EXHIBIT 99.1 - LOAN AGREEMENT
LOAN AGREEMENT
LOAN AGREEMENT, dated as of January ___, 2007 (this "Agreement"), between
SOUTH TEXAS OIL COMPANY, a Nevada corporation ("Borrower"), and LONGVIEW FUND,
L.P., a California limited partnership (together with its successors and
assigns, "Lender")
IN CONSIDERATION of the mutual covenants herein contained, Borrower and
Lender agree as follows:
I. DEFINITIONS.
1.1 GENERAL TERMS. For purposes of this Agreement the following terms
shall have the following meanings:
"Advances" shall have the meaning set forth in Section 2.1.
"Affiliate" of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director or officer (i) of such Person.
For purposes of this definition, control of a Person shall mean the power,
direct or indirect, (x) to vote 20% or more of the securities having ordinary
voting power for the election of directors or, in the case of a Person other
than a corporation, individuals who perform similar functions.
"Agreement" shall mean this Loan Agreement, as amended, restated,
modified and supplemented from time to time.
"Business Day" shall mean any day other than a day on which commercial
banks in New York are authorized or required by law to close.
"Closing Date" shall mean the date hereof.
"Default" shall mean an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Dollar" and the sign "$" shall mean lawful money of the United States of
America.
"Event of Default" shall mean the occurrence of any of the events set
forth in Article IX.
"Governmental Body" shall mean any nation or government, any state or
other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Interest Rate" shall have the meaning set forth in Section 3.1.
"Lender" shall have the meaning ascribed to such term in the preamble to
this Agreement and shall include each Person which becomes a transferee,
successor or assign of Lender.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
condition, operations, assets, business or prospects of Borrower (b) Borrower's
ability to pay the Obligations in accordance with the terms thereof, (c)
Lender's lien on the Accounts or the priority of any such lien or (d) the
practical realization of the benefits of Lender's rights and remedies under
this Agreement and the Transaction Documents.
"Maturity Date" shall mean December 31, 2009.
"Obligations" shall mean and include any and all of Borrower's
indebtedness and/or liabilities to Lender of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several, joint
and several, absolute or contingent, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated,
regardless of how such indebtedness or liabilities arise or by what agreement
or instrument they may be evidenced or whether evidenced by any agreement or
instrument (including all interest accruing after the commencement of any
bankruptcy or similar proceeding whether or not enforceable in such
proceeding), and all obligations of Borrower to Lender to perform acts or
refrain from taking any action.
"Payment Office" shall mean initially ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other office of Lender, which it may designate
by notice to Borrower to be the Payment Office.
"Person" shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether Federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).
"Revolving Credit Note" shall mean the promissory note referred to in
Section 2.1.
"Security Agreement" means the Security Agreement referred to in Section
2.5.
"Term" shall have the meaning set forth in Section 12.1.
"Termination Date" shall have the meaning set forth in Section 12.1.
"Transaction Documents" shall mean the Revolving Credit Note, the
Security Agreement between Borrower and Lender and any and all other
agreements, instruments and documents now or hereafter executed by Borrower
delivered to Lender in respect of the transactions contemplated by this
Agreement.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
New York from time to time.
1.2 CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Each
reference to a Section, an Exhibit or a Schedule shall be deemed to refer to a
Section, an Exhibit or a Schedule, as applicable, of this Agreement unless
otherwise specified. Any pronoun used shall be deemed to cover all genders.
Wherever appropriate in the context, terms used herein in the singular also
include the plural and vice versa. Unless otherwise provided, all references
to any agreements to which Lender is a party, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES.
2.1 MAXIMUM ADVANCES. Under this Agreement, the maximum borrowings
shall be up to $15,000,000.00. Lender shall advance ("Advance or Advances")
to Borrower up to $2,000,000 per calendar month, which amount may be
increased subject to Lender's approval.
2.2 INTEREST. The cost of funds ("Interest") payable to Lender for the
Borrower's borrowings against Receivables shall be determined pursuant to a
Revolving Credit Note issued by Borrower to Lender ("Note"). Interest shall
be calculated daily on all outstanding Advances.
2.3 REQUESTS FOR ADVANCES. Borrower may request in writing Advances up
to $2,000,000 per calendar month but not more frequently than one time each
thirty days. The amount and frequency of the Advances may be increased with
Lender's approval. Provided the conditions set forth in Section VII are
satisfied, Lender will deliver to Borrower the amount demanded pursuant to
the wire instructions set forth in Section 2.5.
2.4 SECURITY INTEREST. Lender will be granted a security interest in
all assets of the Borrower to be memorialized in a "SECURITY AGREEMENT",
which will be executed contemporaneously herewith. Borrower will execute
such other agreements, mortgages, documents and financing statements
requested by Lender, which will be filed at the Borrower's expense with such
jurisdictions, states and counties designated by Lender. Borrower will also
execute all such documents reasonably necessary in the opinion of Lender to
memorialize and further protect the security interest described herein. The
terms of the Security Agreement annexed hereto are incorporated.
2.5 BORROWER'S WIRE INSTRUCTIONS. Lender shall wire Advances to
Borrower's bank as follows:
[REQUIRES COMPLETION]
III. INTEREST, FEES AND OTHER MATTERS.
3.1 INTEREST. Subject to Section 3.4 hereof, interest payable on the
Note shall accrue at a rate per annum (the "Interest Rate") equal to the
"prime rate" published in The Wall Street Journal from time to time, plus
four percent (4%). The Interest 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
computed as of the first Business Day of each calendar quarter and applied to
the Obligations outstanding during such calendar quarter. The Interest Rate
shall not be less than eight percent (8%). Interest on the Obligations shall
be payable quarterly, in arrears, commencing on the first day of the first
calendar quarter after the initial Advance is made and on the first day of
each consecutive calendar quarter thereafter and on the Maturity Date,
whether by acceleration or otherwise.
3.2 COMPUTATION OF INTEREST AND FEES. Interest and fees hereunder
shall be computed on the basis of a year of 360 days and for the actual
number of days elapsed. If any payment to be made hereunder becomes due and
payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall be
payable at the Interest Rate.
3.3 OPTIONAL REDEMPTION OF OBLIGATIONS. Provided an Event of Default
or a Default has not occurred, whether or not such Event of Default has been
cured, the Borrower will have the option of prepaying the outstanding
Obligations ("Optional Redemption"), in whole or in part, by paying to the
Lender a sum of money equal to one hundred and twenty percent (120%) of the
outstanding Advances, together with accrued but unpaid interest thereon and
any and all other Obligations through the Redemption Payment Date as defined
below (the "Redemption Amount"). Borrower's election to exercise its right
to prepay must be by notice in writing ("Notice of Redemption"). The Notice
of Redemption shall specify the date for such Optional Redemption (the
"Redemption Payment Date"), which date shall be thirty (30) days after the
date of the Notice of Redemption (the "Redemption Period"). A Redemption
Notice may be given not more frequently than one time each sixty days. On
the Redemption Payment Date, the Redemption Amount shall be paid in good
funds to the Lender. In the event the Borrower fails to pay the Redemption
Amount on the Redemption Payment Date as set forth herein, then (i) such
Notice of Redemption will be null and void, (ii) Borrower will not have the
right to deliver another Notice of Redemption, and (iii) Borrower's failure
may be deemed by Lender to be a non-curable Event of Default. A Notice of
Redemption may be cancelled at the option of the Lender, if at any time
during the Redemption Period an Event of Default, or a Default (whether or
not such Event of Default has been cured), has occurred.
3.4 MAXIMUM CHARGES. In no event whatsoever shall interest and other
charges hereunder exceed the highest rate permissible under law. If such
interest and other charges would otherwise exceed such rate, such excess
amount shall be first applied to any unpaid principal balance of the
Revolving Credit Note, and if the then remaining excess amount is greater
than the previously unpaid principal balance, Lender shall promptly refund
such excess amount to Borrower and the provisions hereof shall be deemed
amended to provide for such permissible rate.
3.5 EXCULPATION OF LIABILITY. Nothing herein contained shall be
construed to constitute Lender as Borrower's agent for any purpose
whatsoever.
IV. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender as follows:
4.1 DUE INCORPORATION. Borrower is a corporation duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power to own
its properties and to carry on its business as presently conducted. Borrower
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect.
4.2 OUTSTANDING STOCK. All issued and outstanding shares of capital
stock of Borrower has been duly authorized and validly issued and are fully
paid and nonassessable.
4.3 AUTHORITY; ENFORCEABILITY. The Transaction Documents have been
duly authorized, executed and delivered by Borrower and are valid and binding
agreements enforceable in accordance with their terms. Borrower has full
corporate power and authority necessary to enter into and deliver the
Transaction Documents and to perform its obligations thereunder.
4.4 ADDITIONAL ISSUANCES. There are no outstanding agreements or
preemptive or similar rights affecting Borrower's common stock or equity and no
outstanding rights, warrants or options to acquire, or instruments convertible
into or exchangeable for, or agreements or understandings with respect to the
sale or issuance of any shares of common stock or equity of Borrower except as
described in the Reports. For purposes of this Agreement, "Reports" shall mean
all periodic reports of Borrower as filed with the Securities and Exchange
Commission ("Commission") and are accessible at the ▇▇▇▇▇ Website of the
Commission. "Other Written Information" shall mean Borrower's other
information concerning its operations, financial condition and other matters as
the Lender has requested in writing, and considered all factors the Lender
deems material in deciding on the advisability of investing in the Revolving
Credit Notes.
4.5 CONSENTS. No consent, approval, authorization or order of any
court, governmental agency or body or arbitrator having jurisdiction over
Borrower, or any of its Affiliates, the Bulletin Board nor Borrower's
shareholders is required for the execution by Borrower of the Transaction
Documents and compliance and performance by Borrower of its obligations under
the Transaction Documents.
4.6 NO VIOLATION OR CONFLICT. The performance of Borrower's
obligations under the Transaction Documents will not:
(a) violate, conflict with, result in a breach of, or constitute
a default (or an event which with the giving of notice or the lapse of time or
both would be reasonably likely to constitute a default) under (i) the articles
or certificate of incorporation, charter or bylaws of Borrower, (ii) to
Borrower's knowledge, any decree, judgment, order, law, treaty, rule,
regulation or determination applicable to Borrower of any court, governmental
agency or body, or arbitrator having jurisdiction over Borrower or over the
properties or assets of Borrower or any of its Affiliates including
environmental and safety laws, (iii) the terms of any bond, debenture, note or
any other evidence of indebtedness, or any agreement, stock option or other
similar plan, indenture, lease, mortgage, deed of trust or other instrument to
which Borrower or any of its Affiliates is a party, by which Borrower or any of
its Affiliates is bound, or to which any of the properties of Borrower or any
of its Affiliates is subject, or (iv) the terms of any "lock-up" or similar
provision of any underwriting or similar agreement to which Borrower, or any of
its Affiliates is a party except, in each case, the violation, conflict,
breach, or default of which would not have a Material Adverse Effect; or
(b) except as contemplated hereby, result in the creation or
imposition of any lien, charge or encumbrance upon any of the assets of
Borrower or any of its Affiliates; or
(c) result in the activation of any anti-dilution rights or a
reset or repricing of any debt or security instrument of any creditor or equity
holder of Borrower, nor result in the acceleration of the due date of any
obligation of Borrower.
4.7 THE REVOLVING CREDIT NOTE. The Revolving Credit Notes, upon
issuance:
(a) are and will be, free and clear of any security interests,
liens, claims or other encumbrances;
(b) have been, or will be, duly and validly authorized;
(c) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities or debt of
Borrower; and
(d) will not subject the holders thereof to personal liability by
reason of being such holders.
4.8 LITIGATION. There is no pending or, to the best knowledge of
Borrower, threatened action, suit, proceeding or investigation before any
court, governmental agency or body, or arbitrator having jurisdiction over
Borrower, or any of its Affiliates that would affect the execution by Borrower
or the performance by Borrower of its obligations under the Transaction
Documents. Except as disclosed in the Reports, there is no pending or, to the
best knowledge of Borrower, basis for or threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over Borrower, or any of its Affiliates which litigation if
adversely determined would have a Material Adverse Effect.
4.9 REPORTING COMPANY. Borrower is a publicly-held company, subject to
the reporting obligation pursuant to Section 13 and/or 15(d) of the Securities
Exchange Act of 1934 (the "1934 Act") and has a class of common shares reported
pursuant to Section 12(g) of the 1934 Act. Pursuant to the provisions of the
1934 Act, Borrower has timely filed all reports and other materials required to
be filed thereunder with the Commission during the preceding twelve months.
4.10 INFORMATION CONCERNING COMPANY. The Reports contain all material
information relating to Borrower and its operations and financial condition as
of their respective dates which information is required to be disclosed
therein. Since the date of the financial statements included in the Reports
("Latest Financial Date"), and except as modified in the Other Written
Information or in the Schedules hereto, there has been no Material Adverse
Effect relating to Borrower's business, financial condition or affairs not
disclosed in the Reports. The Reports, including the financial statements
contained therein, do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances when
made.
4.11 DEFAULTS. Borrower is not in violation of its articles of
incorporation or bylaws. Borrower is (a) not in default under or in violation
of any other material agreement or instrument to which it is a party or by
which it or any of its properties are bound or affected, which default or
violation would have a Material Adverse Effect, (b) not in default with respect
to any order of any court, arbitrator or governmental body or subject to or
party to any order of any court or governmental authority arising out of any
action, suit or proceeding under any statute or other law respecting antitrust,
monopoly, restraint of trade, unfair competition or similar matters, and (c) to
Borrower's knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a Material Adverse Effect.
4.12 LISTING. Borrower's common stock is quoted on the OTC Bulletin
Board under the symbol: STXX. Borrower has not received any oral or written
notice that the Common Stock is not eligible nor will become ineligible for
quotation on the OTC Bulletin Board nor that the common stock does not meet all
requirements for the continuation of such quotation. Borrower satisfies all
the requirements for the continued quotation of the common stock on the OTC
Bulletin Board.
4.13 NO UNDISCLOSED LIABILITIES. Borrower has no liabilities or
obligations which are material, individually or in the aggregate, which are not
disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of Borrower's businesses since the Latest
Financial Date and which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
4.14 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since the Latest Financial
Date, no event or circumstance has occurred or exists with respect to Borrower
or its businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by Borrower but which has not been so publicly
announced or disclosed in the Reports.
4.15 CAPITALIZATION. The authorized and outstanding capital stock of
Borrower as of the date of this Agreement are set forth in the Reports. Except
as set forth In the Reports, there are no options, warrants, or rights to
subscribe to, securities, rights or obligations convertible into or
exchangeable for or giving any right to subscribe for any shares of capital
stock of Borrower or any of its Subsidiaries. All of the outstanding shares of
common stock of Borrower have been duly and validly authorized and issued and
are fully paid and nonassessable.
4.16 NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS. There are no
disagreements of any kind presently existing, or reasonably anticipated by
Borrower to arise, between Borrower and the accountants and lawyers formerly or
presently employed by Borrower, including but not limited to disputes or
conflicts over payment owed to such accountants and lawyers, nor have there
been any such agreements during the two years prior to the Closing Date.
4.17 DTC STATUS. Borrower's transfer agent is a participant in and
Borrower's common stock is eligible for transfer pursuant to the Depository
Trust Company Automated Securities Transfer Program.
4.18 INVESTMENT COMPANY. Neither Borrower nor any Affiliate is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
V. COVENANTS OF BORROWER. Borrower covenants and agrees with Lender as
follows:
5.1 STOP ORDERS. Borrower will advise the Lender within one Business
Day after it receives notice of issuance by the Commission, any state
securities commission or any other regulatory authority of any stop order or of
any order preventing or suspending any offering of any securities of Borrower,
or of the suspension of the qualification of the Borrower's common stock for
offering or sale in any jurisdiction, or the initiation of any proceeding for
any such purpose.
5.2 LISTING. Borrower will maintain the listing of its common stock
on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market
System, Bulletin Board, or New York Stock Exchange (whichever of the foregoing
is at the time the principal trading exchange or market for the common stock
(the "Principal Market")), and will comply in all respects with Borrower's
reporting, filing and other obligations under the bylaws or rules of the
Principal Market, as applicable. Borrower will provide the Lender copies of all
notices it receives notifying Borrower of the threatened and actual delisting
of the common stock from any Principal Market. As of the date of this
Agreement and the Closing Date, the Nasdaq SmallCap Market is and will be the
Principal Market.
5.3 MARKET REGULATIONS. Borrower shall notify the Commission, the
Principal Market and applicable state authorities, in accordance with their
requirements, of the transactions contemplated by this Agreement, and shall
take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Revolving Credit Note to the Lender and promptly provide copies
thereof to Lender.
5.4 FILING REQUIREMENTS. From the date of this Agreement and until the
Obligations are indefeasibly satisfied, Borrower will (a) cause its Common
Stock to continue to be subject to the reporting obligations of Section 15(d),
12(b) or 12(g) of the 1934 Act, (b) comply in all respects with its reporting
and filing obligations under the Securities Exchange Act of 1934 ("1934 Act"),
and (c) comply with all reporting requirements that are applicable to an issuer
subject to Section 15(d) of the 1934 Act, or, if a class of its securities is
registered under Section 12(b) or 12(g) of the 1934 Act, to all reporting
requirements that are applicable to an issuer with a class of shares registered
pursuant to Section 12(b) or 12(g) of the 1934 Act, as applicable. Borrower
will use its best efforts not to take any action or file any document (whether
or not permitted by the Securities Act of 1933 ("1933 Act") or the 1934 Act or
the rules thereunder) to terminate or suspend its reporting and filing
obligations under said acts until the Obligations are indefeasibly satisfied.
Until the Obligations are indefeasibly satisfied, Borrower will use its best
efforts to continue the listing or quotation of the Common Stock on a Principal
Market and will comply in all respects with Borrower's reporting, filing and
other obligations under the bylaws or rules of the Principal Market.
5.5 TAXES. From the date of this Agreement and until the Obligations
are indefeasibly satisfied, Borrower will promptly pay and discharge, or cause
to be paid and discharged, when due and payable, all lawful taxes, assessments
and governmental charges or levies imposed upon the income, profits, property
or business of Borrower; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if Borrower shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that Borrower will pay all such taxes, assessments, charges or levies
forthwith upon the commencement of proceedings to foreclose any lien which may
have attached as security therefore.
5.6 INSURANCE. From the date of this Agreement and until the
Obligations are indefeasibly satisfied, Borrower will keep its assets which are
of an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, explosion and other risks customarily insured
against by companies in Borrower's line of business, in amounts sufficient to
prevent Borrower from becoming a co-insurer and not in any event less than one
hundred percent (100%) of the insurable value of the property insured; and
Borrower will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated and to the extent available on commercially reasonable
terms.
5.7 BOOKS AND RECORDS. From the date of this Agreement and until the
Obligations are indefeasibly satisfied, Borrower will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
5.8 GOVERNMENTAL AUTHORITIES. From the date of this Agreement and
until the Obligations are indefeasibly satisfied, Borrower shall duly observe
and conform in all material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its properties or
assets.
5.9 INTELLECTUAL PROPERTY. From the date of this Agreement and until
the Obligations are indefeasibly satisfied, Borrower shall maintain in full
force and effect its corporate existence, rights and franchises and all
licenses and other rights to use intellectual property owned or possessed by it
and reasonably deemed to be necessary to the conduct of its business.
5.10 PROPERTIES. From the date of this Agreement and until the
Obligations are indefeasibly satisfied, Borrower will keep its properties in
good repair, working order and condition, reasonable wear and tear excepted,
and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and Borrower will at all
times comply with each provision of all leases to which it is a party or under
which it occupies property if the breach of such provision could reasonably be
expected to have a Material Adverse Effect.
5.11 PUBLIC ANNOUNCEMENT. Borrower shall file a Form 8-K or make a
public announcement relating to the transactions described in this Agreement
not later than the first business day after the Closing Date. The Borrower
will timely make such other announcements and timely file Forms 8-K as are
required under the ▇▇▇▇ ▇▇▇.
5.12 CONFIDENTIALITY. Borrower will not disclose, and will not include
in any public announcement, the name of Lender, unless expressly agreed to by
Lender or unless and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
5.13 NON-PUBLIC INFORMATION. Borrower covenants and agrees that neither
it nor any other person acting on its behalf will provide any Lender or its
agents or counsel with any information that Borrower believes constitutes
material non-public information, unless prior thereto such Lender shall have
agreed in writing to receive such information. Borrower understands and
confirms that the Lender shall be relying on the foregoing representations in
effecting transactions in securities of Borrower.
VI. INDEMNIFICATION.
6.1 Borrower shall indemnify, hold harmless, reimburse and defend
Lender, and each of Lender's officers, directors, agents, Affiliates, control
persons, and shareholders, against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature
(collectively, "Losses") incurred by or imposed on Lender that results,
arises out of or is based upon, directly or indirectly, (i) breach of any
representation by Borrower or breach of any warranty by Borrower in this
Agreement or the Transaction Documents, (ii) breach or default in performance
by Borrower of any covenant by Borrower hereunder or under the Transaction
Documents or (iii) any action taken by any Governmental Body that has or may
have an adverse effect on the ability of Borrower to conduct its business in
the ordinary course.
VII. CONDITIONS TO EACH ADVANCE. The agreement of Lender to make any Advance
is subject to the satisfaction of the following conditions precedent as of the
date such Advance is made:
(a) Representations and Warranties. Each of the representations
and warranties made by Borrower to this Agreement and the Transaction
Documents, and each of the representations and warranties contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement or the Transaction Documents shall
be true and correct in all material respects on and as of such date as if made
on and as of such date;
(b) No Default. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made on such date; provided, however, that Lender,
in its sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default;
(c) Maximum Advances. The aggregate Advances outstanding shall
not exceed the maximum amount of Advances permitted under Section 2.1.
(d) Confirming Representations and Warranties. Each request for
an Advance hereunder shall constitute a representation and warranty by
Borrower as of the date of such Advance that the conditions contained in this
Section have been satisfied.
VIII. INFORMATION AS TO BORROWER.
Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:
8.1 LITIGATION. Promptly notify Lender in writing of the commencement
of any litigation, suit or administrative proceeding affecting Borrower or
Guarantor, whether or not the claim is covered by insurance.
8.2 MATERIAL OCCURRENCES. Promptly notify Lender in writing upon the
occurrence of (a) any Event of Default or Default; and (b) any other
development in the business or affairs of Borrower which could reasonably be
expected to have a Material Adverse Effect; in each case describing the
nature thereof and the action Borrower proposes to take with respect thereto.
8.3 ADDITIONAL INFORMATION. Furnish Lender with such additional
information as Lender shall reasonably request in order to enable Lender to
determine whether the covenants and conditions of this Agreement and the
Revolving Credit Note have been complied with by Borrower.
8.4 NOTICES OF ADVERSE EVENTS. Furnish Lender with prompt notice of
(a) any lapse or other termination of any consent, license or permit issued
to Borrower by any Governmental Body or any other Person that is material to
the operation of Borrower's business, (b) any refusal by any Governmental
Body or any other Person to renew or extend any such consent, license or
permit; and (c) copies of any periodic or special reports filed by Borrower
with any Governmental Body or Person, if such reports indicate any material
change in the business, operations, affairs or condition of any Borrower, or
if copies thereof are requested by Lender or any Lender, and (d) copies of
any notices and other communications from any Governmental Body which
relate to Borrower.
8.6 ADDITIONAL DOCUMENTS. Execute and deliver to Lender, upon request,
such documents and agreements as Lender may, from time to time, reasonably
request to carry out the
IX. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
9.1 failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay,
or by required prepayment or failure to pay any other liabilities or make any
other payment, fee or charge provided for herein when due or in any
Transaction Document;
9.2 issuance of a notice of lien, levy assessment, injunction
attachment or service against any portion of any Borrower's property which is
not stayed or lifted within ten (10) days or bonded pending appeal;
9.3 failure or neglect of Borrower to perform, keep or observe any
term, provision, condition, covenant contained herein or in any Transaction
Document (to the extent such breach is not otherwise embodied in any other
provision of this Article IX for which a different grace or cure period is
specified or which constitute an immediate Event of Default, which is not
cured within ten (10) Business Days after the occurrence of such Event of
Default;
9.4 any judgment or judgments are rendered or judgment liens filed
against Borrower for an aggregate amount in excess of $100,000 which within
thirty (30) days of such rendering or filing is not either satisfied, stayed
or discharged of record;
9.5 Borrower or any Affiliate of Borrower shall (a) apply for, consent
to or suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (b) make a general assignment for the
benefit of creditors, (c) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (d) be adjudicated a
bankrupt or insolvent, (e) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (f) acquiesce to, or fail to
have dismissed, any petition filed against it in any involuntary case under
such bankruptcy laws, or (g) take any action for the purpose of effecting any
of the foregoing;
9.6 Borrower 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;
9.7 any change in the condition or affairs of Borrower (financial or
otherwise) which could have a Material Adverse Effect;
9.8 any warranty or representation by Borrower in any Transaction
Document no longer being accurate and such condition has or could reasonably
be expected to have in a Material Adverse Effect;
9.9 any provision of this Agreement shall, for any reason, cease to be
valid and binding on Borrower, or Borrower shall so claim in writing to
Lender; and
9.10 any Governmental Body shall (i) revoke, terminate, suspend or
adversely modify any license or permit of Borrower or (ii) commence
proceedings to suspend, revoke, terminate or adversely modify any such
license or permit and such proceedings shall not be dismissed or discharged
within forty-five (45) days, or (iii) schedule a hearing on the renewal of,
or the necessity to obtain, any license or permit necessary for the
continuation of Borrower's business.
X. LENDER' RIGHTS AND REMEDIES AFTER DEFAULT.
10.1 RIGHTS AND REMEDIES. Upon the occurrence of (a) an Event of
Default pursuant to Section 9.5 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lender to make Advances
shall be deemed terminated; and (b) any of the other Events of Default and at
any time thereafter at the option of Lender all Obligations shall be
immediately due and payable and Lender shall have the right to terminate this
Agreement and to terminate the obligation of Lender to make Advances. Upon
the occurrence of any Event of Default, Lender shall have the right to
exercise any and all other rights and remedies provided for herein, under the
UCC and at law or equity generally.
10.2 LENDER'S DISCRETION. Except as otherwise provided herein, Lender
shall have the right in its sole discretion to determine which rights, liens,
security interests or remedies Lender may at any time pursue, relinquish,
subordinate, or modify or to take any other action with respect thereto and
such determination will not in any way modify or affect any of Lender's or
Lender's rights hereunder.
10.3 RIGHTS AND REMEDIES NOT EXCLUSIVE. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the
exercise of any right or remedy shall not preclude the exercise of any other
right or remedy provided for herein or otherwise provided by law, all of
which shall be cumulative and not alternative.
XI. WAIVERS AND JUDICIAL PROCEEDINGS.
11.1 WAIVER OF NOTICE. Borrower hereby waives notice of non-payment of
any of the Accounts, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of
loans or advances made, credit extended, Accounts received or delivered, or
any other action taken in reliance hereon, and all other demands and notices
of any description, except such as are expressly provided for herein.
11.2 DELAY. No delay or omission on Lender's part in exercising any
right, remedy or option shall operate as a waiver of such or any other right,
remedy or option or of any default.
11.3 JURY WAIVER. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION (A) ARISING UNDER
THIS AGREEMENT OR ANY TRANSACTION, DOCUMENT OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND
EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS THAT ANY SUCH CLAIM, OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XII. EFFECTIVE DATE AND TERMINATION.
12.1 TERM. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of
Borrower and Lender, shall become effective on the date hereof and shall
continue in full force and effect until the earliest to occur of (a) 12-
months from the date hereof, (b) a date not less than thirty (30) days after
Lender gives notice of such date to Borrower of termination, or (c) the date
on which this Agreement shall be terminated in accordance with the provisions
hereof; (the "Termination Date"; such period referred to herein as the
"Term").
12.2 TERMINATION. The termination of this Agreement shall not affect
Lender's rights, or any of the Obligations having their inception prior to
the effective date of such termination, and the provisions hereof shall
continue to be fully operative until all transactions entered into, rights or
interests created or Obligations have been fully disposed of, concluded or
liquidated. The rights granted to Lender hereunder shall continue in full
force and effect, notwithstanding the termination of this Agreement or the
fact that from time to time there may be no outstanding Obligations, until
all of the Obligations have been paid or performed in full. Accordingly,
Borrower waives any rights which it may have under Section 9-513 of the UCC
to demand the filing of termination statements with respect to the Accounts,
and Lender shall not be required to send such termination statements to
Borrower, or to file them with any filing office, unless and until this
Agreement shall have been terminated in accordance with its terms and all
Obligations paid in full in immediately available funds. All
representations, warranties, waivers and agreements contained herein shall
survive termination hereof until all Obligations are paid or performed in
full.
XIII. WAIVER OF SUBROGATION.
13.1 WAIVER OF SUBROGATION. Borrower expressly waives any and all rights
of subrogation, reimbursement, indemnity, exoneration, contribution of any
other claim which Borrower may now or hereafter have against any Person
directly or contingently liable for the Obligations hereunder, or against or
with respect to Borrower's property (including, without limitation, any
property which is collateral for the Obligations), arising from the existence
or performance of this Agreement, until termination of this Agreement and
repayment in full of the Obligations.
XIV. MISCELLANEOUS.
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York, without giving effect to rules
regarding conflicts of law. Any judicial proceeding by involving, directly
or indirectly, any matter or claim in any way arising out of, related to or
connected with this Agreement or any Transaction Document shall be brought
only in a federal or state court located in the State of New York and in no
other court. By execution and delivery of this Agreement, Borrower and
Lender accept for itself and in connection with its properties, generally and
unconditionally, the exclusive jurisdiction of such court, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by
registered mail (return receipt requested) directed to Borrower at its
address set forth in Section 14.4 and service so made shall be deemed
completed five (5) days after the same shall have been so deposited in the
mails of the United States of America, or, at Lender's option, by service
upon Borrower. Nothing herein shall affect the right to serve process in any
manner permitted by law. Borrower and Lender waive any objection to
jurisdiction and venue of any action instituted hereunder and shall not
assert any defense based on lack of jurisdiction or venue or based upon forum
non conveniens.
14.2 ENTIRE UNDERSTANDING. This Agreement and the Transaction Documents
contain the entire understanding between Borrower and Lender and supersedes
all prior agreements and understandings, if any, relating to the subject
matter hereof. Neither this Agreement nor any portion or provisions hereof
may be changed, modified, amended, waived, supplemented, discharged,
cancelled or terminated orally or by any course of dealing, or in any manner
other than by an agreement in writing, signed by the party to be charged.
Borrower acknowledges that it has been advised by counsel in connection with
the execution of this Agreement and the Transaction Documents and is not
relying upon oral representations or statements inconsistent with the terms
and provisions of this Agreement.
14.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors
and assigns, except that Borrower may not assign or transfer any of its
rights or obligations under this Agreement without the prior written consent
of Lender.
14.4 NOTICE. Any notice or request hereunder may be given to Borrower
and Lender at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of
change of address under this Section. Any notice or request hereunder shall
be given by (a) hand delivery, (b) overnight courier, (c) registered or
certified mail, return receipt requested, or (d) telecopy to the number set
out below (or such other number as may hereafter be specified in a notice
designated as a notice of change of address) with electronic confirmation of
its receipt. Any notice or other communication required or permitted
pursuant to this Agreement shall be deemed given (a) when personally
delivered to any officer of the party to whom it is addressed, (b) on the
earlier of actual receipt thereof or three (3) days following posting thereof
by certified or registered mail, postage prepaid, or (c) upon actual receipt
thereof when sent by a recognized overnight delivery service or (d) upon
actual receipt thereof when sent by telecopier to the number set forth below
with electronic confirmation of its receipt, in each case addressed to each
party at its address set forth below or at such other address as has been
furnished in writing by a party to the other by like notice:
(A) If to Lender at: Longview Fund, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Grushko & ▇▇▇▇▇▇▇, P.C.
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(B) If to Borrower at: South Texas Oil Company
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▇▇▇▇▇ #▇▇▇
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ & Associates
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Fax: (▇▇▇) ▇▇▇-▇▇▇▇
14.5 SEVERABILITY. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated
thereby and shall be given effect so far as possible.
14.6 EXPENSES. All costs and expenses including, without limitation,
(i) reasonable attorneys' fees and disbursements incurred by Lender (a) in
all efforts made to enforce payment of any of the Obligations, or (b) in
connection with the entering into, modification, amendment, administration
and enforcement of this Agreement or the Transaction Documents or any
consents or waivers hereunder or thereunder, or (c) in instituting,
maintaining, preserving, enforcing and foreclosing on Lender's security
interest, whether through judicial proceedings or otherwise, or (d) in
defending or prosecuting any actions or proceedings arising out of or
relating to Lender's transactions with Borrower and (ii) reasonable fees and
disbursements incurred by Lender in connection with any Collateral, field
examinations, collateral analysis or monitoring or other business analysis
conducted by outside Persons in connection with this Agreement and the
Transaction Documents, may be charged to Borrower and shall be part of the
Obligations.
14.7 INJUNCTIVE RELIEF. Borrower recognizes that if Borrower fails to
perform, observe or discharge any of its obligations under this Agreement,
any remedy at law may prove to be inadequate relief to Lender; therefore,
Lender, if Lender so requests, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving that
actual damages are not an adequate remedy.
14.8 CONSEQUENTIAL DAMAGES. Lender shall not be liable to Borrower for
consequential damages arising from any breach of contract, tort or other
wrong relating to the establishment, administration or collection of the
Obligations.
14.9 CAPTIONS. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be
interpreted as part of this Agreement.
14.10 COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original,
but all such counterparts shall constitute one and the same agreement. Any
signature delivered by a party by facsimile transmission shall be deemed to
be an original signature hereto.
14.11 CONSTRUCTION. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction
to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement or any
amendments, schedules or exhibits thereto.
SOUTH TEXAS OIL COMPANY
By:
LONGVIEW FUND, L.P.
By:
