Document:

star_ex1063.htm

Exhibit 10.6.3

 

SECOND AMENDMENT TO CREDIT AGREEMENT

This Second Amendment to Credit Agreement (“Amendment”) is entered into between INDEPENDENT BANK, as lender, and STARBOARD RESOURCES, INC, as borrower, and is dated March 26, 2014.  Terms defined in the Credit Agreement between such lender and such borrower dated June 27, 2013, (as amended prior to the date of this Amendment, the “Credit Agreement”), are used herein as therein defined, unless otherwise defined herein or the context otherwise requires.

R E C I T A L S:

WHEREAS, the Borrower has requested that the Lender increase the Borrowing Base and make a term loan to the Borrower; and

WHEREAS, the Lender is willing to amend the Credit Agreement under the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby agree as follows:

1.           The following definitions are hereby added to Section1.1 of the Credit Agreement as follows:

“Acquisition Properties” means the Properties known as the ‘Crittendon Properties” being acquired by the Borrower from White Oak Energy.

“Second Amendment to Credit Agreement” means the Second Amendment to Credit Agreement dated March 26, 2014, between the Lender and the Borrower, amending the Credit Agreement.

“Term Loan” means the Advance made under Section 2.1.4 or so much thereof as remains outstanding, as the context requires.

“Term Loan Borrowing Request” means a writing, substantially in the form attached to the Second Amendment to Credit Agreement entitled “Form of Notice of Term Loan Borrowing”, properly completed and signed by Borrower, requesting the Term Loan.

“Term Loan Note” means a promissory note issued pursuant hereto, in substantially the form attached to the Second Amendment to Credit Agreement entitled “Form of Term Loan Note”, duly executed by the Borrower and payable to the Lender, including any amendment, modification, renewal or replacement of such promissory note.

2.           The following definitions located in Section1.1 of the Credit Agreement are hereby amended and restated in their respective entireties as follows:

“Borrowing Base” means the amount most recently determined and designated by the Lender as the Borrowing Base in accordance with Section 2.8.1, as such Borrowing Base is reduced in accordance with Section 2.8.2 or other provisions hereof.  The Borrowing Base under Section 2.8.1 is $17,000,000 as of the date of the Second Amendment to Credit Agreement and shall automatically increase to $21,000,000 as of the date the Borrower meets all of the conditions to funding the Term Loan under paragraph 9 of the Second Amendment to the Credit Agreement.

  

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“Final Maturity Date”, “Final Maturity” or “Maturity Date” means (a) with respect to the Loans under the Note, June 1, 2016, or such earlier date on which the Commitment of the Lender terminates as provided in this Agreement, and (b) with respect to the Term Loan under the Term Loan Note, April 1, 2016; provided, however, that in each case, if such date is not a Business Day, the Final Maturity Date shall be the next succeeding Business Day.

“Floating Rate” means for any day a per annum interest rate equal to (i) for Loans under the Note, the higher of (a) the sum of zero percent (0.00%) plus the WSJ Rate from time to time in effect or (b) four percent (4.00%) and (ii) for the Term Loan under the Term Loan Note, the higher of (a) the sum of three percent (3.00%) plus the WSJ Rate from time to time in effect or (b) six and three- quarters percent (6.75%).

“Interest Payment Date” means (i) for the Loan made under the Note, the first day of each month commencing with July 1, 2013, and upon maturity of the Note (whether stated or upon acceleration) and (ii) for the Term Loan made under the Term Loan Note, the first day of each month commencing with May 1, 2014, and upon maturity of the Term Loan Note (whether stated or upon acceleration).

“Note” means a promissory note issued pursuant hereto, in substantially the form attached hereto entitled “Form of Promissory Note”, duly executed by the Borrower and payable to the order of the Lender, including any amendment, modification, renewal or replacement of such promissory note, which Note shall be in the amount of $100,000,000; provided, however, for the purposes of the definition of “Loan Documents”, the definition of “Obligations”, Article III, Section 6.3.1, the lead-in to  Article VII, Section 7.12.1, Article VIII, Article IX, and Article XI, the term “Note” shall be deemed to include both the Note and the Term Loan Note.

3.            Section2.1 of the Credit Agreement is hereby amended and restated in its entirety as follows:

“2.1           Reducing Revolving Line of Credit, Letter of Credit and Term Loan Facilities.

2.1.1           During the Revolving Credit Period, and if no Default exists, the Lender agrees, subject to the other terms and conditions of this Agreement, to make Advances to the Borrower from time to time in amounts not to exceed, in the aggregate at any one time outstanding, the Available Commitment as in effect from time to time.

2.1.2           The Lender shall not be obligated to lend to the Borrower, and the Borrower shall not be entitled to borrow hereunder, any amount which would cause the sum of the outstanding principal of the Note plus the Letter of Credit Exposure, to exceed the Available Commitment.

2.1.3           Upon the terms and conditions and relying on the representations and warranties contained in this Agreement,

(i)           the Lender, agrees, from the date of this Agreement until the date which is 30 days prior to the Final Maturity Date, and if no Default exists, to issue standby letters of credit hereunder for the account of the Borrower, and to renew and extend standby Letters of Credit.

  

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(ii)           letters of credit shall be issued hereunder and Letters of Credit shall be renewed or extended from time to time on any Business Day designated by the Borrower following the receipt by the Lender of the written (or oral, confirmed promptly in writing) request by a Responsible Representative of the Borrower therefor and, if for the issuance of a new letter of credit hereunder, a Letter of Credit Application; provided, however, that

(a)           the expiry date of such requested letter of credit cannot be later than the earlier of (1) 365 days from the date of issuance, unless automatically renewable by its terms, or, if issued in favor of the Texas Railroad Commission, 15 months following the date of issuance, (2) the last date before which the Borrowing Base is scheduled to reduce to an amount less than the sum of the maximum drawable amount of the requested letter of credit plus the undrawn amount of all outstanding Letters of Credit which, by their terms, might be outstanding on such reduction date or (3) 30 days prior to the Final Maturity Date;

(b)           the outstanding principal of the Note plus the Letter of Credit Exposure shall not exceed at any time the Available Commitment;

(c)           the Letter of Credit Exposure shall not exceed at any time $2,000,000;

(d)           with  the  exception  of  standby letters of credit to support plugging bond obligations of the Borrower (for which there shall be no minimum dollar amount or maximum number of such letters of credit), no letter of credit shall be issued hereunder in an amount less than $50,000; and

(e)           the Lender shall not be obligated to issue a letter of credit pursuant hereto or to renew or extend a Letter of Credit, and the Borrower shall not be entitled to have a letter of credit issued pursuant hereto or to have a Letter of Credit renewed or extended, if the issuance of the requested letter of credit or the renewal or extension of an existing Letter of Credit would cause, after taking into account the mandatory reductions in the Borrowing Base required during the proposed term of such requested letter of credit or existing Letters of Credit, the sum of the undrawn amount of all Letters of Credit plus the outstanding principal of the Note, to exceed the Available Commitment.

(iii)           except as otherwise permitted by clause (ii)(d) above, the Lender shall have no obligation to issue a letter of credit hereunder if as a result thereof, there would be outstanding more than five standby Letters of Credit under clause (i) above.

2.1.4           If no Default exists and all conditions to funding of the Term Loan have been satisfied, the Lender will advance the Term Loan to the Borrower in the amount of $4,000,000 at the time of the acquisition of the Acquisition Properties.

2.1.5           The Borrower may use the proceeds of the Term Loan for the purposes set forth in Section 7.1.1.

2.1.6           The Borrower shall give the Lender a Term Loan Borrowing Request prior to 12:00 p.m. on the date of the requested funding of the Term Loan.

2.1.7           The Term Loan shall be evidenced by the Term Loan Note in the amount of $4,000,000 issued by the Borrower, payable to the Lender.

  

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2.1.8           The outstanding principal of the Term Loan Note reflected by the notations (whether handwritten, electronic or otherwise) by the Lender on its records shall be deemed rebuttably presumptive evidence of the principal amount owing on the Term Loan Note.

2.1.9           The Lender will record on its books the Term Loan and the particulars thereof (e.g., date and amount) and each payment of principal or interest made by the Borrower with respect thereto, and may, if the Lender so elects in connection with any transfer or enforcement of the Term thereof appropriate notations to evidence the foregoing information with respect to the Term Loan then outstanding; provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Term Loan Note.  The Lender is hereby irrevocably authorized by the Borrower so to endorse the Term Loan Note and to attach to and make a part of the Term Loan Note a continuation of any such schedule (modified as such Lender shall deem advisable) as and when required.

2.1.10           Subject to the other provisions of this Agreement, the principal of the Term Loan shall be due and payable in 18 consecutive monthly installments, with the first such monthly installment being due and payable on October 1, 2014, with subsequent installments of principal being due and payable on the first day of each month thereafter until fully paid.  The first 17 such monthly installments of principal shall be an amount equal to one-eighteenth (1/18th) of the principal amount of the Term Loan Note outstanding on October 1, 2014, and an 18th and final installment of principal shall be in the amount of the remaining Term Loan.

2.1.11           The principal of the Term Loan Note shall bear interest for each day at a rate per annum equal to the Floating Rate on such day, or, if applicable, such higher rate as is specified in Section 2.1.13.

2.1.12           Accrued interest on the Term Loan Note shall be payable in arrears on each Interest Payment Date and on the Final Maturity Date; provided that interest accrued pursuant to Section 2.1.13 shall be payable on demand.

2.1.13           Unless waived by the Lender, the principal of the Term Loan Note shall bear interest at the Default Rate during any time an Event of Default exists and, to the extent not prohibited by Law, overdue interest on the Term Loan Note shall bear interest at the Default Rate.

2.1.14           Each determination hereunder of interest and calculation of fees shall, unless specifically provided otherwise herein, be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day).  All interest rates applicable hereunder shall be determined by the Lender, and such determinations shall be conclusive absent manifest error, and be binding upon the parties hereto.

2.1.15           Each change in the rate of interest charged under the Term Loan Note shall become effective automatically and without notice to the Borrower upon the effective date of each change in the Floating Rate or the Highest Lawful Rate, as the case may be.

2.1.16           Calculations of interest include the date the Term Loan is made but exclude the date of repayment.

2.1.17           The Term Loan Note shall finally mature no later than the Final Maturity Date, and any unpaid principal of the Term Loan Note and accrued, unpaid interest thereon shall be due and payable on such date.”

  

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4.           Sections 2.6.3 and 2.6.4 of the Credit Agreement are hereby amended and restated as follows:

 

“2.6.3           To compensate the Lender for the costs of the extension of credit hereunder and for the commitment to provide the credit facilities described herein, the Borrower shall pay to the Lender (i) on the closing date of the Second Amendment to Credit Agreement, a non-refundable commitment and facility fee in the amount of $40,000 for the increase in the Borrowing Base plus a non-refundable commitment and facility fee in the amount of $80,000 for the Term Loan and (ii) thereafter upon each increase in the Borrowing Base pursuant to Section2.8.1, a commitment and facility fee in the amount of one percent (1.00%) of the amount by which the Borrowing Base is increased over that in effect on the date of determination.

2.6.4           The Borrower shall pay to the Lender at the time of each issuance of a letter of credit hereunder and at the time of each renewal (including extensions) of a Letter of Credit the greater of (i) a letter of credit fee equal to two percent (2.00%) per annum of the face amount of such letter of credit or Letter of Credit, as applicable, for the maximum number of days from such date of issuance or renewal, as applicable, to the expiry date of such letter of credit or Letter of Credit, as applicable, and (ii) $1,500.”

5.           Section 7.1.1 of the Credit Agreement is amended and restated in its entirety as follows:

“7.1.1           The Borrower will use the proceeds of the Loans under the Note solely to finance the acquisition of Oil and Gas Properties by the Borrower, to develop and maintain Oil and Gas Properties owned by the Borrower and for working capital purposes and will use the proceeds of the Term Loan solely for payment of the acquisition costs and expenses of the Acquisition Properties, which acquisition is set to close on or about March 26, 2014.”

6.           Section 7.2.2 of the Credit Agreement is amended and restated in its entirety as follows:

“7.2.2           (i) at the time of delivery of the engineering reports required by Section 7.2.2(iv) or Section 7.2.2(v) and, if requested by the Lender at any other time, within 60 days following each such request from the Lender, production reports in form and substance satisfactory to the Lender in its reasonable judgment and as of the date or for the periods specified in such request, prepared by the Borrower containing (a) data concerning pricing, quantities of oil, gas and liquid hydrocarbons production from the Oil and Gas Properties utilized in determining the Borrowing Base on a property-by-property basis, by major field and in total, for a period of at least six months, (b) purchasers of production, (c) gross revenues, (d) expenses, (e) production taxes, (f) engineering data, (g) geological data, and (h) such other information with respect thereto as the Lender may reasonably request.

(ii)           within 15 days following each request from the Lender, a report setting forth all accounts receivable and accounts payable of the Borrower as of the date specified in such request, such report to show the age of such accounts and such other information as the Lender shall reasonably request.

(iii)           within 30 days following each request of the Lender, copies for the PRs (the monthly production reports) and the P-1Bs (the producer’s monthly supplemental reports) as filed during such month just ended with the appropriate Governmental Authority in the State of Texas and with respect to states other than Texas, the equivalent production reports as filed with the appropriate Governmental Authority in such states.

  

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(iv)           as soon as available, and in any event on or before March 31 of each year during the term of this Agreement, engineering reports in form and substance satisfactory to the Lender in its reasonable judgment, certified by an independent consulting petroleum engineers selected by the Borrower and acceptable to the Lender as fairly and accurately setting forth (a) the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas reserves (separately classified as such) attributable to the Oil and Gas Properties of the Borrower as of January 1 of such year, (b) the aggregate present value of the future net income with respect to such Properties, discounted at a stated per annum discount rate of proven and producing reserves, (c) projections of the annual rate of production, gross income, and net income with respect to such proven and producing reserves, and (d) information with respect to the “take-or-pay,” “prepayment,” and gas-balancing liabilities of the Borrower and other Persons with respect to such Properties.  For purposes of this clause, the petroleum engineering firm of Forrest A. Garb and Associates shall be deemed to be acceptable to the Lender unless the Lender otherwise advises the Borrower in writing.

(v)           as soon as available, and in any event on or before May 1, 2014 and August 1, 2014, respectively, engineering reports in form and substance satisfactory to the Lender in its reasonable judgment, certified by an independent consulting petroleum engineers selected by the Borrower and acceptable to the Lender as fairly and accurately setting forth (a) the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas reserves (separately classified as such) attributable to the Oil and Gas Properties of the Borrower as of April 1, 2014 and July 1, 2014, respectively, (b) the aggregate present value of the future net income with respect to such Properties, discounted at a stated per annum discount rate of proven and producing reserves, (c) projections of the annual rate of production, gross income, and net income with respect to such proven and producing reserves, and (d) information with respect to the “take-or-pay,” “prepayment,” and gas-balancing liabilities of the Borrower and other Persons with respect to such Properties.  For purposes of this clause, the petroleum engineering firm of Forrest A. Garb and Associates shall be deemed to be acceptable to the Lender unless the Lender otherwise advises the Borrower in writing.

(vi)           simultaneously with the delivery of such production and other reports under clauses (i) through (v) above, a Representative’s Certificate certifying  that, to the best of such signatory’s knowledge, such engineering and other reports are true, accurate and complete in all material respects for the periods covered in such reports; provided that to the extent such reports include projections of future volumes of production and future costs, it is understood that such estimates are necessarily based upon professional opinions, and the Borrower does not warrant that such opinions will ultimately prove to have been accurate.

(vii)            within 10 days after any material change in insurance coverage by the Borrower from that previously disclosed to the Lender, a report describing such change, and, within 30 days after each request by the Lender, certificates of insurance from the insurance companies insuring the Borrower, describing the insurance coverage of the Borrower.

(viii)           within 10 days after the Borrower’s incurring any Contingent Obligation or Guarantee, a report describing such Contingent Obligation or Guarantee in reasonable detail.”

7.           A new Section 7.15.4 is hereby added to Section 7.15 of the Credit Agreement as follows:

“7.15.4                                Second Lien Refinancing.                                           In the event of a refinancing of the Second Lien Obligations, the Borrower will, at the time of the closing of such refinancing, repay from the proceeds of such refinancing, no less than one-half of the then outstanding principal balance of the Term Loan Note.”

 

  

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8.           A Section 7.21 is hereby added to Article VII of the Credit Agreement as follows:

“7.21           Required Hedges.

7.21.1           In addition to the requirements of Section 5.2.13, the Borrower shall have in place within 30 days following the date of the Second Amendment to Credit Agreement, Acceptable Commodity Hedging Transactions in at least the following quantities for at least the minimum swap prices and for the periods set forth below (or with the Administrative Agent’s written approval, Acceptable Commodity Hedging Transactions having substantially equal PW Value):

	
Period

	
Quantity

	
Minimum Price

	
April-December 2014

	
4,000 bbl/mo.

	
$90.00/bbl

	
Calendar Year 2015

	
2,800 bbl/mo.

	
$80.00/bbl

	
January-March 2016

	
1,500 bbl/mo.

	
$75.00/bbl

9.           Conditions to Funding of Term Loan.                                                                The Lender shall have no obligation to fund the Term Loan unless the following conditions have been satisfied in a manner reasonably satisfactory to the Lender:

(i)           The Term Loan Note has been duly executed by the Borrower and delivered to the Lender

(ii)           Mortgages satisfactory to the Lender are being executed by the Borrower and delivered to the Lender covering the Acquisition Properties.

(iii)           An updated certificate of ownership interests covering all Oil and Gas Properties of the Borrower is being executed and delivered to the Lender.

(iv)           The form of assignment of the Acquisition Properties from White Oak Energy to the Borrower is acceptable to the Lender.

(v)           Title to the Acquisition Properties is reasonably acceptable to the Lender.

(vi)           The Borrower shall have delivered to the  Lender such certificates and resolutions as the Lender may require approving and authorizing the transactions described or contemplated hereby.

(vii)           Immediately prior to the funding of the Term Loan, no Default exists.

(viii)           A waiver of operator’s lien satisfactory to the Lender is being executed by ImPetro Operating, LLC and delivered to the Lender covering the Acquisition Properties.

(ix)           The purchase by the Borrower of the Acquisition Properties occurs on or prior to March 31, 2014.

10.           The Lender waives the processing fee payable pursuant to Section 2.6.6 of the Credit Agreement as applied to this Amendment.

  

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11.           The Borrower agrees to execute and deliver or cause the appropriate Person to execute and deliver such certificates, mortgages, amendments to mortgages and other security instruments as the Lender may from time to time reasonably request to reflect the terms of this Amendment.

12.           All of the conditions in this Amendment and the Credit Agreement are solely for the benefit of the Lender, and no Person other than the Lender may rely thereon or insist on compliance therewith.

13.           Ratification.                      The Borrower hereby ratifies the Obligations and each of the Loan Documents to which it is a party, and agrees and acknowledges that the Credit Agreement and each of the other Loan Documents to which it is a party shall continue in full force and effect after giving effect to this Amendment.  Nothing in this Amendment extinguishes, novates or releases any right, claim, Lien, security interest or entitlement of the Lender created by or contained in any of such documents nor is the Borrower released from any covenant, warranty or obligation created by or contained therein.

14.           Representations and Warranties.                                                      The Borrower hereby represents and warrants to the Lender that (a) this Amendment has been duly executed and delivered on behalf of the Borrower, (b) this Amendment constitutes a valid and legally binding agreement  enforceable against the Borrower in accordance with its terms and (c) the execution, delivery and performance of this Amendment has been duly authorized by the Borrower.

15.           Conditions to Effectiveness.                                                       This Amendment shall be effective upon the execution by all parties of this Amendment and the receipt thereof by the Lender.

16.           RELEASE OF CLAIMS.                                           The Borrower for itself, its successors and assigns and all those at interest therewith including, without limitation, each Guarantor (collectively, the “Releasing Parties”), jointly and severally, hereby voluntarily and forever, RELEASE, DISCHARGE AND ACQUIT the Lender and its officers, directors, shareholders, employees, agents, successors, assigns, representatives, affiliates and insurers (sometimes referred to below collectively as the “Released Parties”) and all those at interest therewith of and from any and all claims, causes of action, liabilities, damages, costs (including, without limitation, attorneys’ fees and all costs of court or other proceedings), and losses of every kind or nature at this time known or unknown, direct or indirect, fixed or contingent, which the Releasing Parties, have or hereafter may have arising out of any act, occurrence, transaction, or omission occurring from the beginning of time to the date of execution of this Amendment if related to the Note or the other Loan Documents (the “Released Claims”), except that (i) the future duties and obligations of the Lender under the Loan Documents and the rights of the Borrower to its funds on deposit with the Lender shall not be included in the term Released Claims and (ii) the right of the Borrower to require the correction of manifest accounting errors and similar administrative errors shall not be included in the term Released Claims.  IT IS THE EXPRESS INTENT OF THE RELEASING PARTIES THAT THE RELEASED CLAIMS SHALL INCLUDE ANY CLAIMS OR CAUSES OF ACTION ARISING FROM OR ATTRIBUTABLE TO THE NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY OF THE RELEASED PARTIES.

17.           Counterparts.                                For the convenience of the parties, this Amendment may be executed in multiple counterparts, each of which for all purposes shall be deemed to be an original, and all such counterparts shall together constitute but one and the same agreement.  Delivery of an executed counterpart of a signature page of this Amendment by telecopy, e-mail, facsimile transmission, electronic mail in “portable document format” (“.pdf”) form or other electronic means intended to preserve the original graphic and pictorial appearance of the item being sent shall be effective as a delivery of a manually executed counterpart of this Amendment.

18.           Effect.           This Amendment is one of the Loan Documents.  Except as amended hereby, the Credit Agreement shall remain unchanged and in full force and effect, and the Borrower hereby ratifies the terms of the Credit Agreement (as amended hereby), including, without limitation, the provisions of Sections 9.7 and 9.8 thereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

  

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19.           ENTIRE  AGREEMENT.                                                      THIS AMENDMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF.  FURTHERMORE, IN THIS REGARD, THIS AMENDMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

IN WITNESS WHEREOF, this Amendment is deemed executed effective as of the date first above written.

BORROWER:

STARBOARD RESOURCES, INC.

 

By:

Name:           Michael J. Pawelek

Title:           Chief Executive Officer

 

LENDER:

INDEPENDENT BANK

By:

Name:           Miles Matter

Title:           Vice President

The Guarantor acknowledges and approves the foregoing Amendment, confirms that its Guaranty is in full force and effect and agrees to the release of claims in paragraph 16 of the foregoing Amendment.

GUARANTOR:

ImPetro Resources, LLC

 

By:

Name:           Michael J. Pawelek

Title:           President and Chief Executive Officer

 

ImPetro Operating, LLC

 

By:           ______________________________

Name:           Michael J. Pawelek

Title:           Chief Executive Officer

 

 

Signature Page to Second Amendment to Credit Agreement

(Starboard Resources, Inc.)

  

  

  

 

FORM OF TERM NOTE

TERM LOAN NOTE

$4,000,000                                                      Dallas, Texas                                                                          March 26, 2014

FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned (“Maker”, whether one or more, and if more than one, with liability hereunder being joint and several) promises to pay to the order of Independent Bank (“Payee”), at its banking quarters in Dallas, Dallas County, Texas, the amount of FOUR MILLION AND NO/100 DOLLARS ($4,000,000) or so much thereof as may be advanced against this Term Loan Note and remains unpaid pursuant to the Credit Agreement dated June 27, 2013, by and among Maker and the Lender (as amended, supplemented, restated or otherwise modified from time to time, the “Credit Agreement”), together with interest at the rates and calculated as provided in the Credit Agreement.

Reference is hereby made to the Credit Agreement for matters governed thereby, including, without limitation, certain events which will entitle the holder hereof to accelerate the maturity of all amounts due hereunder.  Capitalized terms used but not defined in this Term Loan Note shall have the respective meanings assigned to such terms in the Credit Agreement.

This Term Loan Note is issued pursuant to, is the “Term Loan Note” under, and is payable as provided in the Credit Agreement.  Subject to compliance with applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any part of this Term Loan Note without the payment of any premium or fee other than as required by the Credit Agreement, but such payment shall not, until this Term Loan Note is fully paid and satisfied, excuse the payment as it becomes due of any payment on this Term Loan Note provided for in the Credit Agreement.

The date and amount, interest rate, and maturity of the Term Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Term Loan Note, may be endorsed by the Lender on the schedules attached hereto or any continuation thereof or on any separate record maintained by the Lender.  Failure to make any such notation or to attach a schedule shall not affect the Lender’s or the Borrower’s rights or obligations in respect of such Term Loan.

This Term Loan Note is issued pursuant to and shall be governed by the Credit Agreement and the holder of this Term Loan Note shall be entitled to the benefits of the Credit Agreement.  This Term Loan Note shall finally mature on the Final Maturity Date applicable to the Term Loan.

Without being limited thereto or thereby, this Term Loan Note is secured by the Security Documents.

The Borrower, and each surety, endorser, guarantor, and other party ever liable for payment of any sums of money payable on this Term Loan Note, jointly and severally waive presentment and demand for payment, protest, notice of protest and nonpayment, and notice of the intention to accelerate, and agree that their liability on this Term Loan Note shall not be affected by any renewal or extension in the time of payment hereof, by any indulgences, or by any release or change in any security for the payment of this Term Loan Note, and hereby consent to any and all renewals, extensions, indulgences, releases, or changes, regardless of the number of such renewals, extensions, indulgences, releases, or changes.

THIS TERM LOAN NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW.

Starboard Resources, Inc.

By:           ________________________________

Name:           Michael J. Pawelek

Title:           Chief Executive Officer

  

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Second Amendment to Credit Agreement – Starboard Resources, Inc. /Form of Term Note

  

LOANS AND PAYMENT OF

PRINCIPAL AND INTEREST

	
Date

	
Amount of Loan

	
Principal Paid or Prepaid

	
Amount of Interest Paid

	
Unpaid Principal Balance

	
Interest Paid to

 

	  
	  

 

	  
	  

 

	  
	  

 

	  
	  

 

	  
	  

 

	  

 

  

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Second Amendment to Credit Agreement – Starboard Resources, Inc. /Form of Term Note

  

 

FORM OF NOTICE OF TERM LOAN BORROWING

March 26, 2014

Independent Bank

2101 Cedar Springs Road, Suite 725

Dallas, Texas 75201

Attention: Energy Lending

Facsimile: 214/740-9400

Re:           Credit Agreement dated June 27, 2013, by and between Independent Bank, as lender, and Starboard Resources, Inc., as borrower, (as amended, restated, or supplemented from time to time, the “Credit Agreement”).  Terms defined in the Credit Agreement are used herein as therein defined unless otherwise defined herein.

Ladies and Gentlemen:

Pursuant to the Credit Agreement, the Borrower hereby makes the Advance request indicated below:

(a)           Amount of Term Loan Borrowing requested: $4,000,000

(b)           Requested Borrowing Date: March 26, 2014

(c)           Request funding into Independent Bank Account Number: _________________

The undersigned individual certifies that [s]he is the_____________________________ of the Borrower, has obtained all consents necessary, and as such [s]he is authorized to execute this request on behalf of the Borrower.  The undersigned individual further certifies, represents, and warrants on behalf of the Borrower, that the Borrower is entitled to receive the requested borrowing under the terms and conditions of the Credit Agreement and that, to the best knowledge of such undersigned individual, there exists as of the date hereof neither a Default nor an Event of Default under the Credit Agreement.

Each capitalized term used but not defined herein shall have the meaning assigned to such term in the Credit Agreement.

Very truly yours,

_____________________________________

Michael J. Pawelek, Chief Executive Officer of

Starboard Resources, Inc.

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Second Amendment to Credit Agreement – Starboard Resources, Inc./Form of Notice of Term Loan Borrowingbfdi_ex101.htm

Exhibit 10.1

 

 

Waiver and Fourth Amendment to Loan Documents

 

THIS WAIVER  AND FOURTH  AMENDMENT  TO LOAN DOCUMENTS  (this “Amendment”) is made as of March 24, 2014, by and between BREKFORD CORP.,  a Delaware corporation (the “Borrower”), and PNC BANK, NATIONAL ASSOCIATION (the “Bank”).

 

BACKGROUND

 

A.         The Borrower has executed and delivered to the Bank (or a predecessor which is now known by the Bank’s name as set forth above), one or more promissory notes, letter agreements, loan agreements, security agreements, mortgages, pledge agreements, collateral assignments, and other agreements, instruments, certificates and documents, some or all of which are more fully described on attached Exhibit A, which is made a part of this Amendment (collectively as amended from time to time, the “Loan  Documents”)  which evidence or secure some or all of the Borrower’s obligations to the Bank for one or more loans or other extensions of credit (the “Obligations”).

 

B.           The  Borrower  and  the  Bank  desire  to  amend  the  Loan  Documents  as  provided  for  in  this

Amendment.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:

 

1.          Certain of the Loan Documents are amended, and certain defaults under the Loan Documents are waived, as set forth in Exhibit A. Any and all references to any Loan Document in any other Loan Document shall be deemed to refer to such Loan Document as amended by this Amendment. This Amendment is deemed incorporated into each of the Loan Documents. Any initially capitalized terms used in this Amendment without definition shall have the meanings assigned to those terms in the Loan Documents. To the extent that any term or provision of this Amendment is or may be inconsistent with any term or provision in any Loan Document, the terms and provisions of this Amendment shall control.

 

2.         The Borrower hereby certifies that: (a) all of its representations and warranties in the Loan Documents, as amended by this Amendment, are, except as may otherwise be stated in this Amendment: (i) true and correct as of the date of this Amendment, (ii) ratified and confirmed without condition as if made anew, and (iii) incorporated into this Amendment by reference, (b) no Event of Default or event which, with the passage of time or the giving of notice or both, would constitute an Event of Default, exists under any Loan Document which will not be cured by the execution and effectiveness of this Amendment, (c) no consent, approval, order or authorization of, or registration or filing with, any third party is required in connection with the execution, delivery and carrying out of this Amendment or, if required, has been obtained, and (d) this Amendment has been duly authorized, executed and delivered so that it constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms. The Borrower confirms that the Obligations remain outstanding without defense, set off, counterclaim, discount or charge of any kind as of the date of this Amendment.

 

3.         The Borrower hereby confirms that any collateral for the Obligations, including liens, security interests,  mortgages,  and  pledges  granted  by  the  Borrower  or  third  parties  (if  applicable),  shall  continue unimpaired and in full force and effect, and shall cover and secure all of the Borrower’s existing and future Obligations to the Bank, as modified by this Amendment.

 

4.          As a condition precedent to the effectiveness of this Amendment, the Borrower shall comply with the terms and conditions (if any) specified in Exhibit A.

 

  

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5.          To induce the Bank to enter into this Amendment, the Borrower waives and releases and forever discharges the Bank and its officers, directors, attorneys, agents, and employees from any liability, damage, claim, loss or expense of any kind that it may have against the Bank or any of them arising out of or relating to the Obligations. The Borrower further agrees to indemnify and hold the Bank and its officers, directors, attorneys, agents and employees harmless from any loss, damage, judgment, liability or expense (including attorneys’ fees) suffered by or rendered against the Bank or any of them on account of any claims arising out of or relating to the Obligations.

 

6.          This Amendment may be signed in any number of counterpart copies and by the parties to this Amendment on separate counterparts, but all such copies shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile transmission shall be effective as delivery of a manually executed counterpart. Any party so executing this Amendment by facsimile transmission shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart executed by facsimile transmission.

 

7.          The  Bank  may  modify  this  Amendment  for  the  purposes  of  completing  missing  content  or correcting erroneous content, without the need for a written amendment, provided that the Bank shall send a copy of any such modification to the Borrower (which notice may be given by electronic mail).

 

8.          This Amendment will be binding upon and inure to the benefit of the Borrower and the Bank and their respective heirs, executors, administrators, successors and assigns.

 

9.          This Amendment has been delivered to and accepted by the Bank and will be deemed to be made in the State where the Bank’s office indicated in the Loan Documents is located. This Amendment will be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State where the Bank’s office indicated in the Loan Documents is located, excluding its conflict of laws rules.

 

10.           Except as amended hereby, the terms and provisions of the Loan Documents remain unchanged, are and shall remain in full force and effect unless and until modified or amended in writing in accordance with their terms, and are hereby ratified and confirmed. Except as expressly provided herein, this Amendment shall not constitute an amendment, waiver, consent or release with respect to any provision of any Loan Document, a waiver of any default or Event of Default under any Loan Document, or a waiver or release of any of the Bank’s rights and remedies (all of which are hereby reserved). The Borrower expressly ratifies and  confirms the confession of judgment (if applicable)  and waiver of jury trial provisions contained  in the Loan Documents.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

  

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WITNESS  the due execution of this Amendment as a document under seal as of the date first written above.

 

	WITNESS / ATTEST: 	 	BREKFORD CORP., a Delaware corporation	 
	 	 	 	 
	 	 	By:	 	 
	Print Name	 	 
(SEAL)

	 
	 	 	 	 
	Title	 	 	 
Chandra (C.B.) Brechin

	 
	 	 	 
Chief Executive Officer

	 
	 	 	 	 
	 	 	By:	 	 
	Print Name	 	 
(SEAL)

	 
	 	 	 	 
	Title	 	 	 
Scott Rutherford

	 
	 
(Include title only if an officer of entity signing to the right)

	 	 
President

	 
	 	 	 	 
	 	 	 	 
	 	 	 
PNC BANK, NATIONAL ASSOCIATION

	 
	 	 	 	 
	 	 	By:	 	 
	 	 	(SEAL)	 
	 	 	 	 
	 	 	 
Stephen D. Palmer

	 
	 	 	 
Senior Vice President

	 

 

  

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EXHIBIT  A TO

WAIVER AND FOURTH  AMENDMENT  TO LOAN DOCUMENTS 

DATED AS OF MARCH 24, 2014

 

A.   The “Loan  Documents”  that  are the subject  of this Amendment include the following (as any of the foregoing have previously been amended,  modified or otherwise supplemented):

 

1.           $3,000,000.00 Committed Line of Credit Note dated June 28, 2012 executed and delivered to the Bank by the Borrower (the “Note”)

 

2.           Loan Agreement dated June 28, 2012 between the Borrower and the Bank (the “Loan Agreement”)

 

3.           Security Agreement dated June 28, 2012 between the Borrower and the Bank

 

4.           Subordination Agreements each dated as of June 28, 2012, among the Borrower, the Bank, and each of:

 

(a)           C. B. Brechin; and

(b)           Scott Rutherford

 

5.           First Amendment to Loan Documents dated December 21, 2012 between the Borrower and the B a n k

 

6.           Waiver and Second Amendment to Loan Documents dated July 18, 2013, between the Borrower and the Bank

 

7.           Second (sic) Amendment to Loan Documents dated September 28, 2013, between the Borrower and the Bank* (*this is effectively the third amendment)

 

8.           All other documents, instruments, agreements, and certificates executed and delivered in connection with the Loan Documents listed in this Section A.

 

B.           Waiver.

 

The Borrower has acknowledged and agreed with the Bank that the Borrower failed to comply with Section (1), the Total Funded Debt to EBITDA covenant, in the Financial Covenants section of the Addendum to the Loan Agreement for the period ending December 31, 2013; and Section (2), the Debt Service Coverage Ratio covenant, in the Financial Covenants section of the Addendum to the Loan Agreement for the period ending December 31, 2013. The Borrower’s failure to comply with the foregoing covenants constitutes Events of Default under the Loan Documents. The Borrower has requested that the Bank waive the Events of Default.  In reliance upon the Borrower’s representations and warranties and subject to the terms and conditions herein set forth, the Bank agrees to grant a waiver of Borrower’s non-compliance with the covenants and of the Events of Default that would otherwise result from a violation of such covenants solely for the above-referenced periods. The Borrower agrees that it will hereafter comply fully with all Financial Covenants and all other provisions of the Loan Documents, which remain in full force and effect.  Except as expressly described in this Amendment, this waiver shall not constitute (a) a modification or an alteration of the terms, conditions or covenants of the Loan Documents or (b) a waiver, release or limitation upon the Bank’s exercise of any of its rights and remedies thereunder, which are hereby expressly reserved.

 

This waiver shall not relieve or release the Borrower in any way from any of its respective duties, obligations, covenants or agreements under the Loan Documents or from the consequences of any Event of Default there under, except as expressly described above. This waiver shall not obligate the Bank, or be construed to require the Bank, to waive any other Events of Default or defaults, whether now existing or which may occur after the date of this waiver.

 

  

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C.            The Loan Documents are amended  as follows:

 

	
  

	
1.

	
Restated  Note.   Concurrently with the execution and delivery of this Amendment, the Borrower shall execute and deliver to the Bank a restated note (the “Restated Note”), evidencing the Line of Credit in the principal amount of Two Million Dollars and no cents  ($2,000,000.00) in form and substance satisfactory to the Bank, a copy of which is attached hereto.  Upon receipt by the Bank of the Restated Note, the existing Note shall be canceled; the Line of Credit and all accrued and unpaid interest on the existing Note shall thereafter be evidenced by the Restated Note; and all references to the “Note” evidencing  the  Line  of  Credit  in  any  documents  relating  thereto  shall  thereafter  be deemed to refer to the Restated Note.  Without duplication, the Restated Note shall not constitute a novation and shall in no way extinguish the Borrower’s unconditional obligation to repay all indebtedness, including accrued and unpaid interest, evidenced by the existing Note.

 

	
  

	
2.

	
Loan Agreement.   The Financial Covenants set forth in the Addendum to the Loan Agreement, as subsequently modified, are hereby amended in their entirety to read as follows:

 

Interest Coverage Ratio

 

The Borrower will maintain, as of the end of each fiscal quarter, an Interest Coverage Ratio calculated as EBITDA divided by Interest Expense of no less than (a) 1.00x for the period ended March 31, 2014 and (b) 1.50x for the period ended June 30, 2014. Interest will be calculated as the interest payments paid fiscal year to date. EBITDA will be calculated on a year-to-date basis.

 

Except as modified hereinabove, the definitions set forth in the Addendum to the Loan

 

Agreement remain unchanged and are incorporated herein.

 

D.            Conditions  to Effectiveness of Amendment: The Bank’s willingness to agree to the amendments set forth in this Amendment is subject to the prior satisfaction  of the following conditions:

 

1.           Execution by all parties and delivery to the Bank of this Amendment, including the attached Consent of Subordinated Creditor, and the Restated Note.

 

2.           Payment by the Borrower to the Bank of a fee in the amount of $5,000.00, and reimbursement of the fees and expenses of the Bank's outside and in-house counsel in connection with this Amendment, which fees and expenses as of the date of this Amendment are $1,000.00.

 

  

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CONSENT OF SUBORDINATED  CREDITOR

 

Each of the undersigned (jointly and severally if more than one, the "Subordinated Creditor") consents to the terms and provisions of the foregoing Waiver and Fourth Amendment to Loan Documents (the "Amendment") and all prior amendments (if any) and confirms and agrees that: (a) its obligations under its Subordination Agreement executed in favor of the Bank, each dated as of June 28, 2012 (collectively if more than one, the "Subordination Agreement") relating to the Obligations mentioned in the Amendment, shall be unimpaired by the Amendment; (b) it has no defenses, set offs, counterclaims, discounts or charges of any kind against  the  Bank,  its  officers,  directors,  employees,  agents  or  attorneys  with  respect  to  its  Subordination Agreement; and (c) all of the terms and conditions of its Subordination Agreement remain unaltered and in full force and effect and are hereby ratified and confirmed and apply to the Obligations, as modified by the Amendment.

 

The Subordinated Creditor ratifies and confirms the indemnification and waiver of jury trial provisions contained  in the Subordination Agreement.

 

WITNESS the due execution of this Consent as a document under seal, as of the date of the

 

Amendment, intending to be legally bound.

 

 

	 
WITNESS / ATTEST:

	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 
(SEAL)

	 
	 
Print Name:

	 	 
C. B. BRECHIN

	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 
Print Name:

	 	SCOTT RUTHERFORD	 

 

 

 

 

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