Document:

pxte8k20110506ex10-02.htm

Exhibit 10.02

SUBORDINATED PROMISSORY NOTE

	
$500,000.00

	
                   May __, 2011

 

 

FOR VALUE RECEIVED, Paxton Energy, Inc., a Nevada corporation, whose principal office is located at 295 Highway 50, Suite 2, Lake Village Professional Building, Stateline, NV 89449 (Mailing Address: P.O. Box 1148 Zephyr Cove, NV89448-1148), and PaxAcq Inc., a Louisiana corporation, whose address is 8550 United Plaza Blvd. Bldg. II Ste 305, Baton Rouge LA 70809 (collectively, the “Makers”), jointly and severally, promise to pay to the order of Montecito Offshore, L.L.C., a Louisiana limited liability company (“Payee”), whose mailing address is 909 Poydras Street, Ste 2200, New Orleans, LA 70112 (“Payee”), at the foregoing address or at such other address as the holder hereof may from time to time specify in writing, in lawful money of the United States of America, the principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00), together with interest from the date of execution and delivery hereof on the unpaid principal balance of such principal at a rate equal to nine percent (9.00%) per annum.

 

Maturity Date.  All unpaid principal, together with unpaid and accrued interest, shall be due and payable ninety (90) days from the date of execution and delivery of this Note.

 

Payment.  This Note may be prepaid at any time without penalty.  Makers will make all cash payments due under the Notes in immediately available funds on the date such payment is due in the manner and at the address set forth above.

 

Security.  This Indebtedness will be secured by a second lien mortgage on interest in Vermillion Block 179 in the Gulf, more particularly described in the first lien Mortgage thereon securing the Company’s Senior Indebtedness.  The term “Senior Indebtedness” shall mean principal and interest on indebtedness of Makers under Two Million Five Hundred Thousand Dollars ($2,500,000) of senior debt in favor of a group of investors in a Convertible Secured Debenture Offering that will be secured by assets being acquired under an Asset Sale Agreement with Payee.

 

By acceptance of this Note, Payee agrees to the terms and provisions of this Note and agrees to execute and deliver such documents as may be reasonably requested from time to time by Makers or any holder of Senior Indebtedness to evidence, better evidence, or implement its provisions.

       Events of Default and Remedies.  At the option of the holder of this Note, the entire unpaid principal balance of, and all accrued interest on, this Note shall immediately become due and payable upon the occurrence at any time of any one or more of the following (herein referred to as an "Event of Default"):

a) The Makers  shall fail to pay the principal of or interest on this Note as and when the same becomes due and payable in accordance with the terms hereof;

	
  

	
b) The Makers  shall fail to perform any other covenant, condition, obligation or agreement set forth in this Note or, the Mortgage securing this obligation;

  

Page 1 of 3

  

	
  

	
c) The Default of any provision or term of the Senior Indebtedness or the first lien mortgage securing the same.

 If an Event of Default shall occur, Payee may (a) declare the entire balance of this Note, principal and interest,  immediately due and payable; (b) exercise any rights under the Note or the Mortgage securing the  Note; and (c) exercise any other remedy provided by law or equity.  No remedy referred to herein is intended to be exclusive, but each shall be cumulative, and the exercise or beginning of exercise by Payee under of any one or more of such remedies should not preclude the simultaneous or later exercise of any or all of such remedies.  Any failure of the Payee to exercise any rights or remedies available to Payee  if an Event of Default should occur shall not constitute a waiver of Payee’s  right to exercise such rights or remedies in the event of any subsequent Event of Default.

 

In the event of default, interest at the highest rate allowed by law will accrue on the then unpaid balance of the Note. In no event however shall the amount of interest due hereunder exceed the maximum rate of interest allowed by applicable law.

 

Binding.  The rights and obligations of Makers and Payee shall be binding upon and benefit the successors, assigns, and transferees of the parties. Any provision of this Note may be amended, waived, or modified upon the written consent of the Makers and Payee.

 

Notices.  All notices, requests, demands, consents, instructions, or other communications required or permitted hereunder shall in writing and mailed, or delivered to each party at the respective addresses of the parties as set forth herein, or at such other address as Makers or Payee shall have furnished to the other party in writing.  All such notices and communications will be deemed effectively given the earlier of: (i) when received; (ii) when delivered personally; (iii) one (1) business day after being delivered by facsimile (with receipt of appropriate confirmation); (iv) one (1) business day after being deposited with an overnight courier service of recognized standing; or, (v) four (4) days after being deposited in the U.S. mail, first class with postage prepaid.

 

Maximum Legal Rate.  In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

 

Waivers by Makers.  Makers hereby waive notice of default, presentment, or demand for payment, protest or notice of nonpayment, or dishonor and all other notices or demands relative to this instrument.

 

Governing Law.  This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Louisiana, without regard to the conflicts of law provisions of any other state.

 

Notices.  All notices, payments, and other communications required or permitted by this Agreement or by law to be served on or given to a party hereto by the other party shall be deemed given: (i) when personally delivered; or (ii) one (1) business day after timely delivery to Federal Express, United Parcel Service or other nationally recognized courier for overnight delivery, charges prepaid, in each case addressed to the addressee at the address set forth above.  Either party may change its addressee, address, fax number, or email address for notice purposes by a notice given in accordance with this Agreement.

  

Page 2 of 3

  

 

Severability.  If any term, provision, covenant, or condition of this Note is held to be invalid, void, or unenforceable, the remaining provisions of this Note shall continue in full force and effect and shall in no way be affected, impaired, or invalidated thereby.

 

Makers. The term Makers as used herein shall mean all parties so designated in this Note and the singular number includes the plural.

  

Attorney Fees.  Makers agree to pay all costs, expenses, and reasonable attorneys’ fees incurred by the holder collecting this Note or in pursuing or defending any right or remedy the holder has under this Note. Principal and interest shall be payable in lawful money of the United States.

 

Limitation of Liability.  The obligations of the parties are acknowledged to be solely entity obligations, and no officer, director, employee, agent, representative, manager, member, owner, or controlling person of any such entity shall be subject to any personal liability to any person or other party, nor will any such claim be asserted by or on behalf of any party or affiliates of such party.

 

IN WITNESS WHEREOF, the parties hereto have executed this Note as of the date set forth above.

 

	
Makers:

	  
	  	  	  
	  	
PAXTON ENERGY, INC.

	
PAXACQ, INC.

	  	
a Nevada corporation

	
a Louisiana corporation

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	
By:_________________________________

	
By:_________________________________

	  	
Its:______________________________

	
Its:______________________________

	  	  	  
	  	  	  

 

 

Page 3 of 3pxte8k20110506ex10-03.htm

Exhibit 10.03

  

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made and entered into effective as of the ___ day of ________________ 2011 (the“Effective Date”), by and between Montecito Offshore, LLC., a Louisiana limited liability company (“Montecito”), and PaxAcq, Inc., a Louisiana corporation and a wholly-owned subsidiary of Paxton Energy, Inc. (“PaxAcq”). Paxton Energy, Inc., a Nevada corporation authorized to do business in Louisiana (“Paxton”), is entering this Agreement for the purpose of confirming that PaxAcq is acting as its designee under the Asset Sale Agreement, as further described below.

W I T N E S S E T H:

 

WHEREAS, Montecito owns an interest in Lease OCS-G 33597, covering the NE/4NE/4, NE/4NE/4SE/4;and E/2SE/4NE/4 of  Block 179, Vermilion Area, OCS Leasing Map, Louisiana Map No.3 (the “Vermilion 179 Lease”);

 

WHEREAS, in accordance with that Asset Sale Agreement, dated March 28, 2011, between Montecito, as seller, and Paxton, as buyer, as later amended and extended (the “Asset Sale Agreement”), Montecito agreed to convey to Paxton or its designee a 70% of 8/8ths working interest and a 51.975% of 8/8ths net revenue interest in the Vermilion 179 Lease (the “Assigned Interest”), all in return for certain cash and other consideration and the assumption of certain obligations and liabilities related to or arising out of the Assigned Interest;

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, including, without limitation, Paxton’s and PaxAcq’s collective assumption of certain liabilities and obligations relating to the Assigned Interest, together with other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto hereby agree as follows:

1.           Assignment.  Montecito hereby conveys, sells, assigns, transfers, and delivers to PaxAcq, as the designee of Paxton, all of Montecito’s  right, title and interest in and to the Assigned Interest, and any and all rights and obligations associated therewith.

2.           Assumption, Release, and Indemnification.  PaxAcq hereby accepts Montecito’s interest in the Assigned Interest, and any and all rights and obligations associated with these assets (collectively, the “Assigned Assets”), and hereby assumes and agrees to perform, and fully discharge, the payment and performance of all liabilities and obligations relating to the Assigned Assets, arising after the Effective Date hereof. In addition, Montecito hereby releases, holds harmless, and agrees to indemnify Paxton and PaxAcq from any and all claims arising out of or relating to the Assigned Assets arising before or relating to the period before the Effective Date.

3.           AS IS-WHERE IS; PHYSICAL INSPECTION AND ENVIRONMENTAL CONDITION.  PAXTON AND PAXACQ REPRESENT THAT THEY HAVE INSPECTED THE ASSIGNED ASSETS AND ALL EQUIPMENT AND PROPERTY LOCATED THEREON AND ACCEPT THE PHYSICAL AND ENVIRONMENTAL CONDITION OF THE ASSIGNED ASSETS ON AN “AS IS-WHERE IS” BASIS, IN THEIR PRESENT CONDITION AND STATE OF REPAIR.  PAXTON AND PAXACQ RELEASE MONTECITO FROM ANY LIABILITY WITH RESPECT TO THE PHYSICAL AND ENVIRONMENTAL CONDITION OF THE ASSIGNED ASSETS AS OF THE EFFECTIVE DATE HEREOF, TO THE EXTENT NOT CAUSED BY OR ATTRIBUTABLE TO MONTECITO’S NEGLIGENCE, FAULT, OR STRICT LIABILITY.  MONTECITO FURTHER REPRESENTS THAT IT HAS NOT MADE, AND HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE CONDITION OF THE ASSIGNED ASSETS, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND FREEDOM FROM REDHIBITORY VICES OR DEFECTS.

  

-1-

  

4.           Subrogation.  Paxton and PaxAcq shall, in assuming such obligations, be fully subrogated to each and every right of Montecito with respect thereto to the fullest extent permitted by law.

6.           Successors and Assigns.  This Agreement shall bind and inure to the benefit of Montecito and Paxton and PaxAcq and their respective successors and assigns.

7.           Headings.  The headings are inserted for convenience of reference only and shall be ignored in the construction or interpretation hereof.

8.           Governing Law.  Unless otherwise expressly indicated, this Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana, excluding such laws that direct the application of the laws of any other jurisdiction.

9.           Survival and Binding Agreement.  The terms and conditions hereof shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, personal representatives, successors, and permitted assigns.

10.          Counterparts.  This Agreement may be executed in one or more counterparts, each

of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.          BOEMRE Form of Assignment. The Parties acknowledge that Montecito’s assignment of the Assigned Interest will also need to be completed on the appropriate BOEMRE form. However, the completion of the BOEMRE form of assignment shall in no way affect or alter the Effective Date hereof.

12.          Conflict With Asset Sale Agreement. To the extent that the terms hereof conflict with the terms of the Asset Sale Agreement, the terms of the Asset Sale Agreement shall control.

13.          Subject to Agreement of Merger. This Agreement is also subject to the terms of that Agreement of Merger, dated April 29, 2011, between and among Paxton, PaxAcq, Virgin Oil Company, Inc. , a Louisiana corporation, and Virgin Offshore U.S.A., Inc., a Delaware corporation (the “Merger Agreement”). To the extent that the terms hereof conflict with the terms of the Merger Agreement, the terms of the Merger Agreement shall control.

  

-2-

  

IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of the date first set forth above.

	  	
Montecito Offshore, LLC.

	  
	  	  	  	  
	  	  	  	  
	  	
By:

	  	  
	  	
Name:

	  	  
	  	
Title:

	  	  
	  	  	  	  
	  	  	  	  
	  	
PaxAcq, Inc.

	  
	  	  	  	  
	  	
By:

	  	  
	  	
Name:

	  	  
	  	
Title:

	  	  
	  	  	  	  
	  	  	  	  
	  	
Paxton Energy, Inc.

	  
	  	  	  	  
	  	  	  	  
	  	
By:

	  	  
	  	
Name:

	  	  
	  	
Title:

	  	  

 

 

 

  

-3-

  

ACKNOWLEDGMENTS

STATE OF LOUISIANA

PARISH OF ORLEANS

On this ___ day of May, 2011, before me appeared___________, to me personally known, who being by me duly sworn, did say that he is the ________________ of Montecito Offshore, LLC., and that the foregoing instrument was signed on behalf of, and as duly authorized by, said limited liability company, and said appearer acknowledged that he executed said instrument as the free act and deed of said limited liability company.

IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the date hereinabove written.

__________________________________________

Notary Public in and for the State of Louisiana

My Commission is Issued For Life

STATE OF ________

COUNTY OF __________

On this __ day of May, 2011, before me appeared ______________, to me personally known, who being by me duly sworn, did say that he is the _________________ of PaxAcq, Inc., and that said instrument was signed on behalf of, and as duly authorized by, said corporation and said appearer acknowledged that he executed said instrument as the free act and deed of said limited liability company.

IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the date hereinabove written.

______________________________________

Notary Public in and for the State of ________

My Commission Is Issued For _____

  

-4-

  

STATE OF ___________

COUNTY OF ___________

On this ____ day of May, 2011, before me appeared _____________, to me personally known, who being by me duly sworn, did say that he is the ___________ of Paxton Energy, LLC, and that said instrument was signed on behalf of, and as duly authorized by, said limited liability company and said appearer acknowledged that he executed said instrument as the free act and deed of said limited liability company,

IN WITNESS WHEREOF, I have hereunto set my official hand and seal on the date hereinabove written,

______________________________________

Notary Public in and for the State of _______

My Commission Is Issued For _____

 

-5-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00189-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00189-of-00352.parquet"}]]