Exhibit 10.3
POST-PETITION LOAN AGREEMENT
THIS POST-PETITION LOAN AGREEMENT (the "Agreement") is made this _____
day of June, 1997, by and between INTERNATIONAL PUBLISHING HOLDING S.A.
("IPH"), with offices located at 0 Xxxxx Xxxxxxx, 0000 Xxxxxxxxxx, Xxxxx Xxxxx
of Luxembourg, and PETRO UNION, INC. (the "Debtor"), with offices located at
000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000.
W I T N E S S E T H:
WHEREAS, the Debtor filed a voluntary petition under Chapter 11 of Title
11 of the United States Code (the "Bankruptcy Code") on May 13, 1996 (the
"Filing Date) in the United States Bankruptcy Court for the Southern District
of Indiana (the "Bankruptcy Court"); and
WHEREAS, since the Filing Date, the Debtor has continued in possession
and management of its property as a Debtor-in-Possession pursuant to 11 U.S.C.
Sections 1107 and 1108; and
WHEREAS, the Debtor is currently engaged in oil drilling activities in
several states and has been offered the opportunity to utilize its oil
drilling expertise in Michigan and other states, and has requested that IPH
provide a working capital loan for continued business operations and in order
to replace the original Post-Petition Loan and Sale Agreement entered into
between the Debtor and Pembrooke Holding Corporation, which was approved by
this Court on August 16, 1996; and
WHEREAS, IPH has indicated substantial interest in funding or
participating in the funding a Plan of Reorganization in order to allow the
Debtor to continue in its oil and gas drilling activities.
NOW, THEREFORE, in consideration of the promises and mutual obligations
herein set forth and other good and valuable consideration, the parties agree
as follows:
I. THE LOAN
1.01. Subject to the terms and conditions hereof, IPH shall loan to the
Debtor the sum of Two Hundred Thousand Dollars ($200,000.00) (the "Loan") as
follows:
1.02. Upon entry of a final Order approving this Agreement by the
Bankruptcy Court and confirming by such Order that Pembrooke Holding
Corporation has no further claim against the Debtor, IPH shall loan to the
Debtor the sum of Two Hundred Thousand Dollars ($200,000.00) for an initial
term of One Hundred Eighty (180) days (the "Initial Term") as evidenced by a
Promissory Note, a copy of which is attached hereto as Exhibit "A" and which
shall meet the requirements of the Uniform Commercial Code in terms of
negotiability. The proceeds of the Loan shall be used solely by the Debtor
for reasonable and necessary operating expenses as set forth on the Budget
attached hereto as Exhibit "B", based upon the terms and conditions of payment
set forth in this Agreement.
1.03. The Loan shall bear interest at the rate of Ten Percent (10%) per
annum from the date upon which IPH loans the sum of Two Hundred Thousand
Dollars ($200,000.00) until paid in full.
II. CONVERSION
2.01. The Debtor shall, on or before the 16th day of June, 1997, file a
Plan of Reorganization, which shall contain the provisions set forth below and
the Debtor shall utilize its best efforts to have the Bankruptcy Court confirm
the Plan of Reorganization within Seventy-Five (75) days after filing said
Plan of Reorganization by entry of a final Order of Confirmation. Such Plan
of Reorganization shall provide, inter alia, that this Agreement is reaffirmed
by the Debtor as a Reorganized Debtor in its entirety (hereinafter the Debtor
following the confirmation of the Plan of Reorganization is referred to as the
"Reorganized Debtor"), with the exception that the Loan shall be subject to
the following alternate treatment pursuant to the Plan of Reorganization:
(I). The Loan shall be converted upon the Effective Date of the Plan
of Reorganization of the Reorganized Debtor to provide IPH with Registered
Common Stock of the Reorganized Debtor in the sum of Forty Thousand (40,000)
shares of such stock at Five Dollars ($5.00) per share all within the
Reorganized Debtor.
(ii). By agreement of the parties, the Debtor cannot, under any
circumstances, terminate this Agreement by repaying the principle and any
accrued interest to IPH.
(iii). Until such time as IPH exercises the conversion option as
provided in subparagraph (i), above, the Promissory Note shall be secured by a
Real Property Mortgage in form and content satisfactory to IPH covering one
hundred (100%) percent of the interest in certain limestone reserves owned by
the Debtor's subsidiary, Calox Corporation ("Calox"), in Monroe County,
Indiana.
(iv). Until such time as IPH exercises the conversion option as
provided in paragraph (I), above, the Promissory Note shall further be secured
by a first and unencumbered security interest on any and all assets of the
Debtor, subordinated only to the extent of administrative claims of
professionals as set forth in paragraph 3.01 of this Agreement. The Debtor
shall execute any and all documentation necessary to provide a first security
interest in all of the Debtor's assets to IPH subsequent to the approval of
this Agreement.
(v). In addition to the other considerations set forth above for
IPH's post-petition Debtor-in-Possession financing, IPH shall be granted in
any Plan of Reorganization a call option upon ninety (90%) percent of the
shares of stock of Calox Corporation, which is the Debtor's wholly owned
subsidiary corporation. The call option on the ninety (90%) percent shares of
the authorized and issued shares of stock of Calox Corporation shall be
exercisable by written notice from IPH to the Debtor or any Reorganized Debtor
within thirty-six (36) months from the date of confirmation of the Debtor's
Plan of Reorganization. Within thirty (30) days, from the date written notice
is provided to the Reorganized Debtor, IPH shall pay to the Debtor no more
than the current book value for payment for ninety (90%) percent shares of
stock of Calox Corporation, which shall be determined as of the date written
notification of exercise of the call option is delivered to the Debtor. Calox
Corporation shall exclusively contain the Monroe County limestone reserves as
its only asset.
III. SUPER-PRIORITY EXPENSE CLAIM AND MORTGAGE
3.01. Upon approval of this Agreement and the Novation Agreement
between Pembrooke Holding Corporation and Petro Union, Inc., and the advance
of the Loan proceeds, the super-priority administration expense claim provided
to Pembrooke Holding Corporation shall be extinguished as set forth in the
Novation Agreement. Further, IPH shall be allowed a super-priority
administration expense claim pursuant to 11 U.S.C. Section 364(c)(1) equal to
the amount of the Loan plus any accrued interest. This super-priority
administration expense claim shall have priority and payment over all other
obligations or liabilities now in existence or incurred hereafter by the
Debtor and all expenses of the kind specified in 11 U.S.C. Sections 503(b) or
507(b), subject only to the payment of professional fees incurred during the
Debtor's Title 11 case as fixed and determined by the Bankruptcy Court and any
quarterly fees owed to the Office of the United States Trustee under Title 28
of the United States Code.
3.02. In addition to the foregoing and as further security for the
prompt and full payment of the Loan, the Debtor shall cause its subsidiary,
Calox Corporation, to execute a Mortgage to IPH in form and content
satisfactory to IPH covering a one hundred (100%) percent interest in certain
limestone reserves owned by Calox Corporation in Monroe, Indiana (hereinafter
the "Monroe County Reserves"). The costs and expenses of preparing and filing
this Mortgage shall be the sole responsibility of the Debtor or Calox
Corporation.
IV. REPRESENTATIONS
In order to induce IPH to enter into this Agreement and to make the Loan
contemplated by this Agreement, the Debtor represents and warrants to IPH
that:
4.01. Corporate Authority. The execution, delivery and performance of
this Agreement and the transactions contemplated hereby, including the
Mortgage with respect to the Monroe County Reserves are within the corporate
power and authority of the Debtor and its affiliate, Calox, and have been
authorized by all necessary corporate proceedings, and do not and will not (i)
require any consent or approval of the shareholders of the Debtor or Calox;
(ii) contravene any provision of the charter documents or by-laws of the
Debtor or Calox, or any law, rule or regulation applicable to the Debtor or
Calox; (iii) contravene any provision of, or constitute an event of default or
event that, but for the requirement that time elapse or notice be given, or
both, would constitute an event of default under, any other agreement,
instrument, order or undertaking binding on the Debtor or Calox; or (iv)
result in or require the imposition of any encumbrance on any of the
properties, assets or rights of the Debtor or Calox except as contemplated
hereby.
4.02. Valid Obligations. This Agreement as it affects the Mortgage
with respect to Monroe County Reserves are the legal, valid and binding
obligations of the Debtor or Calox as approved by the Bankruptcy Court,
enforceable in accordance with their respective terms, notwithstanding any
bankruptcy, insolvency, reorganization, moratorium and/or other laws affecting
the enforcement of creditors' rights generally.
4.03. Consents or Approvals. The execution, delivery and performance
of this Agreement, and the transactions contemplated hereby including the
Loan, Promissory Note, and Mortgage with respect to the Monroe County Reserves
do not require any approval or consent of, or filing or registration with, any
governmental or other agency or authority, or any other party, other than the
Bankruptcy Court.
V. BORROWER'S COVENANTS
So long as the Loan remains outstanding the Debtor covenants that:
5.01. Information. The Debtor will deliver to IPH all information
concerning the business of the Debtor as IPH shall reasonably request and
provide IPH with copies of all operating reports as may be filed with the
Bankruptcy Court. All financial information provided hereunder, other than
public filings with the Bankruptcy Court, Securities and Exchange Commission
or otherwise shall be deemed confidential and shall not be released to any
third party without the written consent of the Debtor.
5.02. Compliance with Laws. The Debtor shall duly observe and comply in
all material respects with all applicable laws and requirements of any
governmental authorities and relative to: (i) its corporate existence,
rights, licenses, and franchises; (ii) the conduct of its business and its
property and assets; and (iii) shall maintain and keep in full force and
effect all licenses and permits necessary in any material respect to the
proper conduct of its business.
5.03. Maintain Properties and Insurance. The Debtor shall maintain its
equipment and machinery in good repair, working order and condition as
required for the normal conduct of its business and shall adequately insure
same and name IPH as an additional insured or loss payee (as the case may be)
on all such insurance and provide IPH with written confirmation of same.
5.04. Taxes. The Debtor shall pay or cause to be paid all taxes,
assessments or governmental charges on or against it or its properties on or
prior to the time when they become due arising subsequent to the assessment
date, provided that this covenant shall not apply to any tax, assessment or
charge that is being contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been established and are being
maintained in accordance with generally accepted principles if no lien shall
have been filed to secure such tax, assessment or charge.
5.05. Inspection. The Debtor shall permit IPH or its designee(s), at
any reasonable time and at reasonable intervals of time, and upon reasonable
notice for the purpose of ascertaining compliance with this Agreement, to (i)
visit and inspect the properties of the Debtor, (ii) examine and make copies
of and take abstract from the books and records of the Debtor and (iii)
discuss the affairs, finances and accounts of the Debtor with their
appropriate officers, employees and accountants.
5.06. Preservation of Corporate Existence. The Debtor shall maintain
the corporate existence of each of the Debtor and Calox, their respective
rights, franchises and privileges, and cause each to qualify and remain
qualified as a foreign corporation in each jurisdiction in which qualification
is necessary in view of their respective business and operations.
5.07. Payment of Debts. The Debtor shall pay and discharge all taxes,
assessments and governmental charges or levies imposed upon the Debtor, its
income or profits and any property belonging to it and make timely payment of
its other obligations and debts, and all lawful claims which if unpaid might
become a lien or a charge upon any properties of the Debtor, other than the
indebtedness existing immediately prior to the Filing Date which is stayed by
the bankruptcy proceeding.
5.08. Maintenance of Insurance. The Debtor shall maintain insurance
with reputable and licensed insurance companies, in such amounts and covering
such risks as are usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the Debtor
operates.
5.09. Records and Books of Account. The Debtor shall keep accurate
records and books of account in which complete entries will be made in
accordance with generally accepted accounting principles consistently applied,
reflecting all transactions of the Debtor, and give IPH and its
representatives access to all of the same and all other corporate records of
the Debtor during normal business hours and upon reasonable prior notice.
VI. CALOX CORPORATION'S COVENANTS
6.01. So long as IPH shall have a mortgage interest upon the property of
Calox, Calox covenants that it will not assign, encumber, hypothecate,
mortgage or otherwise dispose, sell and transfer any interest in the Monroe
County Reserves without the prior written consent and authorization of IPH.
VII. DEFAULT
7.01. The following shall constitute an "Event of Default":
(a) if there is a default in the payment of the Loan due IPH by
the Debtor as provided herein; or
(b) any violation or breach of the representation(s) and
covenant(s) made by the Debtor hereunder or with respect to
the mortgage pertaining to the Monroe County Reserves; or
(c) there shall occur any material adverse change in the assets,
liabilities, financial condition, business or prospects of
the Debtor, as determined in good faith; or
(d) appointment of a Trustee or other fiduciary for the Debtor or
the property of the estate of the Debtor;
(e) conversion of the Debtor's Chapter 11 case to a case under
Chapter 7 of the Bankruptcy Code;
(f) failure of the Debtor to maintain its listing on the National
Stock Exchange known as the Nasdaq market, or to successfully
appeal any decision of Nasdaq to delist the Debtor from its
market listing; or
(g) failure to confirm a Plan of Reorganization on or before the
31st day of August, 1997.
7.02. If an Event of Default occurs which is not cured within ten (10)
business days after written notice to the Debtor and its counsel (other than
non-monetary defaults which are not subject to cure), then the Loan shall
become immediately due and payable with all accrued interest (the "Accelerated
Debt") and IPH shall be authorized to move before the Bankruptcy Court on an
expedited basis to obtain payment of its super-priority claim granted
hereunder or foreclose on the Mortgage pertaining to the Monroe County
Reserves after providing three (3) days' notice to the Debtor and its counsel,
counsel to the Official Committee of Unsecured Creditors if appointed in the
Debtor's Chapter 11 case, the Office of the United States Trustee and any
other party-in-interest filing a notice of appearance and request for service
of papers in the Debtor's bankruptcy case, by telefax or overnight delivery.
In the event there is an Event of Default which IPH does not waive, in
its sole discretion, IPH may, upon its filing notice with the Debtor and the
Bankruptcy Court, retain any and all assets in which it has a perfected
security interest under the terms of this Agreement in full and complete
satisfaction of the debt under the Note executed pursuant to this Agreement,
its stock rights under this Agreement, its super-priority administrative
claim, and any and all other claims IPH may have or would have under this
Agreement.
In the event there is any Event of Default which is not cured, IPH may,
at its sole discretion, and with no compunction to further proceed, waive such
default and elect to continue under the terms and conditions of this
Agreement, without any prejudice to any and all of its other rights hereunder.
VIII. BANKRUPTCY COURT APPROVAL
8.01. This Agreement and the transactions contemplated hereby are
subject to the approval of the Bankruptcy Court having jurisdiction over the
Debtor's Chapter 11 case and the Debtor shall move promptly to obtain such
approval on notice to all necessary creditors and other parties-in-interest as
required by applicable bankruptcy law and rules.
8.02. This Agreement shall become binding and effective upon the entry
of a final Order of the Bankruptcy Court having jurisdiction over the Debtor's
Chapter 11 case, authorizing, inter alia, the Debtor to enter into this
Agreement and the transactions contemplated herein, and granting IPH a
super-priority administration expense claim pursuant to Section 364(c)(1) of
the Bankruptcy Code and Mortgage pertaining to the Monroe County Reserves.
IX. MISCELLANEOUS PROVISIONS
9.01. All notices to be given hereunder shall be in writing and deemed
given if sent by a combination of overnight mail and facsimile transmission
addressed to the parties set forth herein and their respective attorneys or
such other addresses as may be used from time to time.
9.02. If any provision of this Agreement shall be determined to be
invalid or unenforceable, it shall be the intent and understanding of the
parties that the remainder of this Agreement shall continue in full force and
effect.
9.03. This Agreement embodies the entire agreement and understanding
between the parties with respect to the subject matter hereof and there are no
agreements, representations, promises, inducements or warranties, by whomever
made, other than those set forth, provided for or referred to herein.
9.04. This Agreement is binding and enforceable on the parties'
respective successors or assigns (including any trustee or other fiduciary
appointed as a legal representative of the Debtor or with respect to the
property of the estate of the Debtor).
9.05. This Agreement may be signed in counterpart by facsimile
signature.
IN WITNESS WHEREOF, the parties hereto have executed this Post-Petition
Loan Agreement as of the day and year first above written.
INTERNATIONAL PUBLISHING HOLDING CORP.
BY: /s/ Xxxxx X. Xxxxx
ITS: Chairman of the Board of Directors
PETRO UNION, INC.
BY: /s/ Xxxxxxx X. Xxxxx
ITS: President
CALOX CORPORATION
BY: /s/ Xxxxxxx X. Xxxxx
ITS: President
