Contract
Exhibit 10.2
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO GULF COAST OIL
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
FOR
VALUE
RECEIVED, GULF COAST OIL CORPORATION, a Delaware corporation (the
“Company”) hereby promises to pay to VALENS U.S. SPV I, LLC
(the “Holder”) or its registered assigns or successors in
interest, the sum of Three Million One Hundred Thousand Dollars ($3,100,000),
together with any accrued and unpaid interest hereon, on November 22, 2010
(the
“Maturity Date”) if not sooner indefeasibly paid in
full.
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain Securities Purchase Agreement dated as of the date hereof
(as amended, restated, modified and/or supplemented from time to time, the
“Purchase Agreement”) among the Company, the Holder, each other
Purchaser and LV Administrative Services, Inc., as administrative and collateral
agent for the Purchasers (the “Agent” together with the
Purchasers, collectively, the “Creditor Parties”).
The
following terms shall apply to this Secured Term Note (this
“Note”):
ARTICLE
I
CONTRACT
RATE AND AMORTIZATION
1.1 Contract
Rate. Subject to Sections 2.2 and 3.9, interest payable on the
outstanding principal amount of this Note (the “Principal
Amount”) shall accrue at a rate per annum equal to the “prime rate”
published in The Wall Street Journal from time to time (the “Prime
Rate”), plus two percent (2%) (the “Contract
Rate”). The Contract Rate shall be increased or decreased as
the case may be for each increase or decrease in the Prime Rate in an amount
equal to such increase or decrease in the Prime Rate; each change to be
effective as of the day of the change in the Prime Rate. The Contract
Rate shall not at any time be less than eight percent (8%). Interest
shall be (i) calculated on the basis of a 360 day year, and (ii) payable
monthly, in arrears, commencing on March 1, 2008, on the first business day
of
each consecutive calendar month thereafter through and including the Maturity
Date, and on the Maturity Date, whether by acceleration or
otherwise.
1.2 Contract
Rate Payments. The Contract Rate shall be calculated on the last
business day of each calendar month hereafter (other than for increases or
decreases in the Prime Rate which shall be calculated and become effective
in
accordance with the terms of Section 1.1) until the Maturity Date and shall
be
subject to adjustment as set forth herein.
1.3 Principal
Payments. Amortizing payments of the Principal Amount shall be
made by the Company on December 1, 2007 and on the first business day of each
succeeding month thereafter through and including the Maturity Date (each,
an
“Amortization Date”). So long as no Event of Default
shall have occurred and then be continuing, interest hereunder shall only be
payable as a component of the Amortization Amount (as hereafter defined) in
accordance with the terms of this Section 1.3. Subject to Article II
below, commencing on the first Amortization Date, the Company shall make monthly
payments of principal and interest to the Holder on each Amortization Date
equal
to the Amortization Amount. All such payments shall be applied by the
Holder first to accrued and unpaid interest, fees and expenses owing by the
Company to the Holder and then to the outstanding principal balance owing
hereunder. In the event the Amortization Amount (as hereafter
defined) due and payable on any Amortization Date which occurs on or after
the
March 1, 2008 Amortization Date is less than $26,220, then the Company shall
nevertheless be required to make a payment to the Holder on such Amortization
Date of an amount equal to the difference between $26,220 and the then
applicable Amortization Amount, which such payment shall be applied by the
Holder to accrued and unpaid interest, fees and expenses owing by the Company
to
the Holder and then to the outstanding principal balance owing hereunder;
provided, however, during such time as an Event of Default shall
have occurred and be continuing, the Company shall make interest payments
hereunder to the Holder in accordance with Sections 1.1 and 2.2 of this Note
without regard to any reduction in such cash interest payment which may
otherwise have been applicable under this Section 1.3 had no Event of Default
then been in existence. Any outstanding Principal Amount together
with any accrued and unpaid interest and any and all other unpaid amounts which
are then owing by the Company to the Holder under this Note, the Purchase
Agreement and/or any other Related Agreement shall be due and payable on the
Maturity Date. For purposes of this Section, (a) the term
“Amortization Amount” shall mean an amount equal to the product
of (i) .437 times (ii) eighty percent (80%) of the Net Revenue relating to
all
oil and gas properties of the Company identified on Schedule A attached
hereto and any others developed with the proceeds of the Loans evidenced by
this
Note for the calendar month immediately preceding the Amortization Date;
provided, however, such percentage shall increase to one hundred
(100%) upon the occurrence and during the continuance of an Event of Default
and
(b) “Net Revenue” shall mean the gross proceeds paid to the
Company in respect of oil, gas and/or other hydrocarbon production in which
the
Company has an interest whether or not such proceeds are remitted to the lockbox
account and/or any other blocked account established by the Company in
connection with the transactions contemplated hereby net of, in each case,
with
respect to the period for which such Net Revenue relates (i) the reasonable
ordinary day to day expenses associated with the Company’s operation of the
leases, xxxxx and equipment, including fuel, materials, labor, maintenance,
routine production equipment replacement, repairs, routine workover costs to
maintain production from an existing completed well, royalty, severance tax
and
ad valorem tax, in each case using accounting practices and procedures ordinary
and customary in the oil and gas industry (collectively, the “Lease
Operating Expenses”) and (ii) the Company’s reasonable estimate of its
federal tax (including federal income tax) liability (after taking into account
all applicable deductions, depletion and credits) (the “Estimated
Taxes”), all of which, in the case of the foregoing clauses (i) and
(ii), shall be subject to the Agent’s approval which shall be provided in the
exercise of the Agent’s reasonable discretion based on such supporting
documentation from the Company as the Agent shall request.
ARTICLE
II
EVENTS
OF DEFAULT
2.1 Events
of Default. The occurrence of any of the following events set
forth in this Section 2.1 shall constitute an event of default (“Event
of Default”) hereunder:
(a) Failure
to Pay. The Company fails to pay when due any installment of
principal, interest or other fees hereon in accordance herewith, or the Company
fails to pay any of the other Obligations (under and as defined in the Master
Security Agreement) when due, and, in any such case, such failure shall continue
for a period of three (3) days following the date upon which any such payment
was due;
(b)
Breach of Covenant. The Company or any of its Subsidiaries
breaches any covenant or any other term or condition of this Note in any
material respect and such breach, if subject to cure, continues for a period
of
fifteen (15) days after the occurrence thereof;
(c) Breach
of Representations and Warranties. Any representation, warranty
or statement made or furnished by New Century Energy Corp. (the
“Parent”), the Company, any of their Subsidiaries or any
guarantor (each a “Guarantor”) issuing to the Holder a guaranty
agreement (each a “Guaranty”) in connection with the
transactions contemplated hereby in this Note, the Purchase Agreement or any
other Related Agreement shall at any time be false or misleading in any material
respect on the date as of which made or deemed made;
(d) Default
Under Other Agreements. The occurrence of any default (or similar
term) in the observance or performance of any other agreement or condition
relating to any indebtedness or contingent obligation, in each case in an
aggregate amount of not less than $100,000, of the Parent, the Company or any
of
their Subsidiaries beyond the period of grace (if any), the effect of which
default is to cause, or permit the holder or holders of such indebtedness or
beneficiary or beneficiaries of such contingent obligation to cause, such
indebtedness to become due prior to its stated maturity or such contingent
obligation to become payable;
(e) Material
Adverse Effect. Any change or the occurrence of any event which
could reasonably be expected to have a Material Adverse Effect;
(f) Bankruptcy. The
Parent, the Company, any of their Subsidiaries or any Guarantor shall
(i) apply for, consent to or suffer to exist the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated
a bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, without
challenge within ten (10) days of the filing thereof, or failure to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
(g) Judgments. Attachments
or levies in excess of $100,000 in the aggregate are made upon the Parent’s, the
Company’s or any of their Subsidiaries’ or any Guarantor’s assets or a judgment
is rendered against the Parent’s, the Company’s or any of their Subsidiaries’ or
any Guarantor’s property involving a liability of more than $100,000 which shall
not have been vacated, discharged, stayed or bonded within thirty (30) days
from
the entry thereof;
(h) Insolvency. The
Parent, the Company or any of their Subsidiaries or any Guarantor shall admit
in
writing its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;
(i)
Change of Control. A Change of Control (as defined below)
shall occur with respect to the Company, unless Holder shall have expressly
consented to such Change of Control in writing. A “Change of
Control” shall mean any event or circumstance as a result of which (i)
any “Person” or “group” (as such terms are
defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the
date hereof), other than the Holder, is or becomes the “beneficial
owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange
Act), directly or indirectly, of 35% or more on a fully diluted basis of the
then outstanding voting equity interest of the Company (other than a
“Person” or “group” that beneficially owns 35%
or more of such outstanding voting equity interests of the Company on the date
hereof), (ii) unless the Holder provides its written consent thereto (which
shall not be unreasonably withheld), the Board of Directors of the Company
shall
cease to consist of a majority of the Company’s board of directors on the date
hereof (or directors appointed by a majority of the board of directors in effect
immediately prior to such appointment) or (iii) the Company or any of its
Subsidiaries merges or consolidates with, or sells all or substantially all
of
its assets to, any other person or entity;
(j)
Indictment; Proceedings. The indictment or threatened
indictment of the Parent, the Company, any of their Subsidiaries or any
Guarantor or any executive officer of the Parent, the Company or any of their
Subsidiaries under any criminal statute, or commencement or threatened
commencement of criminal or civil proceeding against the Parent, the Company,
any of their Subsidiaries or any Guarantor or any executive officer of the
Parent, the Company, any of their Subsidiaries or any Guarantor pursuant to
which statute or proceeding penalties or remedies sought or available include
forfeiture of any of the property of the Parent, the Company, any of their
Subsidiaries or any Guarantor; or
(k)
The Purchase Agreement and Related Agreements. (i) An Event of
Default shall occur under and as defined in the Purchase Agreement or any other
Related Agreement (including, without limitation, the breach by any Guarantor
of
any provision of any Guaranty), (ii) the Parent, the Company, any of their
Subsidiaries or any Guarantor shall breach any term or provision of the Purchase
Agreement or any other Related Agreement in any material respect and such
breach, if capable of cure, continues unremedied for a period of fifteen (15)
days after the occurrence thereof, (iii) the Parent, the Company, any of their
Subsidiaries or any Guarantor attempts to terminate, challenges the validity
of,
or its liability under, the Purchase Agreement or any Related Agreement, (iv)
any proceeding shall be brought to challenge the validity, binding effect of
the
Purchase Agreement or any Related Agreement, (v) the
Purchase Agreement or any Related Agreement ceases to be a valid, binding and
enforceable obligation of the Parent, the Company, any of their Subsidiaries
or
any Guarantor (to the extent such persons or entities are a party thereto)
or
(vi) an Event of Default shall occur under and as defined in any one or more
of
the following documents: (i) the Securities Purchase Agreement dated
as of June 30, 2005 by and between the Parent and Laurus Master Fund, Ltd.
(“Laurus”) (as amended, restated, modified and/or supplemented
from time to time, the “June 2005 Securities Purchase
Agreement”), (ii) each Related Agreement referred to in the June 2005
Securities Purchase Agreement, as each may be amended, restated, modified and/or
supplemented from time to time, (iii) the Securities Purchase Agreement dated
as
of September 19, 2005 by and between the Parent and Laurus (as amended,
restated, modified and/or supplemented from time to time, the “September
2005 Securities Purchase Agreement”), (iv) each Related Agreement
referred to in the September 2005 Securities Purchase Agreement, as each may
be
amended, restated, modified and/or supplemented from time to time, (v) the
Securities Purchase Agreement dated as of April 28, 2006 by and between the
Company and Laurus (as amended, restated, modified and/or supplemented from
time
to time, the “April 2006 Securities Purchase Agreement”), (vi)
each Related Agreement referred to in the April 2006 Securities Purchase
Agreement, as each may be amended, restated, modified and/or supplemented from
time to time, (vii) the Securities Purchase Agreement dated as of June 30,
2006
by and between the Company and Laurus (as amended, restated, modified and/or
supplemented from time to time, the “June 2006 Securities Purchase
Agreement”), (viii) each Related Agreement referred to in the June 2006
Securities Purchase Agreement, as each may be amended, restated, modified and/or
supplemented from time to time, (ix) the Securities Purchase Agreement dated
as
of December 28, 2006 by and between the Parent and Laurus (as amended, restated,
modified and/or supplemented from time to time, the “December 2006
Securities Purchase Agreement”) and (x) each Related Agreement referred
to in the December 2006 Securities Purchase Agreement, as each may be amended,
restated, modified and/or supplemented from time to time.
2.2 Default
Interest. Following the occurrence and during the continuance of
an Event of Default, the Company shall pay additional interest on the
outstanding principal balance of this Note in an amount equal to two percent
(2%) per month, and all outstanding obligations under this Note, the Purchase
Agreement and each other Related Agreement, including unpaid interest, shall
continue to accrue interest at such additional interest rate from the date
of
such Event of Default until the date such Event of Default is cured or
waived.
2.3 Default
Payment. Following the occurrence and during the continuance of
an Event of Default, the Agent may demand repayment in full of all obligations
and liabilities owing by the Company to the Holder under this Note, the Purchase
Agreement and/or any other Related Agreement and/or may elect, in addition
to
all rights and remedies of the Agent under the Purchase Agreement and the other
Related Agreements and all obligations and liabilities of the Company under
the
Purchase Agreement and the other Related Agreements, to require the Company
to
make a Default Payment (“Default Payment”). The
Default Payment shall be one hundred thirty percent (130%) of the outstanding
principal amount of this Note, plus accrued but unpaid interest, all other
fees
then remaining unpaid, and all other amounts payable hereunder. The
Default Payment shall be due and payable immediately on the date that the Agent
has demanded payment of the Default Payment pursuant to this Section
2.3.
ARTICLE
III
MISCELLANEOUS
3.1 Cumulative
Remedies. The remedies under this Note shall be
cumulative.
3.2 Failure
or Indulgence Not Waiver. No failure or delay on the part of the
Holder hereof in the exercise of any power, right, privilege or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of
any such power, right, privilege or remedy preclude other or further exercise
thereof or of any other power, right, privilege or remedy. All
rights, powers, privileges and remedies existing hereunder are cumulative to,
and not exclusive of, any rights, powers, privileges or remedies otherwise
available.
3.3 Notices. Any
notice herein required or permitted to be given shall be given in writing in
accordance with the terms of the Purchase Agreement.
3.4 Amendment
Provision. The term “Note” and all references
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended
or
supplemented, and any successor instrument as such successor instrument may
be
amended or supplemented.
3.5 Assignability. This
Note shall be binding upon the Company and its successors and assigns, and
shall
inure to the benefit of the Holder and its successors and assigns, and may
be
assigned by the Holder in accordance with the requirements of the Purchase
Agreement. The Company may not assign any of its obligations under
this Note without the prior written consent of the Holder, any such purported
assignment without such consent being null and void.
3.6 Cost
of Collection. In case of the occurrence of an Event of Default
under this Note, the Company shall pay the Holder the Holder’s reasonable costs
of collection, including reasonable attorneys’ fees.
3.7 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
(b) THE
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER
RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE
OR
ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND
FURTHERPROVIDED, THAT
NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
THE OBLIGATIONS (AS DEFINED IN THE MASTER SECURITY AGREEMENT), TO REALIZE ON
THE
COLLATERAL (AS DEFINED IN THE MASTER SECURITY AGREEMENT) OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR
OF
THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND THE
COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE
BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH
IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(c) THE
COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE
HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL
TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY
OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR
THERETO.
3.8
Severability. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then
such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule
of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other
provision of this Note.
3.9
Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that
the rate of interest required to be paid or other charges hereunder exceed
the
maximum rate permitted by such law, any payments in excess of such maximum
rate
shall be credited against amounts owed by the Company to the Holder and thus
refunded to the Company.
3.10 Security
Interest, Guarantee and Mortgage. The Agent, for the ratable
benefit of the Creditor Parties, has been granted a security interest
(i) in certain assets of the Parent,
the Company and Century Resources, Inc. (“CRI”) as more fully
described in the Master Security Agreement dated as of the date hereof,
(ii) in the equity interests of the Parent in the Company pursuant to the
Stock Pledge Agreement dated as of the date hereof, (iii) in the oil and
gas properties of the Company pursuant to a Mortgage, Deed of Trust, Security
Agreement, Financing Statement and Assignment of Production, dated as of the
date hereof and (iv) in the oil and gas properties of the Parent and CRI
pursuant to a Mortgage, Deed of Trust, Security Agreement, Financing Statement
and Assignment of Production, dated as of the date hereof. The
obligations of the Company under this Note are guaranteed by the Parent pursuant
to the Guaranty dated as of the date hereof.
3.11 Construction;
Counterparts. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that
the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any
party
against the other. This Note may be executed by the parties hereto in
one or more counterparts, each of which shall be deemed an original and all
of
which when taken together shall constitute one and the same
instrument. Any signature delivered by a party by facsimile or
electronic transmission shall be deemed to be an original signature
hereto.
3.12 Registered
Obligation. This Note shall be registered (and such registration
shall thereafter be maintained) as set forth in Section 9.4(b) of the Purchase
Agreement. Notwithstanding any document, instrument or agreement
relating to this Note to the contrary, transfer of this Note (or the right
to
any payments of principal or stated interest thereunder) may only be effected
by
(i) surrender of this Note and either the reissuance by the Company of this
Note
to the new holder or the issuance by the Company of a new instrument to the
new
holder or (ii) registration of such holder as assignee in accordance with
Section 9.4(b) of the Purchase Agreement.
IN
WITNESS WHEREOF, the Company has caused this Secured Term Note to be signed
in
its name effective as of this 20th day of
November,
2007.
GULF
COAST OIL CORPORATION
By:
/s/ Xxxxxx X. XxXxxxxxx
Name:
Xxxxxx X. XxXxxxxxx
Title:
President
WITNESS:
/s/
Xxxxxxx X. Xxxxxxx
SCHEDULE
A
[Confidential
Information Removed]
