JUNE 2008 AMENDMENT TO SENIOR NOTES AND PURCHASE AGREEMENT
Exhibit
99.1
JUNE
2008 AMENDMENT TO SENIOR NOTES AND PURCHASE AGREEMENT
THIS
JUNE
2008 AMENDMENT TO SENIOR NOTES AND PURCHASE AGREEMENT (this “Agreement”)
is
made as of June 30, 2008, among South Texas Oil Company, a Nevada corporation
(the “Company”),
the
Subsidiaries, The Longview Fund, L.P., a California limited partnership
(“Longview”),
and
Longview Marquis Master Fund, L.P., a British Virgin Islands limited partnership
(“Marquis”
and
together with Longview, the “Buyers”).
Capitalized terms used, but not otherwise defined, herein shall have the
meanings ascribed to them in the Purchase Agreement (as amended hereby) (as
defined below).
W
I T N E
S S E T H:
WHEREAS,
the Company and the Buyers entered into that certain Securities Purchase
Agreement, dated as of April 1, 2008 (as amended by the June 2008 Amendment
Agreement (as defined below), and as may otherwise be amended, supplemented,
restated or modified and in effect from time to time, the “Purchase
Agreement”),
pursuant to which the Company (i) has issued to the Buyers, among other things,
senior secured notes in an aggregate original principal amount of $31,377,350.82
(such notes, together with any promissory notes or other securities issued
in
exchange or substitution therefor or replacement thereof, and as any of the
same
may be amended, supplemented, restated or otherwise modified and in effect
from
time to time, the “Initial Notes”),
and
(ii) the Company has the option to sell, and if the Company exercises such
option the Buyers are obligated to purchase, subject to the terms and conditions
of the Purchase Agreement, additional senior secured notes in an aggregate
original principal amount of up to $622,649.18 (including any promissory notes
or other securities issued in exchange or substitution for such senior secured
notes or replacement thereof, and as any of the same may be amended, restated,
modified or supplemented and in effect from time to time, the “Additional
Notes,”
and
together with the Initial Notes, the “Notes”);
WHEREAS,
pursuant to that certain June 2008 Amendment Agreement, dated as of June
18, 2008 (the “June
2008 Amendment Agreement”),
among
the Company and the Buyers, among other things, Marquis assigned, and Longview
assumed, all of Marquis’s obligation to purchase Additional Notes pursuant to
the Purchase Agreement, such
that
Marquis would have no further obligations, on or after June 18, 2008, to
purchase Additional Notes pursuant to the Purchase Agreement;
WHEREAS,
pursuant to that certain letter agreement, dated as of June 26, 2008, between
Longview and Marquis, Longview assigned, and Marquis assumed, Longview’s
obligation to purchase from the Company that certain Initial Note No. NVAM-012,
in the original principal amount of $1,000,000; and
WHEREAS,
the Company and Buyers desire to amend the terms of each of the Initial Notes
and the form of Additional Note attached as Exhibit
B
to the
Purchase Agreement (the “Form
of Additional Note”)
as
provided herein.
NOW,
THEREFORE, in consideration of the agreements, provisions and covenants
contained herein and for other good and valuable consideration, the receipt
and
sufficiency of which are hereby acknowledged, each of the undersigned agrees
as
follows:
1. Amendment
of the Purchase Agreement.
a. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, the Purchase Agreement is hereby amended to
increase the Maximum Borrowing Amount from $32,000,000 to $32,500,000, and,
accordingly, the reference in the Purchase Agreement to “$32,000,000” as the
“Maximum Borrowing Amount” shall be replaced with “$32,500,000.”
b. As
amended hereby, the Purchase Agreement shall remain in full force and
effect.
2. Amendment
of Notes.
a. Each
of
the Buyers, severally and not jointly, hereby agrees with the Company that,
as
of the date first above written, Section 5 of each of the Initial Notes and
the
Form of Additional Note is hereby amended by adding the following sentence
at
the end thereof:
“Notwithstanding
the foregoing, the Interest Amount payable on any Interest Payment Date (but
not
the Interest Amount payable on any Company Early Redemption Date) that occurs
on
or prior to the earlier of (a) December 31, 2008 and (b) the Company Financing
Date, shall be paid by adding such Interest Amount to the Principal (i.e.,
by
capitalizing such Interest Amount) on such Interest Payment Date, and on and
after such Interest Payment Date such Interest Amount shall itself (as part
of
the Principal) bear Interest in accordance herewith. For purposes of this Note,
“Company
Financing Date”
means
the first date after the Issuance Date on which the Company and its Subsidiaries
have received an aggregate of $15,000,000 or more in gross proceeds in one
or
more transactions following June 30, 2008 (the “Amendment
Date”)
from
(A) any sales of debt and/or equity securities of the Company and/or any of
the
Subsidiaries or any securities convertible into or exercisable or exchangeable
for debt and/or equity securities of the Company and/or any of its Subsidiaries
(including debt securities with an equity component), other than issuances
of
Common Stock upon exercise of stock options outstanding on the Amendment Date,
provided that such stock options are not amended or otherwise modified after
the
Amendment Date, (B) any other debt and/or equity financings (including any
debt
financing with an equity component), (C) any “farm-out” financing transactions
or similar transactions which do not have operating obligations of the financing
party as a major component, in any form, and/or (D) any sales of Hydrocarbon
Property.”
b. As
amended hereby, each of the Initial Notes shall remain in full force and
effect.
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c. Any
Additional Note issued on or after the date hereof shall be in the Form of
Additional Note, as amended hereby.
3. Mutual
Acknowledgement and Agreement of the Parties.
The
parties hereto hereby acknowledge and agree that any increase in Principal
under
any of the Notes resulting from any capitalization of any Interest Amount in
accordance with the last sentence of Section 5 of such Note (as amended hereby)
shall not be included in the calculation of the aggregate principal amount
of
Notes outstanding for purposes of determining whether the Additional Note
Issuance Amount Limitations have been exceeded under Section 1(b) of the
Purchase Agreement (as amended hereby).
4. Representations
and Warranties of the Company.
The
Company represents and warrants to each of the Buyers that:
a. Authorization;
Enforcement; Validity.
Each of
the Company and the Subsidiaries is a duly organized and validly existing
corporation or limited liability company and has the requisite corporate or
limited liability company power and authority to enter into and perform its
obligations under this Agreement, the Purchase Agreement (as amended hereby),
each of the Notes (as amended hereby) and the other Transaction Documents.
The
execution and delivery of this Agreement by the Company and the Subsidiaries
and
the consummation of the transactions contemplated hereby, by the Purchase
Agreement (as amended hereby), by the Notes (as amended hereby) and by the
other
Transaction Documents have been duly authorized by the respective boards of
directors of the Company and the Subsidiaries, and no further consent or
authorization is required by the Company, the Subsidiaries or their respective
boards of directors or shareholders. This Agreement has been duly executed
and
delivered by the Company and each of the Subsidiaries, and each of this
Agreement, the Purchase Agreement (as amended hereby), the Notes (as amended
hereby) and the other Transaction Documents constitutes a valid and binding
obligation of each of the Company and the Subsidiaries (as applicable),
enforceable against each of the Company and the Subsidiaries (as applicable)
in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
b. No
Conflicts.
The
execution and delivery of this Agreement by each of the Company and the
Subsidiaries, the performance by each of the Company and the Subsidiaries (as
applicable) of their respective obligations hereunder, under the Purchase
Agreement (as amended hereby), under the Notes (as amended hereby) and under
the
other Transaction Documents, and the consummation by each of the Company and
the
Subsidiaries (as applicable) of the transactions contemplated hereby, by the
Purchase Agreement (as amended hereby), by the Notes (as amended hereby) and
by
the other Transaction Documents will not (i) result in a violation of the
articles of incorporation or the bylaws of the Company or the organizational
documents of any Subsidiary; (ii) conflict with, or constitute a breach or
default (or an event which, with the giving of notice or lapse of time or both,
constitutes or would constitute a breach or default) under, or give to others
any right of termination, amendment, acceleration or cancellation of, or other
remedy with respect to, any agreement, indenture or instrument to which the
Company or any of the Subsidiaries is a party; or (iii) result in a violation
of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or any of
the
Subsidiaries or by which any property or asset of the Company or any of the
Subsidiaries is bound or affected. Neither the Company nor any of the
Subsidiaries is required to obtain any consent, authorization or order of or,
except as required by Section
6
below,
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under, or contemplated by, this Agreement, the
Purchase Agreement (as amended hereby), the Notes (as amended hereby) and the
other Transaction Documents.
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5. Representation
and Warranties of each of the Buyers.
Each of
the Buyers, severally, and not jointly, represents and warrants to the Company
that (a) such Buyer is a validly existing limited partnership and has the
requisite limited partnership power and authority to enter into and perform
its
obligations under this Agreement, and (b) this Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer, enforceable against such Buyer in
accordance with its terms.
6. Acknowledgment
of the Company and the Subsidiaries.
The
Company and each of the Subsidiaries hereby irrevocably and unconditionally
acknowledge, affirm and covenant to each Buyer that:
a. Such
Buyer is not in default under any of the Transaction Documents and has not
otherwise breached any obligations to the Company or any of the Subsidiaries;
and
b. there
are
no offsets, counterclaims or defenses to the Liabilities (as defined in the
Security Agreement) or Obligations (as defined in the Subsidiary Guaranty),
including the liabilities and obligations of the Company under the Purchase
Agreement (as amended hereby) and the Notes (as amended hereby), or to the
rights, remedies or powers of Buyer in respect of any of the Liabilities or
Obligations or any of the Transaction Documents, and the Company and each of
the
Subsidiaries agree not to interpose (and each does hereby waive and release)
any
such defense, set-off or counterclaim in any action brought by such Buyer with
respect thereto.
7. Covenants. Prior
to
5:30 p.m., New York time, on the first Business Day following the date hereof,
the Company shall file a current report on Form 8-K (the “Amendment
Form 8-K”)
with
the Securities and Exchange Commission (the “SEC”), describing
the terms of this Agreement and including this Agreement as an exhibit thereto,
in the form required by the Securities Exchange Act of 1934, as amended. From
and after the filing of the Amendment Form 8-K with the SEC, Buyer shall not
be
in possession of any material nonpublic information received from the Company
or
any of its affiliates, officers, directors, employees or agents as a result
of
this Agreement or any of the matters referred to herein.
8. Avoidance
of Doubt.
The
parties hereto hereby agree, for the avoidance of doubt, that (a) the term
“Notes”
as
used
in the Transaction Documents shall mean the Notes, as, and to the extent,
amended by this Agreement, and (b) the term “Liabilities”
and
“Obligations”
as
used
in the Transaction Documents shall include all liabilities and obligations
of
the Company under this Agreement, under the Purchase Agreement (as amended
hereby), under the Notes (as amended hereby) and under the other Transaction
Documents, and each of the parties hereto agrees not to take any contrary
positions.
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9. Reservation
of Rights.
Neither
of the Buyers has hereby waived (a) any breach, default or Event of Default
that
may be continuing under any of the Transaction Documents or (b) any of such
Buyer’s rights or remedies arising from any such breach, default or Event of
Default or otherwise available under the Transaction Documents or at law. Each
of the Buyers expressly reserves all such rights and remedies.
10. Successors
and Assigns.
This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. The successors
and
assigns of such entities shall include their respective receivers, trustees
or
debtors-in-possession.
11. Further
Assurances.
The
Company hereby agrees from time to time, as and when requested by any Buyer,
to
execute and deliver or cause to be executed and delivered, all such documents,
instruments and agreements, including secretary’s certificates, stock powers and
irrevocable transfer agent instructions, and to take or cause to be taken such
further or other action, as any Buyer may reasonably deem necessary or desirable
in order to carry out the intent and purposes of this Agreement, the Purchase
Agreement (as amended hereby), the Notes (as amended hereby) and the other
Transaction Documents.
12. Governing
Law; Jurisdiction; Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
13. Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to each other party.
In
the
event that any signature to this Agreement or any amendment hereto is delivered
by facsimile transmission or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature page were an original
thereof. No party hereto shall raise the use of a facsimile machine or e-mail
delivery of a “.pdf” format data file to deliver a signature to this Agreement
or any amendment hereto or the fact that such signature was transmitted or
communicated through the use of a facsimile machine or e-mail delivery of a
“.pdf” format data file as a defense to the formation or enforceability of a
contract, and each party hereto forever waives any such
defense.
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14. Section
Headings.
The
section headings herein are for convenience of reference only, and shall not
affect in any way the interpretation of any of the provisions
hereof.
15. No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rule of strict construction
will
be applied against any party.
16. Merger.
This
Agreement, the Purchase Agreement (as amended hereby), the Notes (as amended
hereby) and the other Transaction Documents represent the final agreement of
each of the parties hereto with respect to the matters contained herein and
may
not be contradicted by evidence of prior or contemporaneous agreements, or
prior
or subsequent oral agreements, among any of the parties hereto. Except as
expressly set forth in this Agreement, in the Purchase Agreement (as amended
hereby), in the Notes (as amended hereby) and in the other Transaction
Documents, none of the Company nor any of the Buyers makes any representation,
warranty, covenant or undertaking with respect to such matters.
17. Interpretative
Matters.
Unless
otherwise indicated or the context otherwise requires, (i) all references to
Sections, Schedules, Appendices or Exhibits are to Sections, Schedules,
Appendices or Exhibits contained in or attached to this Agreement, (b) words
in
the singular or plural include the singular and plural and pronouns stated
in
either the masculine, the feminine or neuter gender shall include the masculine,
feminine and neuter, (c) the words “hereof,” “herein” and words of similar
effect shall reference this Agreement in its entirety, and (d) the use of the
word “including” in this Agreement shall be by way of example rather than
limitation.
18. Reaffirmation.
Each of
the Company and the Subsidiaries as issuer, debtor, grantor, pledgor, mortgagor,
guarantor or assignor, or in other any other similar capacity in which such
Person grants Liens or security interests in its property or otherwise acts
as
accommodation party or guarantor, as the case may be, hereby (i) acknowledges
and agrees that it has reviewed this Agreement, (ii) ratifies and reaffirms
all
of its obligations, contingent or otherwise, under each of the Transaction
Documents, including the Purchase Agreement (as amended hereby) and the Notes
(as amended hereby) to which it is a party (after giving effect hereto), and
(iii) to the extent such Person granted Liens on or security interests in any
of
its property pursuant to any such Transaction Document as security for or
otherwise guaranteed the Liabilities or Obligations under or with respect to
the
Transaction Documents, ratifies and reaffirms such guarantee and grant of
security interests and Liens and confirms and agrees that such security
interests and Liens hereafter secure all of the Liabilities and Obligations
as
amended hereby. Each of the Company and the Subsidiaries hereby consents to
this
Agreement and acknowledges that each of the Transaction Documents, including
the
Purchase Agreement (as amended hereby) and the Notes (as amended hereby),
remains in full force and effect and is hereby ratified and
reaffirmed.
[Remainder
of page intentionally left blank; Signature page
follows]
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IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by each
of
the undersigned as of the date first above written.
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COMPANY:
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SOUTH
TEXAS OIL COMPANY,
a
Nevada corporation
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By:
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/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
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Title:
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Chief
Executive Officer
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SUBSIDIARIES:
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SOUTHERN
TEXAS OIL COMPANY,
a
Texas corporation
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By:
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/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
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Title:
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Chief
Executive Officer
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STO
OPERATING COMPANY,
a
Texas corporation
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By:
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/s/
▇▇▇▇▇▇ ▇▇▇▇
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Name:
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▇▇▇▇▇▇
▇▇▇▇
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Title:
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Director
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STO
PROPERTIES LLC,
a
Texas limited liability company
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By:
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/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
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Title:
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Manager
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STO
DRILLING COMPANY,
a
Texas corporation
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By:
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/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
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Title:
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Chief
Executive Officer
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BUYERS:
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THE
LONGVIEW FUND, L.P.,
a
California limited partnership
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By:
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Viking
Asset Management, L.L.C.
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Its:
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Investment
Advisor
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By:
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/s/
S. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name:
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S.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title:
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Chief
Financial Officer
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LONGVIEW
MARQUIS MASTER FUND, L.P.
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By:
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Viking
Asset Management, LLC
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Its:
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Investment
Advisor
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By:
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/s/
S. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name:
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S.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Title:
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Chief
Financial Officer
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