rate of interest shall be reduced to the
Maximum Rate. For the purpose of determining the maximum amount of interest
permitted to be charged or collected hereunder, all sums paid or agreed to be
paid to Lender for the use, forbearance or detention of the proceeds of this
Note shall be amortized, prorated, allocated and spread throughout the full
term of this Note so that the rate or amount of interest on account of this
Note is uniform throughout the term hereof and does not exceed the applicable
usury ceiling.
Xxxxxxxx agrees that the Maximum Rate to be charged or col lected
pursuant to this Note shall be the indicated rate ceiling referred to in TEX.
REV. CIV. STAT. XXX. Art. 5069-1.04, provided that Lender may rely on other
applicable laws, including without limitation laws of the United States, for
calculation of the Maximum Rate if the application thereof results in a
greater Maximum Rate. Except as provided above, the provisions of this Note
shall be governed by the laws of the State of Texas.
Xxxxxxxx and each other person who is a maker, surety, guarantor or
endorser of this Note hereby waives demand, grace, notice, presentment for
payment, notice of intention to accelerate the maturity hereof, notice of the
acceleration of the maturity hereof and protest, and agrees that this Note
and the liens securing its payment may be renewed, and the time of payment
extended, from time to time, without notice and without releasing any of the
foregoing. As additional security for all amounts owed by Borrower to Lender,
Borrower hereby grants to Lender a lien and security interest on (and the
express right of setoff against) any of Borrower's funds which may from time
to time be deposited with or in the possession of Lender.
As used in this Note, the term "Base Rate" shall mean at any time
the variable rate of interest then most recently announced publicly by Lender
(or any successor to all or substantially all of its assets) as its base rate
of interest and, without notice to Borrower or any other person, such rate of
interest shall change as and when changes in that base rate of interest are
announced.
--------
Initials
-3-
The principal of this Note represents funds which Xxxxxx may advance
to Borrower, pursuant to and subject to the Loan Agreement, from time to time
upon request of Borrower. Any part of the principal may be repaid by Xxxxxxxx
and thereafter reborrowed, provided the outstanding principal amount of this
Note shall never exceed the face amount of this Note. Each advance shall
constitute a part of the principal hereof and shall bear interest from the
date of the advance. The provisions of Tex. Rev. Civ. Stat. Xxx. art.
5069-15.01, ET. SEQ., as the same may be amended, shall not apply to this
Note or to any of the Security Documents.
Borrower has acquired various oil and gas properties which are
described in one or more of the Security Documents (hereinafter defined). The
acquisition of such oil and gas properties was made subject to certain
indebtedness of Texstar Petroleum, L.L.C. ("Texstar L.L.C.") to Lender,
including, without limitation, the indebtedness pursuant to that certain
$750,000.00 Promissory Note dated July 3, 1996, executed by Xxxxxxx L.L.C.
and payable to the order of Lender. A portion of the principal of this Note
represents funds which will be used to repay the indebtedness of Texstar
L.L.C. secured by the existing liens on such oil and gas properties of
Borrower, including the indebtedness pursuant to the above-described
$750,000.00 Promissory Note, and the liens securing the payment of such note,
which burden the interests acquired by Borrower, are not released, but are
hereby ratified and hereby carried forward to secure this Note.
This Note is the Revolving Note referred to in, is subject to, and
is entitled to the benefits of and security afforded by the following
documents (the "Security Documents"):
(a) that certain letter loan agreement of even date herewith
between Borrower and Xxxxxx, as that letter loan agreement may be
amended, modified or supplemented from time to time (the "Loan
Agreement");
(b) those certain Mortgages, Deeds of Trust, Assignments of
Production, Security Agreements and Financing Statements of even date
herewith, executed by Borrower for the benefit of Lender and covering
certain oil and gas properties in Xxxxxxxxx Xxxxx and Xxxxx Counties,
Mississippi;
(c) those certain Mortgages, Collateral Assignments, Security
Agreements and Financing Statements of even date herewith, executed by
Borrower for the benefit of Lender and covering certain oil and gas
properties in Ascension and Iberville Parishes, Louisiana;
(d) that certain Mortgage, Collateral Assignment, Security
Agreement and Financing Statement dated
--------
Initials
-4-
September 14, 1995, executed for the benefit of Lender by Xxxxxxx X.
Xxxxxxxxx, Xx. (the "Trustee"), Trustee of and on behalf of The
Xxxxxxxx Trust, The Ruston Trust and The Houston Trust, created by
Trust Agreements dated January 14, 1987, executed by Xxxxxxxx X.
Xxxxxxxxx, as Xxxxxxx, and Xxxxxxx X. Xxxxxxxxx, Xx., as Trustee,
covering certain oil and gas properties in Iberville Parish, Louisiana,
and filed for record under Mortgage Book 290, Entry 315 of the Mortgage
Records of Iberville Parish, Louisiana, as the same has been amended by
that certain Supplemental Mortgage, Deed of Trust and Modification
Agreement dated July 3, 1996 among the Trustee, Texstar L.L.C., Xxxxxxx
X. Xxxxxxxxx, Xx. ("Xxxxxxxxx") and Xxxxxx, filed for record under
Mortgage Book 296, Entry 168 of the Mortgage Records of Iberville
Parish, Louisiana, and by that certain Supplemental Mortgage,
Collateral Assignment, Security Agreement and Financing Statement of
even date herewith among the Trustee, Texstar L.L.C., Xxxxxxxx and
Xxxxxx;
(e) that certain Mortgage, Collateral Assignment, Security
Agreement and Financing Statement dated July 3, 1996, executed by
Xxxxxxx, L.L.C. for the benefit of Lender, covering certain oil and gas
properties in Iberville Parish, Louisiana and filed for record under
Mortgage Book 296, Entry 169 of the Mortgage Records of Iberville
Parish, Louisiana, as the same has been amended by that certain
Supplemental Mortgage, Collateral Assignment, Security Agreement and
Financing Statement dated July 24, 1996 among Texstar L.L.C., Xxxxxxxxx
and Lender, filed for record under Mortgage Book 297, Entry 102 of the
Mortgage Records of Iberville Parish, Louisiana, that certain
Supplemental Mortgage, Collateral Assignment, Security Agreement and
Financing Statement dated August 5, 1996, among Texstar L.L.C.,
Xxxxxxxxx and Xxxxxx, filed for record under Mortgage Book 297, Entry
103 of the Mortgage Records of Iberville Parish, Louisiana, and that
certain Supplemental Mortgage, Collateral Assignment, Security
Agreement and Financing Statement of even date herewith among Texstar
L.L.C., Xxxxxxxx and Xxxxxx;
(f) that certain Mortgage, Collateral Assignment, Security
Agreement and Financing Statement dated September 14, 1995, executed by
the Trustee for the benefit of Lender, covering certain oil and gas
properties in Ascension Parish, Louisiana, and filed for record under
Clerk's File No. 363153 of the Real Property Records of Ascension
Parish, Louisiana, as the same has been amended by that certain
Supplemental Mortgage, Deed of Trust and Modification Agreement dated
July 3, 1996 among the Trustee, Texstar L.L.C., Xxxxxxxxx and Xxxxxx,
--------
Initials
-5-
filed for record under Clerk's File No. 375873 of the Real Property
Records of Ascension Parish, Louisiana, that certain Supplemental
Mortgage, Collateral Assignment, Security Agreement and Financing
Statement dated August 5, 1996, among Texstar L.L.C., Xxxxxxxxx and
Xxxxxx, filed for record under Clerk's File No. 377497 of the Real
Property Records of Ascension Parish, Louisiana, and by that certain
Supplemental Mortgage, Collateral Assignment, Security Agreement and
Financing Statement of even date herewith among the Trustee, Texstar
L.L.C., Borrower and Lender;
(g) that certain Guaranty Agreement of even date
herewith, executed by Benz Energy Ltd. for the benefit of
Lender;
(h) that certain Guaranty Agreement of even date
herewith, executed by Xxxxxxxxx for the benefit of
Xxxxxx;
(i) that certain Guaranty Agreement of even date
herewith, for the benefit of Xxxxxx, executed by Xxxxxxx X.
Xxxxxxxxx, Xx., Trustee of and on behalf of The Xxxxxxxx Trust,
The Ruston Trust and The Houston Trust, created by Trust
Agreements dated January 14, 1987, executed by Xxxxxxxx X.
Xxxxxxxxx, as Xxxxxxx, and Xxxxxxx X. Xxxxxxxxx, Xx., as Trustee;
and
(j) that certain Guaranty Agreement of even date herewith,
executed by Xxxxxxx X. Xxxxxxxxx, as Trustee of and on behalf of The
Starbucks Trust, created by Trust Agreement dated January 17, 1996,
executed by Xxxxx Xxx Xxxxxx, as Xxxxxxx, and Xxxxxxx X. Xxxxxxxxx, as
Trustee, for the benefit of Xxxxxx.
This Note is subject to the provisions contained in the Security Documents
which, among other things, provide for the acceleration of the maturity
hereof upon the occurrence of certain events.
Borrower represents and warrants that this loan is for business,
commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use.
TEXSTAR PETROLEUM, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx, Xx.
----------------------------
Title: President
----------------------------
--------
Initials
-6-
July 17, 1997
Bank One, Texas, N.A.
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Gentlemen:
This letter loan agreement (this "Agreement") confirms the mutual
agreements between TEXSTAR PETROLEUM, INC., a Texas corporation ("Borrower"),
and BANK ONE, TEXAS, N.A., a national banking association ("Lender"), in
connection with a credit facility more fully described herein.
Section 1. CREDIT FACILITY. Subject to the terms of this Agreement,
Xxxxxx agrees to lend and Xxxxxxxx agrees to borrow certain amounts pursuant
to the following terms and conditions (the "Credit Facility"):
(a) NOTE: Xxxxxxxx's obligation to repay the Credit Facility shall be
evidenced by its execution of a promissory note (the "Revolving Note") of
even date herewith, payable to the order of Lender, in the original
principal amount of Ten Million and No/100 Dollars ($10,000,000.00), and
in the form attached as Exhibit "A" attached hereto.
(b) MAXIMUM AVAILABILITY: The lesser of $10,000,000.00 and the
Borrowing Base (as defined in Section 5(c) hereof).
(c) ADVANCE PROCEDURES: At least one (1) Business Day (hereinafter
defined) prior to the requested date of advance (other than the initial
advance being made on the date hereof), Borrower may make a written request
to Xxxxxx for direct advances pursuant to the Credit Facility. Prior to the
requested date of advance, Xxxxxx shall advise Borrower of whether Xxxxxx
will make the advance as requested by Borrower or whether Lender will
require additional engineering reports or other documents prior to making
the requested advance.
(d) TERM: Through June 30, 2000 (the "Maturity Date").
(e) PURPOSE: To finance certain costs associated with the
acquisition and development of Borrower's oil and gas properties included
in the determination of the Borrowing Base.
(f) FACILITY FEE: Borrower shall pay to Lender a facility fee in the
amount of $5,000 plus two percent (2%) of any
Bank One, Texas, N.A.
July 17, 1997
Page 2
increase in the Borrowing Base over $750,000.00 upon the effectiveness
of such increase.
(g) UNUSED FEE: Borrower shall pay to Lender an unused fee in an
amount equal to one-half percent (1/2%) of the average unused portion of
the Borrowing Base, payable in arrears on the last day of each calendar
quarter.
(h) BORROWING BASE REDETERMINATION FEES: Borrower shall pay to
Lender a fee of $2,500.00 for the initial determination of the Borrowing
Base and, with respect to each redetermination of the Borrowing Base,
Borrower shall pay a like amount to Lender for all engineering and
related expenses (including a reasonable charge for services performed by
employees of Lender or affiliates of Lender) incurred by Lender in
connection with such redetermination.
Section 2. INTEREST RATE AND REPAYMENT TERMS.
(a) INTEREST RATE.
(1) Subject to the provisions of paragraphs (2) and (3) of this
Section 2(a), Borrower shall pay interest on the outstanding principal
amount of the Revolving Note at two percent (2%) per annum over the Base
Rate. Accrued and unpaid interest on the Revolving Note shall be
calculated on the basis of a 365-day year of 366-day year, as the case
may be, and the actual number of days elapsed.
(2) In the event that, and for so long as, any event of default
hereunder shall have occurred and be continuing, then and in any such
event, the outstanding principal amount of the Revolving Note shall bear
interest at the Maximum Rate (as defined in the Revolving Note).
(3) Notwithstanding anything contained herein to the contrary, in no
event shall the interest rate payable with respect to the Revolving Note
exceed the Maximum Rate.
(4) As used herein, the following terms shall have the following
meanings:
(A) "Business Day" shall mean a day other than a Saturday,
Sunday, or legal holiday for commercial banks under the laws of the
State of Texas.
Bank One, Texas, N.A.
July 17, 1997
Page 3
(B) "Base Rate" shall mean at any time the variable rate of
interest then most recently announced publicly by Lender (or any
successor to all or substantially all of its assets) as its base
rate of interest and, without notice to Borrower or any other
person, such rate of interest shall change as and when changes in
that base rate of interest are announced.
(b) REPAYMENT TERMS. Accrued and unpaid interest on the Revolving Note
shall be due and payable on August 1, 1997, and on the first day of each
month thereafter. The principal portion of the Revolving Note is subject to
mandatory prepayments as set forth in Section 5(c) hereof. The balance of
unpaid principal and accrued and unpaid interest on the Revolving Note shall
be due and payable on the Maturity Date.
Section 3. REPRESENTATION AND WARRANTIES. Borrower represents and
warrants to Lender that, as of the date hereof and as of the date of each
advance the Credit Facility:
(a) ORGANIZATION, AUTHORITY, ETC. Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of the
State of Texas and is qualified to transact business in the State of
Louisiana and Mississippi, and in all other jurisdictions where such
qualification is necessary. Borrower is authorized to execute this
Agreement, the Revolving Note, and all other Loan Documents (hereinafter
defined), and those documents or instruments, when executed and
delivered will be valid and binding obligations of Borrower, enforceable
in accordance with their terms and do not violate the provisions of the
Articles of Incorporation or Bylaws of Borrower, or any contract,
agreement, law or regulation to which Borrower is subject.
(b) FINANCIAL STATEMENTS. All financial statements of Xxxxxxxx
delivered to Lender are complete and correct and have been prepared in
accordance with generally accepted accounting principles, consistently
applied, and no material adverse change in the condition of Borrower,
financial or otherwise, has occurred since the date of the most recent
financial statements of Borrower in Xxxxxx's possession.
(c) INVESTMENTS, LIABILITIES AND LITIGATION. Borrower has not
made any investments, guarantees or advances or incurred any liabilities
except (i) for investments in, guarantees of, or advances to other
entities in the ordinary course of business and liabilities incurred in
the ordinary course of business
Bank One, Texas, N.A.
July 17, 1997
Page 4
and (ii) as disclosed in the most recent financial statements of
Xxxxxxxx in Xxxxxx's possession. Borrower has no litigation and there
is no legal or administrative proceeding, investigation or other action
pending or threatened against or affecting Borrower which, in any case,
involves the possibility of any judgment or liability not fully covered
by insurance.
(d) TITLE. Borrower has good title to its assets and properties,
free and clear of adverse claims, except as disclosed in the most recent
financial statements of Borrower in Xxxxxx's possession.
(e) TAX RETURNS. Xxxxxxxx has filed all federal and state tax
returns required to be filed as of the date of this Agreement and has
paid all taxes or assessments related to said returns.
(f) NO DEFAULT. Borrower is not, and after giving effect to any
requested advance under the Credit Facility will not be, in default in
any respect under this Agreement, any other Loan Document, or any other
contract, agreement, or instrument to which Borrower is a party or by
which Borrower may be bound, and Borrower is in compliance with all
applicable laws and regulations.
(g) ERISA; MARGIN SECURITIES. No fact exists, including but not
limited to any reportable event or prohibited transaction (as defined
in the Employee Retirement Income Security Act of 1974, as amended
["ERISA"]) which might constitute grounds for termination of any plan of
Borrower or appointment of a trustee to administer such plan. Borrower
does not own any "margin security" or "margin stock" as defined in
Regulations G, U, or X of the Board of Governors of the Federal Reserve
System.
(h) PATENTS, ETC. Borrower has all patents, licenses, trademarks,
franchises and the like necessary to conduct its business and is not
aware of any conflict with the rights of others.
(i) NO UNTRUE STATEMENTS. Neither this Agreement nor any other
information furnished by Borrower to Lender contains any untrue statement
of a fact or omits a fact necessary to make the statements not misleading.
Section 4. REPORTING REQUIREMENTS. Xxxxxxxx will deliver the following
reports to Xxxxxx:
Bank One, Texas, N.A.
July 17, 1997
Page 5
(a) ENGINEERING REPORTS: On or before each October 1, and each
April 1, commencing October 1, 1997, an engineering report, containing
such engineering, title and other information as Lender may request,
covering all properties of Borrower forming a part of the Borrowing Base
and all other properties of Borrower that Borrower proposes to add to
the Borrowing Base.
(b) QUARTERLY FINANCIAL STATEMENTS OF BORROWER: Within sixty (60)
days after the last day of each calendar quarter, the balance sheet of
Borrower as of the last day of such quarter and the statements of
income, stockholders' equity and cash flow of Borrower for such quarter,
certified by the chief financial officer of Borrower.
(c) QUARTERLY REPORTS: Simultaneously with the financial
statements delivered pursuant to Section 4(b) above, a certificate of
the chief financial officer of Xxxxxxxx (A) stating whether Xxxxxxxx has
kept and performed all covenants set forth in this Agreement and the
other Loan Documents and, if Borrower has not, specifying the default
and corrective action, if any, and (B) containing a calculation to
verify compliance with the financial covenants set forth herein.
(d) FINANCIAL STATEMENTS OF BENZ ENERGY: Within sixty (60) days
after the last day of each calendar quarter, the balance sheet of Benz
Energy (hereinafter defined) as of the last day of such quarter and the
statements of income, stockholders' equity and cash flow of Benz Energy
for such quarter, certified by the chief financial officer of Benz
Energy, and within one hundred twenty (120) days after the last day of
each calendar year, the balance sheet of Benz Energy as of the last day
of such year and the statements of income, stockholders' equity and cash
flow of Benz Energy for such year, certified without qualification by
independent certified public accountants acceptable to Lender.
(e) FINANCIAL STATEMENTS OF OTHER GUARANTORS: Within ninety (90)
days after the last day of each calendar year, the balance sheet
(including specifically, a listing in reasonable detail of contingent
liabilities) of each Guarantor other than Benz Energy, as of the last
day of such year, and the statements of income and cash flow of such
Guarantor for such year, certified by such Guarantor.
(f) NOTICE OF DEFAULT. Within three (3) days after the occurrence
of a default, or an event which with the
Bank One, Texas, N.A.
July 17, 1997
Page 6
giving of notice, the passage of time, or both, would constitute a
default, under this Agreement, notice of such default (or event)
together with Borrower's plans to correct such default.
(g) NOTICE OF LIABILITIES. Within five (5) days of notice
thereof, written notice of any liability outside the ordinary course
of business (whether actual or contingent) in which the liability or
claimed liability of Borrower is greater than $100,000.00.
(h) OTHER INFORMATION. Such other information as Xxxxxx may
request from time to time.
Section 5. AFFIRMATIVE COVENANTS.
(a) COMPLIANCE AND PERFORMANCE. Borrower will comply with all statutes
and governmental regulations and will pay all taxes, assessments,
governmental charges, claims for labor and the like. Borrower will maintain
its existence as a Texas corporation and will remain qualified to do business
in the State of Louisiana and Mississippi, and in all other jurisdictions in
which it is required to be qualified and will maintain its properties in good
and workable condition at all times. Borrower will perform all obligations
under this Agreement, and under all indentures, agreements, and contracts by
which Borrower is bound. Borrower will maintain with financially sound and
reputable insurers acceptable to Lender, insurance with respect to its
properties and business against such liabilities, casualties, risks and
contingencies as is customary for its business naming Lender as loss payee
with respect to any insurance covering collateral securing the loans
hereunder, and will, upon Xxxxxx's request, provide satisfactory evidence of
such insurance. Upon Xxxxxx's request, Borrower will provide Lender and/or
Xxxxxx's representatives access to Borrower's books, records and properties
at such times during ordinary business hours as Lender may request.
(b) REIMBURSEMENT; INDEMNITY. Borrower will reimburse Lender for all
its costs and expenses in connection with this Agreement, including, without
limitation, any and all legal fees and expenses incurred in the preparation
or enforcement of this Agreement or any other Loan Document. Xxxxxxxx agrees
to indemnify and hold Lender harmless from any costs or expense incurred by
Xxxxxx as a result of the provisions of federal, state and local environmental
laws and ordinances, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, as such laws and
ordinances may relate to Borrower or any property or operations of Borrower.
(c) BORROWING BASE. The aggregate outstanding indebtedness pursuant to
the Credit Facility shall never exceed the maximum
Bank One, Texas, N.A.
July 17, 1997
Page 7
amount determined by Lender, in its sole discretion, in accordance with its
normal customary oil and gas lending parameters and procedures (the
"Borrowing Base"). The initial Borrowing Base shall be Seven Hundred Twenty
Thousand and No/100 Dollars ($720,000.00). The Borrowing Base shall be
reduced by $30,000.00 effective the first day of each month commencing
August 1, 1997. The amount of the Borrowing Base will be redetermined by
Lender as of each Borrowing Base Redetermination Date, taking into
consideration such matters as Lender, in its sole discretion, deems relevant.
The Borrowing Base shall be increased or decreased, as the case may be,
immediately upon each Borrowing Base Redetermination Date. As used herein,
the term "Borrowing Base Redetermination Date" shall mean each November 1 and
each May 1, commencing November 1, 1997, as well as any other date on which
Lender, in its sole discretion, redetermines the Borrowing Base. Upon any
change in the Borrowing Base, Lender shall redetermine, in its sole
discretion, the amount by which the Borrowing Base will reduce effective the
first day of each month thereafter. If the amount outstanding under the
Credit Facility at any time is greater than the Borrowing Base at such time,
Borrower shall, within thirty (30) days after written notice thereof from
Lender, make a prepayment on the Revolving Note in an amount sufficient to
reduce the outstanding amount thereof to an amount not more than the
Borrowing Base.
(d) SECURITY. The Revolving Note and the other indebtedness hereunder
shall be secured by a first and prior lien on the oil and gas properties of
Borrower included in the determination of the Borrowing Base (collectively,
the "Mortgaged Property").
(e) OPERATING ACCOUNTS. Borrower shall maintain with Lender all of
Borrower's operating accounts and will deposit into such accounts all
proceeds of any property forming a portion of the Borrowing Base. Borrower
hereby authorizes Xxxxxx to debit, without notice to Borrower, from any
operating or other deposit account maintained by Borrower with lender, all
sums which may become due or owing under the terms of this Agreement or the
Revolving Note, including without limitation, all payments of principal and
interest as they become due under the Revolving Note.
(f) GUARANTEE. The Revolving Note and the other indebtedness hereunder
shall be guaranteed by Xxxxxxx X. Xxxxxxxxx, Xx. ("Xxxxxxxxx"), Benz Energy
Ltd., a Yukon Territory corporation ("Benz Energy"), Xxxxxxx X. Xxxxxxxxx,
Xx., Trustee of and on behalf of The Xxxxxxxx Trust, the Ruston Trust and the
Houston Trust, created by Trust Agreements dated January 14, 1987, executed
by Xxxxxxxx X. Xxxxxxxxx, as Xxxxxxx, and Xxxxxxx X. Xxxxxxxxx, Xx., as
Trustee, and Xxxxxxx X. Xxxxxxxxx, Trustee of and on behalf
Bank One, Texas, N.A.
July 17, 1997
Page 8
of The Starbucks Trust, created by Trust Agreement dated January 17, 1996,
executed by Xxxxx Xxx Xxxxxx, as Xxxxxxx and Xxxxxxx X. Xxxxxxxxx, as
Trustee. The foregoing guarantors are individually referred to herein as a
"Guarantor" and collectively referred to herein as the "Guarantors".
Section 6. NEGATIVE COVENANTS. Unless waived by Xxxxxx in writing:
(a) INVESTMENTS, LOANS AND ADVANCES. Borrower will not make
investments in or loans or advances to any company, person or entity,
except those made in the ordinary course of its business and investments
in obligations of the United States of America or certificates of deposit
issued by Lender.
(b) MERGER AND CONSOLIDATION. Borrower will not merge or
consolidate with any person or create any subsidiaries, enter into any
partnerships or acquire any other entity. Borrower may enter into joint
ventures in the ordinary course of business.
(c) DIVIDENDS AND DISTRIBUTIONS. Borrower will not declare or pay
any dividends or distributions in cash or otherwise or purchase or redeem
any stock of Borrower.
(d) SALE OF ASSETS. Borrower will not sell, transfer or otherwise
dispose of any of its assets or enter into any arrangement accomplishing
substantially the same purpose, except that the foregoing restrictions
shall not apply to transactions in the ordinary course of business.
(e) INDEBTEDNESS. Borrower will not incur, create, assume or
guarantee in any manner any indebtedness, obligation or liability (direct
or contingent), except (i) for indebtedness under the Credit Facility,
and (ii) up to $100,000.00 in purchase money indebtedness incurred by
Borrower in the ordinary course of its business.
(f) LIENS. Borrower will not create or permit to exist any lien,
security interest or other encumbrance on any of its properties or assets
except (1) liens in favor of Lender, (2) liens for taxes or other
governmental charges not yet due or contested in good faith, (3) liens
in connection with workers' compensation, unemployment insurance or
other such obligations, (4) legal or equitable encumbrances deemed to
exist by reason of this or other negative pledge covenants, (5) legal
or equitable encumbrances resulting from legal proceedings, (6) vendors',
mechanics', or other like liens, or
Bank One, Texas, N.A.
July 17, 1997
Page 9
(7) servitudes, easements and other similar property rights.
(g) BASIC BUSINESS. Borrower will not change or add to its basic line
of business from that on the date hereof.
(h) TRANSACTIONS WITH AFFILIATES. Borrower will not enter into any
agreement or transaction with any affiliate of Borrower unless the terms and
provisions thereof are no less favorable to Borrower than what Borrower could
obtain from an unrelated third party.
(i) HEDGING. Borrower will not enter into any agreement by which
Borrower xxxxxx the prices to be received by Borrower for any oil or gas
produced by or attributable to the interests of Borrower.
Section 7. FINANCIAL COVENANTS.
(a) Borrower will not at any time permit its Tangible Net Worth to be
less than $2,500,000.00 PLUS all net proceeds of any issuance of any equity
of Borrower after February 28, 1997, PLUS seventy-five (75%) of positive net
income for each fiscal quarter of Borrower, commencing with respect to the
fiscal quarter ended June 30, 1997.
(b) Borrower will not at any time permit its Debt Coverage Ratio to be
less than 1.25 to 1.00.
(c) Borrower will not at any time permit its Debt to Worth Ration to be
greater than 2.00 to 1.00.
(d) For the purposes of this Agreement, the following terms shall have
the following meanings:
(1) "Cash Flow" shall mean net income before taxes, plus
depreciation, depletion, amortization and other non-cash charges.
(2) "Debt Coverage Ratio" shall mean the ratio of (i) Cash Flow
plus interest expense for the preceding four (4) calendar quarters
(except that for the calculations made with respect to any period prior
to the quarter ending June 30, 1998, the Cash Flow and interest expense
for such period shall be annualized) to (ii) projected Debt Service for
the succeeding four (4) calendar quarters.
Bank One, Texas, N.A.
July 17, 1997
Page 10
(3) "Debt Service" shall mean the sum of current maturities of
long-term indebtedness plus required interest payments on all
indebtedness.
(4) "Debt to Worth Ratio" shall mean the ratio of total debt
to Tangible Net Worth.
(5) "Tangible Net Worth" shall mean the amount by which total
assets (excluding the amount of any write up of any assets over the
depreciated costs, intangible assets such as good will and patent
rights and all notes or accounts receivable due from affiliates)
exceeds total liabilities.
All terms not expressly defined shall be defined in accordance with generally
accepted accounting principles. All determinations under this Agreement shall
be made in accordance with generally accepted accounting principles
consistently applied, except where expressly provided to the contrary. All
references to a preceding period shall mean the period ending as of the end
of the month, quarter or fiscal year for which the applicable report is
delivered. All references to a period immediately following shall mean the
period beginning on the first day of the month, quarter or fiscal year
following the end of the period for which the applicable report is delivered.
Section 8. DEFAULT AND REMEDIES. It shall constitute an event of
default hereunder if (a) Borrower fails to make when due any payment on the
Revolving Note or on any other indebtedness hereunder, (b) Borrower fails to
comply with any provision of Section 7 hereof and such violation remains
uncured for a period of thirty (30) days, (c) Borrower fails to perform any
of its other agreements contained herein, (d) Borrower defaults under the
terms or provisions of any other Loan Document or any other agreement,
instrument or document executed in connection with or as security for the
Credit Facility, (e) any representation or warranty of Borrower proves to
have been untrue when made, (f) any petition in bankruptcy is filed by
Borrower, or any order granting relief under any bankruptcy or receivership
law is filed with respect to Borrower, (g) Borrower permits a monetary
judgment against it to remain undischarged for a period in excess of thirty
(30) days, or (h) Borrower dissolves. Upon the occurrence of an event of
default specified in clause (f) above, immediately, and upon the occurrence
of any other event of default hereunder at the option of Lender, without
notice to Borrower or any other person, the obligation of Lender to make any
advances (or deemed advances) under the Credit Facility shall be terminated,
all indebtedness of Borrower to Lender shall be immediately due and payable
and Lender may take any other actions as may be permitted by this Agreement,
any other Loan Document or any other document or instrument evidencing or
securing the Credit Facility. Borrower expressly waives presentment,
Bank One, Texas, N.A.
July 17, 1997
Page 11
demand, protest, notice of protest, or other notice of dishonor of any kind
including, without limitation, notice of intent to accelerate the maturity of
the Revolving Note and other indebtedness hereunder and notice of
acceleration of the maturity of the Revolving Note and other indebtedness
hereunder.
Section 9. CLOSING. The initial funding of the Credit Facility shall
be subject to the payment upon execution hereof of all legal fees and
expenses incurred by Xxxxxxx Xxxxx Xxxxxx & Xxxxx, L.L.P., counsel to Xxxxxx,
in connection with the preparation, negotiation and execution of this
Agreement and the other Loan Documents, as well as the receipt by Lender of
the following documents, instruments and certificates (the "Loan Documents"),
each of which shall be satisfactory in form and substance to Lender and its
counsel:
(a) a copy of this Agreement executed by Xxxxxxxx;
(b) the Revolving Note executed by Xxxxxxxx;
(c) a Mortgage, Collateral Assignment, Security Agreement and
Financing Statement covering certain oil and gas properties of Borrower
in Ascension and Iberville Parishes, Louisiana, executed by Borrower;
(d) a Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement executed by Xxxxxxxx, covering certain
oil and gas properties of Borrower in Xxxxxxxxx Xxxxx and Xxxxx
Counties, Mississippi;
(e) a Supplemental Mortgage, Collateral Assignment, Security
Agreement and Financing Statement executed by Borrower with respect to
each parish in which any property presently pledged to Lender and
included in the determination of the Borrowing Base is located, covering
all of such properties;
(f) a Guaranty Agreement executed by each Guarantor;
(g) all financing statements or amendments thereto requested by
Xxxxxx, executed by Xxxxxxxx;
(h) various Transfer Orders and Instructions to Pipeline
Companies, executed in blank by Xxxxxxxx;
Bank One, Texas, N.A.
July 17, 1997
Page 12
(i) a Notice of Final Agreement executed by Xxxxxxxx and the
Guarantors;
(j) certificate of the Secretary of Borrower, certifying as to the
Articles of Incorporation and Bylaws of Borrower, resolutions of the
board of directors of Borrower, and the signatures of authorized officers
of Xxxxxxxx;
(k) resolutions of the board of directors of Borrower;
(l) resolutions of the board of directors of Benz Energy;
(m) a Certificate of Existence issued by the Secretary of State of
Texas with respect to Xxxxxxxx;
(n) a Certificate of Existence and Good Standing issued by the
Registrar of Corporations of the Yukon Territory with respect to Benz
Energy;
(o) a Certificate of Good Standing issued by the Comptroller of
Public Accounts of the State of Texas with respect to Xxxxxxxx;
(p) Certificates of Authority and Good Standing with respect to
Xxxxxxxx, issued by the Secretary of State of Louisiana and the
Secretary of State of Mississippi;
(q) an opinion of counsel of Xxxxxxxx and each Guarantor; and
(r) such other documents and instruments as may be reasonably
requested by Xxxxxx or its counsel.
Section 10. CHANGE IN OWNERSHIP OR MANAGEMENT. If at any time while
Xxxxxxxx is indebted to Lender or Lender has a commitment to Borrower
hereunder, any change in the ownership of the Borrower occurs, whatever
class, or if any member of senior management of Borrower ceases to hold the
position he or she currently holds with Borrower or perform the functions he
or she currently performs, then in any such event, Borrower shall give Lender
written notice thereof and Lender shall have the option for a period of
thirty (30) days from receipt of said notice to declare all indebtedness of
Borrower to Xxxxxx immediately due and payable.
Bank One, Texas, N.A.
July 17, 1997
Page 13
Section 11. DISCLOSURE. Any additions or exceptions applicable to the
terms of this Agreement, the representations and warranties of Borrower
herein or the covenants hereof shall only be those disclosed in writing to
Lender concurrently with the execution hereof.
Section 12. MISCELLANEOUS.
(a) NOTICES. All notices hereunder (including, without limitation, any
notice of default) shall be in writing or by telecopy or telegram, confirmed
in writing, and shall be sufficient in all respects if delivered or sent by
registered or certified mail to the address set forth on the signature page
of this Agreement. Either party may, by proper written notice hereunder to
the other party, change the address to which notices shall thereafter be sent.
(b) SUCCESSORS AND ASSIGNS. All covenants and agreements herein
contained by or on behalf of Borrower shall bind its successors and assigns
and shall inure to the benefit of Lender and its successors and assigns.
(c) RENEWALS AND EXTENSIONS. All provisions of this Agreement shall
apply with equal force and effect to each and all renewals and extensions, in
whole or in part, of the Revolving Note or the Credit Facility.
(d) XXXXX AND SAVINGS CLAUSE. Nothing contained in this Agreement or in
any of the other Loan Documents shall be construed to obligate Borrower,
under any circumstances whatsoever, to pay interest in excess of the maximum
non-usurious interest rate applicable to Borrower. In the event that any sums
received from Borrower are at any time under applicable law deemed to be in
excess of the maximum non-usurious amount Lender could collect under
applicable usury law, the effective rate of interest on the loans hereunder
shall be reduced to and be the maximum non-usurious interest rate permitted
under applicable law and Borrower and all sureties, endorsers and guarantors
shall accept as their sole remedy under such circumstances either the return
of any sums of interest which may have been collected and which produced a
rate of interest in excess of the applicable maximum non-usurious interest
rate or the application of those sums as a credit against the unpaid
principal amount of the loan, whichever remedy may be elected by Xxxxxx.
(e) HEADINGS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit,
amplify or modify the terms and provisions hereof.
(f) NO WAIVER; REMEDIES CUMULATIVE. No course of dealing on the part of
Lender or its members, managers or employees, or any
Bank One, Texas, N.A.
July 17, 1997
Page 14
failure or delay by Xxxxxx with respect to exercising any right, power, or
privilege of Lender under this Agreement or any other Loan Document shall
operate as a waiver thereof. The rights and remedies of Lender under this
Agreement and the other Loan Documents shall be cumulative and the exercise
or partial exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.
(g) GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
(h) INVALID PROVISIONS. In the event any one or more of the provisions
contained in this Agreement or any of the other Loan Documents shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or the other Loan Documents. Furthermore, in lieu
of such invalid, illegal or unenforceable provision, there shall
automatically be added a provision as similar in terms to such invalid,
illegal or unenforceable provision as may be possible and as may be valid,
legal and enforceable.
Section 13. ENTIRE AGREEMENT. THIS WRITTEN LOAN AGREEMENT, TOGETHER WITH
THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
If this evidences your understanding of the agreements herein, please
execute in the space provided.
Sincerely,
TEXSTAR PETROLEUM, INC.
By /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxxx, Xx.
--------------------------------
Title: President
-------------------------------
Address for Notice:
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Bank One, Texas, N.A.
July 17, 1997
Page 15
ACCEPTED AND AGREED TO
BANK ONE, TEXAS, N.A.
By: /s/ Xxxx X. Xxxxx
--------------------------------
Name: Xxxx X. Xxxxx
--------------------------
Title: Senior Vice President
-------------------------
Address for Notice:
000 Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
EXHIBIT A
P R O M I S S O R Y N O T E
----------------------------
$10,000,000.00 July 17, 1997
FOR VALUE RECEIVED, after date, without grace, in the manner, on the
dates and in the amounts so herein stipulated, the undersigned, TEXSTAR
PETROLEUM, INC., a Texas corporation ("Borrower"), PROMISES TO PAY TO THE
ORDER OF BANK ONE, TEXAS, N.A., a national banking association ("Lender"), in
Houston, Xxxxxx County, Texas, the sum of TEN MILLION AND NO/100 DOLLARS
($10,000,000.00) or, if less, the aggregate unpaid principal amount of
advances made by Xxxxxx to Borrower pursuant to this Promissory Note (this
"Note"), in lawful money of the United States of America, which shall be
legal tender in payment of all debts and dues, public and private, at the
time of payment, and to pay interest on the advanced and unpaid principal
amount from date until maturity at a rate equal to the Base Rate (hereinafter
defined) plus two percent (2%) per annum ("Stated Rate"), not to exceed the
maximum non-usurious interest rate permitted by applicable law from time to
time in effect as such law may be interpreted, amended, revised, supplemented
or enacted ("Maximum Rate"), provided that if at any time the Stated Rate
exceeds the Maximum Rate then interest hereon shall accrue at the Maximum
Rate. In the event the Stated Rate subsequently decreases to a level less
than the Maximum Rate or if the Maximum Rate applicable to this Note should
subsequently be increased to a level greater than the Stated Rate, then, in
either case, interest hereon shall thereafter accrue at a rate equal to the
applicable Maximum Rate until the aggregate amount of interest accrued
through the term of this Note equals the aggregate amount of interest which
would have accrued at the Stated Rate without regard to any usury limit, at
which time interest hereon shall again accrue at the Stated Rate.
This Note is payable as follows:
1. Accrued and unpaid interest shall be due and payable on the
first day of each month, commencing August 1, 1997.
2. All accrued and unpaid interest and unpaid principal shall
be due and payable on June 30, 2000.
All payments under this Note shall be applied first against the accrued and
unpaid interest hereon and the remainder against the principal balance hereof.
This Note is subject to mandatory prepayments, as set forth in the
Loan Agreement (hereinafter defined). In addition, Borrower may prepay this
Note, in whole or in part, at any time prior to maturity without penalty, and
interest shall cease on any amount
--------
Initials
prepaid. Any partial prepayment shall be applied toward the payment of the
principal installments last maturing on the Note, that is, in the inverse
order of maturity, without reducing the amount or time of payment of the
remaining installments.
Any check, draft, money order or other instrument given in payment
of all or any part hereof may be accepted by Lender and handled in collection
in a customary manner, but same shall not constitute payment hereof or
diminish any rights of Lender except to the extent that actual cash proceeds
of such instrument are unconditionally received by Xxxxxx.
It is agreed that time is of the essence of this agreement. In the
event of default in the payment of any installment of principal or interest
when due or in the event of any other default hereunder, Xxxxxx may
accelerate and declare this Note immediately due and payable without notice.
Any failure to exercise this option shall not constitute a waiver by Lender of
the right to exercise the same at any other time.
In the event of default in the making of any payment herein
provided, either of principal or interest, or in the event this Note is
declared due, interest hereunder shall accrue at the Maximum Rate.
Borrower hereby agrees to pay all expenses, including reasonable
attorneys' fees, all of which shall become a part of the principal hereof,
incurred by Xxxxxx if this Note is placed in the hands of an attorney for
collection or if collected by suit or through any probate, bankruptcy or any
other legal proceedings.
Interest charges will be calculated on amounts advanced hereunder on
the actual number of days the amounts are outstanding on the basis of a
365-day or 366-day year, as is applicable.
It is expressly stipulated and agreed to be the intent of Borrower
and Lender to comply with applicable Texas law governing the maximum
non-usurious rate or amount of interest payable on or in connection with this
Note (or applicable United States federal law to the extent that it permits
Lender to contract for, charge, take, reserve or receive a greater amount of
interest than under Texas law). Accordingly, it is agreed that notwithstanding
any provision to the contrary in this Note, or in any of the documents
securing payment hereof or otherwise relating hereto, no such provision shall
require the payment or permit the collection of interest at a rate in excess
of the Maximum Rate. If any excess of interest in such respect is provided
for, or shall be judicially interpreted to be so provided for, in this Note
or in any of the documents securing payment hereof or otherwise relating
hereto, or if the acceleration of the maturity of this Note or any prepayment
by Borrower results in Borrower's having paid any interest in excess of that
permitted by applicable law, then in any such event,
--------
Initials -2-
it is the express intent of Borrower and Lender that (1) the provisions of
this paragraph shall govern and control, (2) neither Borrower nor any other
person primarily liable on this Note, nor their respective heirs, legal
representatives, successors or assigns, shall be obligated to pay the amount
of such interest to the extent that it is in excess of the Maximum Rate,
(3) any such excess which may have been collected shall be either applied as
a credit against the then unpaid amount hereof or refunded to Borrower, and
(4) the provisions of this Note and any documents securing payment of this
Note shall be automatically deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so that the effective rate of interest shall be reduced to the
Maximum Rate. For the purpose of determining the maximum amount of interest
permitted to be charged or collected hereunder, all sums paid or agreed to be
paid to Lender for the use, forbearance or detention of the proceeds of this
Note shall be amortized, prorated, allocated and spread throughout the full
term of this Note so that the rate or amount of interest on account of this
Note is uniform throughout the term hereof and does not exceed the applicable
usury ceiling.
Xxxxxxxx agrees that the Maximum Rate to be charged or collected pursuant
to this Note shall be the indicated rate ceiling referred to in TEX. REV.
CIV. STAT. XXX. Art. 5060-1.04, provided that Lender may rely on other
applicable laws, including without limitation laws of the United States, for
calculation of the Maximum Rate if the application thereof results in a
greater Maximum Rate. Except as provided above, the provisions of this Note
shall be governed by the laws of the State of Texas.
Xxxxxxxx and each other person who is a maker, surety, guarantor or
endorser of this Note hereby waives demand, grace, notice, presentment for
payment, notice of intention to accelerate the maturity hereof, notice of the
acceleration of the maturity hereof and protest, and agrees that this Note and
the liens securing its payment may be renewed, and the time of payment
extended, from time to time, without notice and without releasing any of the
foregoing. As additional security for all amounts owed by Borrower to Lender,
Borrower hereby grants to Lender a lien and security interest on (and the
express right of setoff against) any of Borrower's funds which may from time
to time be deposited with or in the possession of Lender.
As used in this Note, the term "Base Rate" shall mean at any time the
variable rate of interest then most recently announced publicly by Lender (or
any successor to all or substantially all of its assets) as its base rate of
interest and, without notice to Borrower or any other person, such rate of
interest shall change as and when changes in that base rate of interest are
announced.
-------------
Initials -3-
The principal of this Note represents funds which Xxxxxx may advance to
Borrower, pursuant to and subject to the Loan Agreement, from time to time
upon request of Borrower. Any part of the principal may be repaid by Xxxxxxxx
and thereafter reborrowed, provided the outstanding principal amount of this
Note shall never exceed the face amount of this Note. Each advance shall
constitute a part of the principal hereof and shall bear interest from the
date of the advance. The provisions of Tex. Rev. Civ. Stat. Xxx.
art. 5069-15.01, ET. SEQ., as the same may be amended, shall not apply to
this Note or to any of the Security Documents.
Borrower has acquired various oil and gas properties which are described
in one or more of the Security Documents (hereinafter defined). The
acquisition of such oil and gas properties was made subject to certain
indebtedness of Texstar Petroleum, L.L.C. ("Texstar L.L.C.") to Lender,
including, without limitation, the indebtedness pursuant to that certain
$750,000.00 Promissory Note dated July 3, 1996, executed by Xxxxxxx L.L.C.
and payable to the order of Lender. A portion of the principal of this Note
represents funds which will be used to repay the indebtedness of Texstar
L.L.C. secured by the existing liens on such oil and gas properties of
Borrower, including the indebtedness pursuant to the above-described
$750,000.00 Promissory Note, and the liens securing the payment of such note,
which burden the interests acquired by Borrower, are not released, but are
hereby ratified and hereby carried forward to secure this Note.
This Note is the Revolving Note referred to in, is subject to, and is
entitled to the benefits of and security afforded by the following documents
(the "Security Documents"):
(a) that certain letter loan agreement of even date herewith between
Borrower and Xxxxxx, as that letter loan agreement may be amended,
modified or supplemented from time to time (the "Loan Agreement");
(b) those certain Mortgages, Deeds of Trust, Assignments of
Production, Security Agreements and Financing Statements of even date
herewith, executed by Borrower for the benefit of Lender and covering
certain oil and gas properties in Xxxxxxxxx Xxxxx and Xxxxx Counties,
Mississippi;
(c) Those certain Mortgages, Collateral Assignments, Security
Agreements and Financing Statements of even date herewith, executed by
Borrower for the benefit of Lender and covering certain oil and gas
properties in Ascension and Iberville Parishes, Louisiana;
(d) that certain Mortgage, Collateral Assignment, Security
Agreement and Financing Statement dated
---------------
Initials -4-
September 14, 1995, executed for the benefit of Lender by Xxxxxxx X.
Xxxxxxxxx, Xx. (the "Trustee"), Trustee of and on behalf of The Xxxxxxxx
Trust, The Ruston Trust and The Houston Trust, created by Trust
Agreements dated January 14, 1987, executed by Xxxxxxxx X. Xxxxxxxxx, as
Xxxxxxx, and Xxxxxxx X. Xxxxxxxxx, Xx., as Trustee, covering certain oil
and gas properties in Iberville Parish, Louisiana, and filed for record
under Mortgage Book 290, Entry 315 of the Mortgage Records of Iberville
Parish, Louisiana, as the same has been amended by that certain
Supplemental Mortgage, Deed of Trust and Modification Agreement dated
July 3, 1996 among the Trustee, Texstar L.L.C., Xxxxxxx X. Xxxxxxxxx,
Xx. ("Xxxxxxxxx") and Xxxxxx, filed for record under Mortgage Book 296,
Entry 168 of the Mortgage Records of Iberville Parish, Louisiana, and by
that certain Supplemental Mortgage, Collateral Assignment, Security
Agreement and Financing Statement of even date herewith among the
Trustee, Texstar L.L.C., Xxxxxxxx and Xxxxxx;
(e) that certain Mortgage, Collateral Assignment, Security
Agreement and Financing Statement dated July 3, 1996, executed by
Xxxxxxx L.L.C. for the benefit of Lender, covering certain oil and gas
properties in Iberville Parish, Louisiana and filed for record under
Mortgage Book 296, Entry 169 of the Mortgage Records of Iberville Parish,
Louisiana, as the same has been amended by that certain Supplemental
Mortgage, Collateral Assignment, Security Agreement and Financing
Statement dated July 24, 1996 among Texstar L.L.C., Xxxxxxxxx and
Lender, filed for record under Mortgage Book 297, Entry 102 of the
Mortgage Records of Iberville Parish, Louisiana, that certain
Supplemental Mortgage, Collateral Assignment, Security Agreement and
Financing Statement dated August 5, 1996, among Texstar L.L.C.,
Xxxxxxxxx and Xxxxxx, filed for record under Mortgage Book 297, Entry
103 of the Mortgage Records of Iberville Parish, Louisiana, and that
certain Supplemental Mortgage, Collateral Assignment, Security Agreement
and Financing Statement of even date herewith among Texstar L.L.C.,
Xxxxxxxx and Xxxxxx;
(f) that certain Mortgage, Collateral Assignment, Security
Agreement and Financing Statement dated September 14, 1995, executed by
the Trustee for the benefit of Lender, covering certain oil and gas
properties in Ascension Parish, Louisiana, and filed for record under
Clerk's File No. 363153 of the Real Property Records of Ascension
Parish, Louisiana, as the same has been amended by that certain
Supplemental Mortgage, Deed of Trust and Modification Agreement dated
July 3, 1996 among the Trustee, Texstar L.L.C., Xxxxxxxxx and Xxxxxx,
--------
Initials -5-
filed for record under Clerk's File No. 375873 of the Real Property
Records of Ascension Parish, Louisiana, that certain Supplemental
Mortgage, Collateral Assignment, Security Agreement and Financing
Statement dated August 5, 1996, among Texstar L.L.C., Xxxxxxxxx and
Xxxxxx, filed for record under Clerk's File No. 377497 of the Real
Property Records of Ascension Parish, Louisiana, and by that certain
Supplemental Mortgage, Collateral Assignment, Security Agreement and
Financing Statement of even date herewith among the Trustee, Texstar
L.L.C., Borrower and Lender;
(g) that certain Guaranty Agreement of even date herewith,
executed by Benz Energy Ltd. for the benefit of Lender;
(h) that certain Guaranty Agreement of even date herewith,
executed by Xxxxxxxxx for the benefit of Xxxxxx;
(i) that certain Guaranty Agreement of even date herewith, for the
benefit of Xxxxxx, executed by Xxxxxxx X. Xxxxxxxxx, Xx., Trustee of and
on behalf of The Xxxxxxxx Trust, The Ruston Trust and The Houston Trust,
created by Trust Agreements dated January 14, 1987, executed by Xxxxxxxx
X. Xxxxxxxxx, as Xxxxxxx, and Xxxxxxx X. Xxxxxxxxx, Xx., as Trustee; and
(j) that certain Guaranty Agreement of even date herewith,
executed by Xxxxxxx X. Xxxxxxxxx, as Trustee of and on behalf of The
Starbucks Trust, created by Trust Agreement dated January 17, 1996,
executed by Xxxxx Xxx Xxxxxx, as Xxxxxxx, and Xxxxxxx X. Xxxxxxxxx, as
Trustee, for the benefit of Xxxxxx.
This Note is subject to the provisions contained in the Security Documents
which, among other things, provide for the acceleration of the maturity
hereof upon the occurrence of certain events.
Borrower represents and warrants that this loan is for business,
commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use.
TEXSTAR PETROLEUM, INC.
By:
-----------------------------------
Name:
----------------------------
Title:
----------------------------
-6-
