Exhibit 10.22

 

THIRD AMENDMENT TO LOAN AGREEMENT

   

            THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Amendment") dated as
of December 31, 2003, is made between THE EXPLORATION COMPANY OF DELAWARE, INC.,
a Delaware corporation ("Borrower"), and HIBERNIA NATIONAL BANK, a national
banking association ("Lender") who agree as follows:

   

RECITALS

 

A.      The Borrower and the Lender entered into that certain Loan Agreement
dated as of March 4, 2002, as amended by a First Amendment to Loan Agreement
dated as of December 13, 2002 and a Second Amendment to Loan Agreement dated as
of August 13, 2003 (as amended, the "Loan Agreement"). Unless otherwise
specified herein, capitalized terms used in this Amendment shall have the
meanings indicated in the Loan Agreement.

 

B.      The Borrower and the Lender desire to amend the Loan Agreement to alter
the interest rate, to extend the maturity date, and otherwise to provide with
respect to the Loan.

 

AGREEMENT

            NOW, THEREFORE, in consideration of the terms and conditions
contained herein, and the loans and extensions of credit heretofore, now or
hereafter made to the Borrower by the Lender, the parties hereto hereby agree as
follows:

 

ARTICLE 1.

AMENDMENTS

 

            1.1      The Borrower and the Lender hereby amend Section 1.2 of the
Loan Agreement by adding definitions of the terms "Tranche A", "Tranche B",
"Tranche B Level", and "Tranche B Rate", each inserted within Section 1.2 in the
proper alphabetical place, such definitions to read in their entirety as
follows:

   

"Tranche A" shall mean the portion of the principal amount of Advances
outstanding at any one time up to the Tranche B Level.

         

"Tranche B" shall mean the portion, if any, of the principal amount of Advances
outstanding at any one time exceeding the Tranche B Level.

         

"Tranche B Level" shall mean $12,500,000.00, subject to future changes by the
Lender in its sole discretion in conjunction with future redeterminations of the
Borrowing Base.

         

"Tranche B Rate" shall mean, during any Interest Period (as defined in the
definition of LIBO Rate) for any portion of any Advance within Tranche B, an

   

interest rate per annum equal to the Reserve Adjusted LIBO Rate (as defined in
the definition of LIBO Rate) plus four (4%) percent.

       

            1.2      The Borrower and the Lender hereby amend Section 1.2 of the
Loan Agreement, on page 7, by amending the definition of "Applicable LIBO Rate
Margin" within the definition of LIBO Rate, to substitute the following schedule
set forth below, replacing the prior schedule:

     

Applicable LIBO

 

 

Percentage Outstanding

Rate Margin

               

less than 1/3

2.25%

     

1/3 to 2/3

2.50%

     

above 2/3

2.75%

             

            1.3      The Borrower and the Lender hereby amend and restate the
definition of "Maturity Date" in Section 1.2 of the Loan Agreement to read in
its entirety as follows:

   

"Maturity Date" shall mean March 4, 2006, or such earlier date on which the Loan
is accelerated pursuant to Section 8.2 hereof.

       

            1.4      Notwithstanding Section 1.3 of this Amendment, the Borrower
and the Lender agree that the maturity of the Tranche B portion of the Loan
shall be January 1, 2005 (subject to future change, including earlier maturity,
as part of a Borrowing Base redetermination). Absent further written amendment
of the Loan Agreement, on and after January 1, 2005, the Borrower shall not be
permitted to borrow in excess of, or leave outstanding any principal amount of
the Advances exceeding, the Tranche B Level (which shall then be equal to the
Amount). The Borrower and the Lender acknowledge that as of the date of this
Amendment, the Tranche B Level is $12,500,000.00, and the Amount and the
Borrowing Base each is $14,000,000.00, subject to future changes in the Amount
and the Tranche B Level by the Lender in accordance with the Loan Agreement as
part of the periodic redeterminations of the Borrowing Base.

 

            1.5      In consideration of the granting of the foregoing
amendments, the Borrower shall pay to the Lender a fee in the amount equal to
twenty-five thousand ($25,000.00) dollars immediately upon execution of this
Amendment by the Lender.

 

ARTICLE 2.

ACKNOWLEDGMENT OF COLLATERAL

 

            2.1      The Borrower hereby specifically reaffirms all of the
Collateral Documents. The Borrower hereby reaffirms its original intention as
stated in the Collateral Documents that said Collateral Documents secure the
Indebtedness, including without limitation the Note as amended or extended from
time to time. The Borrower hereby confirms and agrees that the Collateral
Documents secure the Loan Agreement as amended by this Amendment and the Note as
extended pursuant to this Amendment.

     

ARTICLE 3.

MISCELLANEOUS

 

            3.1      The Borrower represents and warrants to the Lender (which
representations and warranties will survive the execution of this Amendment)
that (i) all representations and warranties contained in the Loan Agreement and
the Collateral Documents are true and correct on and as of the date hereof as
though made on and as of such date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true and correct on and as of
such earlier date, (ii) no event has occurred and is continuing as of the date
hereof which constitutes a Default or Event of Default, (iii) there has not
occurred any material adverse change in the Collateral or other assets,
liabilities, financial condition, business operations, affairs or circumstances
of the Borrower or any other facts, circumstances or conditions (financial or
otherwise) upon which the Lender has relied or utilized in making its decision
to enter into this Amendment, and (iv) there is no defense, offset,
compensation, counterclaim or reconventional demand with respect to amounts due
under, or performance of, the terms of the Note. To the extent any such defense,
offset, compensation, counterclaim or reconventional demand or other causes of
action by the Borrower against the Lender might exist, whether known or unknown,
such items are hereby waived by the Borrower.

 

            3.2      Subject to the specific amendments set forth in Article 1
of this Amendment and the other provisions contained in this Amendment, all
terms and provisions of the Loan Agreement and of the Note are hereby ratified
and confirmed, and shall be and remain in full force and effect, enforceable in
accordance with their terms.

 

            3.3      The Borrower agrees to pay on demand all reasonable
expenses of Lender in connection with the preparation, reproduction, execution
and delivery of this Amendment and the other instruments and documents to be
delivered hereunder (including the reasonable fees and expenses of counsel for
Lender). In addition, the Borrower shall pay any and all stamp or other taxes,
recordation fees and other fees payable in connection with the execution,
delivery, filing or recording of this Amendment and the other instruments and
documents to be delivered hereunder and agrees to hold the Lender harmless from
and against any and all liabilities with respect to or resulting from any delay
or omission in paying such taxes or fees.

 

            3.4      THIS AMENDMENT IS A CONTRACT MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES OF
AMERICA AND THE STATE OF LOUISIANA.

 

            3.5      The Borrower and the Lender agree that this Amendment may
be executed in multiple separate counterparts, and each party's signature may
appear on a separate counterpart, but all such counterparts taken together shall
constitute one and the same instrument. The parties specifically confirm their
intent to be bound by delivery of such signed counterparts by telecopier.

 

            3.6      The provisions of this Amendment shall become effective if
and when, and only when, (i) each and every representation and warranty of
Borrower contained in this Amendment is true, complete and accurate, (ii) no
event exists which constitutes a Default, and (iii) the receipt by the Lender of
the following:

 

            (a)      A duly executed counterpart of this Amendment;

 

            (b)      A duly executed substitute Note reflecting the extension of
maturity;

 

            (c)      A duly executed First Supplement to the Borrower's Texas
Deed of Trust;

 

            (d)      A Certificate of the Secretary of the Borrower, confirming
the continued effectiveness of the resolutions of its Board of Directors; and

 

            (e)       Payment of the fee required by Paragraph 1.5 of this
Amendment.

 

The Borrower hereby certifies by execution of this Amendment that the foregoing
conditions (i) and (ii) are satisfied and true and correct. The documents
required under condition (iii) in each case shall be in form and substance
satisfactory to the Lender and its counsel.

 

       IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.

 

BORROWER

:

THE EXPLORATION COMPANY OF DELAWARE, INC.

By:__/s/ James E. Sigmon_____________________

      Name:      James E. Sigmon
      Title:         President

LENDER

:

HIBERNIA NATIONAL BANK

By:__/s/ Nancy G. Moragas____________________

      Name:       Nancy G. Moragas
      Title:         Vice President