EXHIBIT 4.1
EXHIBIT A
PROMISSORY NOTE
$___________________ Houston, Texas September 8, 2004
FOR VALUE RECEIVED, the undersigned, BLUE DOLPHIN ENERGY COMPANY, a
Delaware corporation ("BORROWER"), promises to pay to the order of
__________________ ("LENDER"), in lawful money of the United States of America,
the principal amount of _________________________________ AND NO/100
($__________), plus such additional amounts that may be added to principal
pursuant to the terms of this Note or any of the Loan Documents (as defined
below), together with interest on the principal balance from time to time
remaining unpaid at the rate and upon the terms provided in this Note. Unless
otherwise defined in this Note, or unless the context of this Note otherwise
requires, each capitalized term used in this Note shall have the meaning given
to such term in such applicable Loan Document.
1. Defined Terms. As used in this Note,
BASE RATE means, from day to day, an annual rate of interest equal to the
lesser of (a) 12% and (b) the Maximum Rate.
BUSINESS DAY means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized to close under the laws of, or are in fact
closed in, the City of Houston, Xxxxxx County, Texas.
DEBTOR RELIEF LAW means Title 11 of the United States Code and all other
applicable liquidation, conservatorship, bankruptcy, fraudulent transfer,
assignment for the benefit of creditors, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally.
DEFAULT is defined in Section 11 below.
DEFAULT RATE means, from day to day, an annual rate of interest equal to
the lesser of (a) the 18% and (b) the Maximum Rate.
EXTENDED MATURITY DATE means the earlier to occur of (a) the first
anniversary of the date of this Note, and (b) the date upon which the Obligation
has been accelerated pursuant to Section 11 below.
GAAP means generally accepted accounting principles in the U.S. set out in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board as in effect from time to time.
GOVERNMENTAL AUTHORITY means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of, or pertaining to, government.
INVESTORS means all the Lenders, as defined in the Mortgage.
LOAN DOCUMENTS means, collectively, this Note, the Mortgage, the Note and
Warrant Purchase Agreement, the Warrants, the Additional Warrants (as defined in
the Note and Warrant Purchase Agreement), and all other documents and
instruments executed and delivered in connection with this Note, in each case as
the same may be renewed, extended, amended, restated or otherwise modified from
time to time.
MATURITY DATE means the earlier to occur of (a) December 7, 2004, and (b)
the date upon which the Obligation has been accelerated pursuant to Section 11
below.
MAXIMUM AMOUNT and MAXIMUM RATE, respectively, mean the maximum
non-usurious amount and the maximum non-usurious rate of interest that, under
applicable law, Lender is permitted to contract for, charge, take, reserve or
receive on the Obligation.
MORTGAGE is defined in Section 15 below.
OBLIGATION means all Principal Debt, interest, and other amounts due under
this Note and all other present and future debt, liabilities and obligations,
whether direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, and all renewals, increases and extensions
thereof, or any part thereof, now or in the future owed to Lender by Borrower or
any other obligor under any Loan Document, together with all interest accruing
thereon, reasonable fees, costs and expenses payable under the Loan Documents or
in connection with the enforcement of rights under the Loan Documents.
PERSON means any individual, partnership, limited partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, syndicate, Governmental
Authority or other entity or organization of whatever nature.
PRINCIPAL DEBT means, when determined, the outstanding principal amount of
this Note.
PRIOR LIEN INSTRUMENTS has the meaning given to such term in the Mortgage.
NOTE AND WARRANT PURCHASE AGREEMENT means that certain Note and Warrant
Purchase Agreement dated the same date as this Note among Borrower, Lender and
other Investors, as defined therein, covering the Warrants.
SALVAGE CONTRACT has the meaning given to such term in the Prior Lien
Instruments.
SUBSIDIAR(Y)IES means all Persons controlled directly or indirectly by
Borrower, or in which Borrower directly or indirectly owns an equity or voting
interest of ten percent (10%) or more. For purposes hereof, "controlled" means
the power to direct the management or policies of a person, whether through
voting securities, by contract or otherwise.
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VOTING AGREEMENT means that certain Shareholder Voting Agreement of
Borrower dated of even date hereof among Borrower, the Investors and certain
shareholders of Borrower.
WARRANTS means, collectively, those certain 1,250,000 Warrants issued to
Lender and other Investors on the date of this Note to acquire Borrower voting
common stock pursuant to the terms and conditions of the Note and Warrant
Purchase Agreement.
2. Interest Rate. Subject to Section 4 and Section 7 below, the unpaid
Principal Debt from time to time outstanding shall accrue interest from the date
of this Note until maturity at a fixed rate which shall be equal to the Base
Rate.
3. Use of Proceeds; Payment Terms; Extension of Maturity Date.
(a) Borrower shall use the proceeds of this Note for working
capital and other lawful corporate purposes, and may not use such proceeds
for any other purpose.
(b) Accrued but unpaid interest under this Note shall be due and
payable monthly in arrears, commencing on the date that is one month from
the date hereof and continuing to be due and payable on the same date of
each month thereafter until the Maturity Date; provided that, so long as
no Default exists on such interest payment date, from the date of this
Note until the Maturity Date, a portion of the interest due under this
Note equal to 8% per annum that has accrued during such period shall not
be payable on such interest payment date, but shall continue to accrue on
a daily basis and shall be due and payable on the Maturity Date. The
outstanding Principal Debt plus all accrued and unpaid interest on this
Note and all other Obligations shall be due and payable on the Maturity
Date.
(c) No later than 15 days after the date hereof, Borrower will
file a preliminary proxy statement on Schedule 14A with the Securities and
Exchange Commission, which will include a proposal for the stockholders of
the Borrower to vote on, among other matters, the issuance of the
Additional Warrants (as defined under, and further described in, the Note
and Warrant Purchase Agreement), and provided that no Default exists on
the Maturity Date but subject to issuance of the Additional Warrants and
such other documents as Lender may reasonably request, upon at least seven
(7) days' prior written notice by Borrower to Lender designating the
Extended Maturity Date, together with evidence of stockholder approval of
the issuance of the Additional Warrants, the Maturity Date shall be
renewed and extended to the Extended Maturity Date, and Borrower and
Lender agree to execute a note modification agreement (or similar
instrument) to this Note evidencing such renewal and extension at
Borrower's sole cost and expense.
4. Default Rate. After the date this Note matures or is accelerated,
the Principal Debt shall accrue interest at the Default Rate, until all amounts
due or past due are paid (whether payment is made before or after entry of a
judgment) or the Default is otherwise cured or waived.
5. Prepayment. Borrower may prepay this Note in whole or in part at any
time, but no earlier than three Business Days after the Special Meeting (as
defined in the Note and Warrant Purchase Agreement); provided that, upon such
prepayment Borrower shall pay a
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prepayment fee in an amount equal to 6% of the Principal Debt prepaid. All
prepayments under this Note shall be applied to the principal or interest of
this Note. This Note represents a single advance term loan made on the date of
this Note and any amount prepaid or paid under this Note may not be re-borrowed.
6. Calculation of Interest. Interest will be calculated on the basis of
actual number of days elapsed (including the first day but excluding the last
day), but computed as if each calendar year consisted of 365 days. All interest
rate determinations and calculations by Lender are conclusive and binding,
absent manifest error.
7. Maximum Rate. Regardless of any provision in this Note or in any
Loan Document it is the intention of Borrower and Lender that Lender not (a)
contract for, charge, take, reserve, receive, or apply, as interest on all or
any part of the principal of this Note any amount in excess of the Maximum Rate
or the Maximum Amount or (b) receive any unearned interest, in violation of any
applicable law. If any acceleration of the maturity of this Note or any payment
under this Note or any other Loan Document produces a rate in excess of the
Maximum Rate or if Lender shall for any reason receive any such unearned
interest or if any transaction contemplated hereby or by any other Loan Document
would otherwise be usurious under applicable law, then (i) the aggregate of all
interest under applicable usury laws that is contracted for, charged, taken,
reserved, received or applied under this Note, the other Loan Documents, or
otherwise shall under no circumstances exceed the Maximum Amount, (ii) neither
Borrower nor any other Person shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum Amount, (iii) any
excess or unearned interest shall be deemed to be and shall be treated as a
partial prepayment or repayment of principal and any remaining excess or
unearned interest will be refunded to Borrower, and (iv) the provisions of this
Note and the Loan Documents shall immediately be deemed reformed, without the
necessity of the execution of any new document or instrument, so as to comply
with all applicable usury laws. In determining whether interest paid or payable
exceeds the Maximum Rate or the Maximum Amount, Lender shall, to the maximum
extent permitted under applicable law (w) treat all advances under this Note and
the other Loan Documents as a single extension of credit, (x) characterize any
non-principal payment as an expense, fee or premium rather than as interest, (y)
exclude voluntary prepayments or repayments and their effects, and (z) amortize,
prorate, allocate and spread the total amount of interest throughout the entire
contemplated term of this Note. However, if the Note is paid in full before the
end of its full contemplated term, and if the interest received for its actual
period of existence exceeds the Maximum Rate or the Maximum Amount, Lender shall
refund any excess (and Lender may not, to the extent permitted by law, be
subject to any penalties provided by any laws for contracting for, charging,
taking, reserving or receiving interest in excess of the Maximum Amount). If the
Laws of the State of Texas are applicable for purposes of determining the
"Maximum Rate" or the "Maximum Amount," the "Maximum Rate" may not exceed the
"weekly ceiling" from time to time in effect under Chapter 303 of the Texas
Finance Code, as amended and in effect from time to time.
8. Conditions to Advance. Lender shall advance to Borrower all of the
proceeds under this Note in a single advance upon execution and delivery to
Lender of each of the following documents in form and substance satisfactory to
Lender (i) this Note, (ii) the Mortgage, (iii) the Note and Warrant Purchase
Agreement, (iv) the Warrants, (v) the Voting Agreement, (vi) a letter agreement
among Borrower, the Collateral Agent designated in the
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Mortgage ("Collateral Agent"), and Tetra Applied Technologies, Inc. (together
with its successors and assigns) in form and substance satisfactory to the
parties thereto, (vii) a Secretary's Certificate containing (1) a copy of
Borrower's resolutions authorizing this Note and related Loan Documents and
transactions thereby, (2) a copy of Borrower's organizational documents, and (3)
an incumbency certificate of Borrower's authorized officers, and (viii) such
other documents or instruments that Lender may request.
9. Representations. Borrower does hereby certify, warrant and represent
unto, and agrees with, Lender as follows: (i) the Salvage Contract and Prior
Lien Instruments are in good standing and, to the best knowledge and belief of
Borrower, no uncured breaches or defaults exist thereunder; (ii) the unpaid
unpaid balance of the Salvage Contract on this date is $668,000; (iii) no amount
other than the outstanding amount under the Salvage Contract is claimed to be
owing or secured by the Prior Line Instruments; and (iv) upon the occurrence of
an event of default under the Salvage Contract, the Prior Lien Instruments or
any other agreement or instrument secured by any Prior Lien Instrument, Borrower
shall provide Collateral Agent with written notice of such default within three
(3) Business Days of knowledge of such default.
10. Negative Covenant. During the term of this Note, without prior
consent of the Collateral Agent, Borrower will not allow any material change to
be made in the character of its business, nor will it allow any Subsidiary to
make any material change to be made in the character of any of their businesses.
11. Default. The term "DEFAULT" means the occurrence of any one or more
of the following events:
(a) The failure of Borrower to pay any part of the principal or
interest under this Note when and as required to be paid or a default
occurs under the Mortgage.
(b) The failure of Borrower or any obligor to punctually and
properly perform, observe and comply with any covenant, agreement or
condition in this Note or in any other Loan Document (not described in (a)
above), and such failure continues for 10 days.
(c) Borrower or any Subsidiary (i) voluntarily seeks, consents to,
or acquiesces in the benefit of any Debtor Relief Law, (ii) becomes a
party to or is made the subject of any proceeding provided for by any
Debtor Relief Law (other than as a creditor or claimant), and (A) the
petition is not controverted within 10 days and is not dismissed within 60
days, or (B) an order for relief is entered under Title 11 of the United
States Code, (iii) makes an assignment for the benefit of creditors, or
(iv) fails (or admits in writing its inability) to pay its debts generally
as they become due.
(d) There is entered against Borrower or any Subsidiary (i) a
final judgment or order for the payment of money in the aggregate amount
exceeding $100,000 (individually or in the aggregate and net of applicable
insurance if the insurer has accepted coverage) or (ii) one or more
non-monetary final judgments that could be, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on Borrower's consolidated financial condition, and, in either case
(A)
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enforcement proceedings are commenced by any creditor upon such judgment
or order, or (B) there is a period of 10 consecutive days during which a
stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, is not in effect.
(e) Borrower or any Subsidiary enters into, or is subject to, any
agreement or other action (i) for the sale of all or substantially all of
its assets, (ii) for any (x) sale, transfer or conveyance of its equity
interests (other than the Warrants; the Additional Warrants or the
Director Warrants in either case to be issued under, and as defined in,
the Note and Warrant Purchase Agreement), (y) merger or (z) other business
combination and in the case of clause (y) or (z), and is not the survivor
of such merger or business combination, (iii) for the dissolution of
Borrower or such Subsidiary otherwise fails to maintain all licenses,
permits or franchises to maintain its status as a corporation in existence
and good standing in its state of incorporation and in each other State
where it is required to qualify to transact business, (iv) for the
incurrence of any indebtedness other than (A) the indebtedness evidenced
by this Note, (B) any other indebtedness to Lender, or (C) as previously
disclosed in writing to Lender before the date hereof.
(f) Any warrant of attachment, sequestration or similar proceeding
against Borrower or any Subsidiary's assets is not stayed within 10 days
or diligently contested in good faith by appropriate proceedings
diligently pursued with adequate reserves being made in accordance with
GAAP.
(g) Any representation or warranty made to Lender (or its
representatives) by Borrower or such grantor or obligor or contained in
any Loan Document, at any time proves to have been incorrect, incomplete
or misleading when made.
(h) Except for trade accounts payable in the ordinary course of
business, Borrower or any Subsidiary fails to pay when due (after lapse of
any applicable grace period) any debt or obligation which (individually or
in the aggregate) exceeds $50,000, or any default exists under any
agreement which permits any Person to cause any debt or obligation which
(individually or in the aggregate) exceeds $50,000 to become due and
payable by Borrower or such Subsidiary before its stated maturity.
(i) Borrower or such Subsidiary breaches or defaults under any
term, condition, provision, representation or warranty contained in any
agreement, including any agreement with Lender (other than this Note and
the other Loan Documents), and the effect of such breach or default could
reasonably be expected to result in a Material Adverse Effect on the
consolidated financial condition of Borrower and Borrower fails for 5
Business Days to commence and thereafter diligently pursue a cure.
If a Default occurs, after the expiration of any applicable grace or notice and
opportunity to cure periods, the holder of this Note shall be entitled to (i)
declare the entire unpaid principal of, and all accrued and unpaid interest on,
this Note immediately due and payable, without notice of intent to accelerate,
notice of acceleration, any other notice, demand, or presentment, all of which
are hereby waived, (ii) foreclose any liens or security interests securing all
or any part of the debt evidenced by this Note, (iii) exercise its offset rights
under Section 14 below, (iv) exercise any of its rights under the other Loan
Documents, or (v) proceed to protect, enforce, and
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exercise any other right or remedy to which the holder may be entitled by
agreement, at law, or in equity.
12. No Waiver. No delay on the part of the holder of this Note in the
exercise of any right or remedy available to the holder shall operate as a
waiver of such right or remedy. No single or partial exercise of a particular
right or remedy shall operate as a waiver of that particular right or remedy or
any other right or remedy.
13. Waiver. Except as provided in this Note, Borrower and any party
which may be or become liable for the payment of any amounts due under this Note
(including any surety, endorser, or guarantor) jointly and severally waive (to
the extent permitted by law) all applicable exemption rights (whether arising by
constitution, law, or otherwise), all valuation and appraisement rights,
presentment and demand for payment, protest, notice of protest and nonpayment,
notice of the intention to accelerate, and notice of acceleration and agree that
their liability on this Note shall not be affected by any renewal or extension
in the time of payment hereof, by any indulgences, or by any release or change
in any security for the payment of this Note, and hereby consent to any and all
renewals, extensions, indulgences, releases, or changes, regardless of the
number of such renewals, extensions, indulgences, releases, or changes.
14. Collection Costs; Fees and Expenses. If this Note is placed in the
hands of an attorney for collection, or if it is collected through any legal
proceedings, Xxxxxxxx agrees to pay the court costs, reasonable attorneys' fees,
and other costs of collection incurred by or on behalf of the holder of this
Note. Borrower shall promptly pay upon demand (a) all reasonable costs, fees and
expenses paid or incurred by Lender in connection with the negotiation,
preparation, delivery and execution of this Note and the Loan Documents,
including those incurred in connection with the preparation, execution and
delivery of collateral documents, and any related or subsequent amendment,
waiver or consent (including in each case, the reasonable fees and expenses of
Xxxxxx's counsel), (b) all due diligence, closing, and post-closing costs
including filing fees, recording costs, lien searches, corporate due diligence,
third-party expenses, appraisals (if required by Lender), title insurance (if
required by Lender), environmental surveys (if required by Lender), and other
related due diligence, closing and post-closing costs and expenses, and (c) all
costs, fees and expenses of Lender incurred in connection with the enforcement
of this Note and the Loan Documents or the exercise of any rights arising under
the Loan Documents (including reasonable attorneys' fees, expenses and costs
paid or incurred in connection with any negotiation, workout or restructure and
any action taken in connection with any Debtor Relief Laws), all of which shall
be a part of the Obligation and shall accrue interest, if not paid upon demand,
at the Default Rate until repaid.
15. Set-Off Rights. While a Default exists, Lender (and each of its
affiliates) is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply (a) any and all deposits
(general or special, time or demand, provisional or final) at any time held by
Lender (or its affiliates) and (b) any other debt at any time owing by Lender
(or any of its affiliates) to or for the credit or the account of Borrower,
against the Obligation even if Xxxxxx has not made demand under this Note and
the Obligation is unmatured. Xxxxxx agrees to promptly notify Borrower after any
such set off and application is made; provided that, the failure to give such
notice shall not affect the validity of such set off and application. The rights
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of Lender under this Section 14 are in addition to other rights and remedies
(including other rights of set off) that Lender may have.
16. Collateral. This Note is secured by the security interests in, and
liens granted under, that certain Deed of Trust, Mortgage, Assignment of
Proceeds, Security Agreement and Financing Statement dated the same date as this
Note by Blue Dolphin Pipe Line Company to X. Xxxxxxx Xxxxxx Trustee, for the
benefit of Investors, covering the collateral described therein (the
"MORTGAGE"). The Mortgage is incorporated into this Note by reference for all
purposes.
17. Applicable Law. This Note shall be construed, and its performance
enforced, in accordance with the laws of the State of Texas.
18. Remedies of Lender. Lender shall have all rights, remedies, and
recourse granted in this Note and all other Loan Documents and those available
at law or equity and the same (a) shall be cumulative and concurrent, (b) may be
pursued separately, successively, or concurrently against Borrower or any other
liable party or against any one or more of them in such order as Lender, in its
sole discretion, shall determine, (c) may be exercised as often as occasion
therefor shall arise, it being agreed by Borrower and any other liable party
that the exercise or failure to exercise any of the same shall in no event be
construed as a waiver or release thereof or of any other right, remedy, or
recourse, and (d) are intended to be, and shall be, nonexclusive.
19. Subordination. Anything herein or any Loan Document to the contrary,
the security interests created under the Mortgage shall be subordinate to the
security interests granted by Blue Dolphin Pipeline Company to MCNIC Offshore
Pipeline & Processing Company ("MCNIC") in and to the "Collateral" as defined in
and pursuant to that certain Pledge and Security Agreement dated February 1,
2002 ("MCNIC SECURITY AGREEMENT"). Should an event of default occur pursuant to
the terms of the MCNIC Security Agreement, such act shall constitute an event of
default hereunder. In such event and to the extent MCNIC commences any remedial
action under the MCNIC Security Agreement, the Collateral Agent on behalf of the
Investors may, at its option, cure the default under the MCNIC Security
Agreement. Any costs incurred by the Collateral Agent in curing such default
shall constitute an advance from Lender to Borrower of a portion of such
advance, such portion to be determined by multiplying the amount of the costs
incurred by Collateral Agent by a fraction, the numerator of which is the
original principal amount of this Note and the denominator of which is the
aggregate original principal amount of all the "Notes" (as defined in the
Mortgage), which amount shall be immediately due and payable, shall bear
interest at the maximum non-usurious rate permitted by applicable law, shall be
secured by the Mortgage and shall be deemed to be made at the instance of
Borrower, and the Collateral Agent and Investors shall be subrogated to the
rights of the person to whom any payment is made. Should the Collateral, as
defined in the MCNIC Security Agreement, be sold by virtue of a foreclosure sale
(or other sale) authorized pursuant to the terms of the MCNIC Security
Agreement, and should such sale be for an amount in excess of the indebtedness
secured by the MCNIC Security Agreement, such residue, up to the amount of the
indebtedness under the "Notes," as defined in the Mortgage (including any
authorized fees and expenses) shall be paid directly by MCNIC to Collateral
Agent for the ratable benefit of the Investors.
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20. Notices. Anything herein to the contrary, any notice by Xxxxxxxx
required hereunder shall be satisfied if such notice is provided to Western Gulf
Pipeline Partners, LP at c/o Peregrine Management, LLC, 00000 Xx. Xxxx'x Xxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000.
21. ENTIRE AGREEMENT. THIS NOTE (AS AMENDED OR REPLACED FROM TIME TO
TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY XXXXXXXX AND XXXXXX (OR
BY BORROWER FOR THE BENEFIT OF XXXXXX) REPRESENT THE FINAL AGREEMENT BETWEEN
XXXXXXXX AND XXXXXX AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY XXXXXXXX AND XXXXXX. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN BORROWER AND LENDER.
BORROWER:
BLUE DOLPHIN ENERGY COMPANY,
a Delaware corporation
By:_________________________________________
Xxxx Xxxx
Chairman and Chief Executive Officer
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