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EXHIBIT 4.2
FIRST AMENDMENT
TO
LOAN AGREEMENT
Between
SOUTH TEXAS DRILLING & THE FROST NATIONAL BANK
EXPLORATION, INC. and 000 X. Xxxxxxx Xxxxxx
0000 Xxxxxxxx, Xxxxxxxx 0 Xxx Xxxxxxx, Xxxxx 00000
Xxx Xxxxxxx, Xxxxx 00000
The parties to this First Amendment to Loan Agreement (the "Amendment")
are:
Borrower: SOUTH TEXAS DRILLING & EXPLORATION, INC.,
a Texas corporation
Lender: THE FROST NATIONAL BANK
The effective date of this Amendment is December 31, 2000.
Borrower and Lender entered into a Loan Agreement (the "Agreement")
dated effective August 11, 2000, and now desire to amend various provisions of
the Agreement. Borrower and Lender have agreed to such amendment subject to and
upon the terms, covenants, conditions, representations and warranties set forth
in the Agreement and this Amendment.
NOW THEREFORE, Borrower and Lender agree as follows, the foregoing
recitals being incorporated and made a part of this Amendment to the Agreement
for all purposes:
I.
Section 1 (a) of the Agreement entitled "Borrowing Base Line of Credit"
is hereby deleted in its entirety and Lender shall have no further obligation to
make advances under the Note executed by Borrower pursuant to such provision.
Lender agrees to release any Collateral taken by it to secure the repayment of
the Borrowing Base Line of Credit.
II.
Subsections (b), (c), (f), and (i) of the Agreement under Section 8
entitled "Negative Covenants" are hereby modified in their entirety to allow the
transfer of assets only from Borrower to PIONEER DRILLING CO., LTD., a Texas
limited partnership (the
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"Partnership"), and only to the plan of reorganization contemplated thereby,
subject however, to the following conditions and requirements:
A. Borrower agrees to cause the Partnership to execute and deliver to
Lender contemporaneously herewith a guaranty agreement, in form and
substance satisfactory to Lender;
B. Borrower agrees to cause the Partnership to execute and deliver to
Lender UCC-1 Financing Statements covering the Collateral held by
Lender pursuant to Sections 3(b) and 3(c) of the Agreement for
filing with the office of the Secretary of State of the State of
Texas; and
C. Borrower agrees to cause the Partnership and any related entities to
execute such other agreements and documents as Lender or its
attorneys shall deem appropriate and otherwise require from time to
time to more fully create and perfect Lender's lien and security
interests in the Collateral described in Sections 3(b) and 3(c) of
the Agreement and any Loan Documents.
III.
Section 9 of the Agreement entitled "Financial Covenants" is hereby
amended to read as follows:
"9. Financial Covenants. Until (i) the Note dated August 11,
2000 in the original principal amount of NINE MILLION AND NO/100
DOLLARS ($9,000,000.00) executed by Borrower in favor of Lender and all
other obligations and liabilities of Borrower under this Loan Agreement
and the other Loan Documents are fully paid and satisfied, and (ii) the
Lender has no further commitment to lend hereunder, Borrower and
Partnership collectively will maintain the following financial
covenants:
(a) LEVERAGE RATIO. Borrower and Partnership will
collectively maintain a leverage ratio not to exceed 3.0:1.0, to be
tested annually.
Defined as:
Funded Bank Debt
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Net Income + Interest + Taxes + Depreciation + Amortization
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(b) CASH FLOW COVERAGE RATIO. Borrower and
Partnership will collectively maintain a cash flow coverage ratio of
not less than 1.25:1.0, to be tested annually.
Defined as:
Net Income + Interest + Taxes + Depreciation + Amortization - Dividends -
Capital Expenditures
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Current Portion of Long-Term Debt + Interest Expense
(c) Capitalization Ratio. Borrower and Partnership
will collectively maintain, at all times, a capitalization ratio not to
exceed 0.5:1.0, to be tested quarterly.
Defined as:
Funded Bank Debt
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Net Worth + Funded Bank Debt
Unless otherwise specified, all accounting and financial terms and
covenants set forth above are to be determined according to generally
accepted accounting principles, consistently applied."
IV.
Section 10 of the Agreement entitled "Reporting Requirements" is
hereby amended to read as follows:
"10. Reporting Requirements. Until (i) the Note dated August
11, 2000 in the original principal amount of NINE MILLION AND NO/100
DOLLARS ($9,000,000.00) executed by Borrower in favor of Lender and
all other obligations and liabilities of Borrower under this Loan
Agreement and the other Loan Documents are fully paid and satisfied,
and (ii) the Lender has no further commitment to lend hereunder,
Borrower will, unless Lender shall otherwise consent in writing,
furnish, or cause to be furnished, to Lender:
(a) Interim Monthly Financial Statements. As soon as
available, and in any event within thirty (30) days after the end of
each month of each fiscal year of Borrower, a consolidated balance
sheet, income statement, and cash flow statement of Borrower as of the
end of such fiscal quarter, all in form and substance and in reasonable
detail satisfactory to Lender and duly certified (subject to year-end
review adjustments) by the President and/or Chief Financial
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Officer of Borrower (i) as being true and correct in all material
aspects to the best of his or her knowledge and (ii) as having been
prepared in accordance with generally accepted accounting principles,
consistently applied.
(b) Quarterly Statements. Within sixty (60) days
after the end of each quarter of each fiscal year of Borrower, a
consolidated l0-Q Report as filed with the Securities and Exchange
Commission ("SEC").
(c) Annual Statements. Within one hundred twenty
(120) days after the end of each fiscal year of Borrower, a
consolidated 10-K Report as filed with the SEC.
(d) Compliance Certificate. A certificate signed by
the President and/or Chief Financial Officer of Borrower, within one
hundred twenty (120) days after the end of each fiscal year, stating
that Borrower is in full compliance with all of its obligations under
this Loan Agreement and all other Loan Documents and is not in default
of any term or provisions hereof or thereof, and demonstrating
compliance with all financial ratios and covenants set forth in this
Loan Agreement."
V.
This Amendment may be separately executed in any number of
counterparts, each of which shall be an original, but all of which, taken
together, shall be deemed to constitute one and the same instrument.
VI.
Borrower further agrees that, except as amended herein, all other
terms, conditions and provisions of the Agreement shall remain in full force and
effect for the entire term thereof.
VII.
For purposes of negotiating and finalizing this Amendment, if this
document or any document executed in connection with it is transmitted by
facsimile machine ("fax"), it shall be treated for all purposes as an original
document. Additionally, the signature of any party on this document transmitted
by way of a facsimile machine shall be considered for all purposes as an
original signature. Any such faxed document shall be considered to have the same
binding legal effect as an original document. At the request of any party, any
faxed document shall be re-executed by each signatory party in an original
form.
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IN WITNESS WHEREOF, Borrower and Lender have executed this Amendment
effective on the date set forth above.
BORROWER LENDER:
SOUTH TEXAS DRILLING THE FROST NATIONAL BANK,
& EXPLORATION, INC., a national banking association
a Texas corporation
By: /s/ Wm. Xxxxx Xxxxx By: /s/ Xxxxx X. Xxxxxx
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Name: Wm. Xxxxx Xxxxx Xxxxx X. Xxxxxx,
---------------- Senior Vice President
Title: President & CFO
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