Document:

ex-10_2.htm

Execution Version

Red Mountain Resources, Inc 8-K

Exhibit 10.2

 

INTER-BORROWER AGREEMENT

 

This Inter-Borrower Agreement (this “Agreement”) is made and entered into this 5th day of February, 2013 (the “Effective Date”), by and between Red Mountain Resources, Inc., a Florida corporation (“Red Mountain”), RMR Operating LLC, a Texas limited liability company (“RMR Operating”), Black Rock Capital, Inc., an Arkansas corporation (“Black Rock”, and together with Red Mountain and RMR Operating, the “Red Mountain Parties”) and Cross Border Resources, Inc., a Nevada corporation (“Cross Border”).  Red Mountain, RMR Operating, Black Rock and Cross Border are referred to herein, individually, as a “Party” and, collectively, as the “Parties”.

 

R E C I T A L S :

 

A.         Each of the Parties is a “Borrower” under and as defined in that certain Senior First Lien Secured Credit Agreement dated as of February 5, 2013 (the “Credit Agreement”) among the Parties, as co-borrowers, and Independent Bank, as lender.

 

B.         The “Obligations” under and as defined in the Credit Agreement are joint and several among the Parties.

 

C.         The Parties desire to set forth in this Agreement certain of their rights and obligations as between the Red Mountain Parties and Cross Border in connection with the Credit Agreement and the other Loan Documents.

 

D.         Capitalized terms used herein and not otherwise defined have the meaning set forth in the Credit Agreement as of the date hereof.

 

A G R E E M E N T

 

In consideration of the mutual covenants and agreements contained in this Agreement, the Parties agree as follows:

 

Section 1.         Agreement regarding Loan Documents.

 

(a)         Except as expressly set forth herein, each Party agrees that it shall be responsible for the performance of the obligations and liabilities agreed to be performed by such Party under the Loan Documents.  The Party requesting an Advance or Letter of Credit as among the Parties (the “Requesting Party”) pursuant to the terms of the Credit Agreement shall be responsible for, and agrees to pay or repay to Lender, all principal, interest (including default interest), and fees and expenses directly incurred by or on behalf of such Party in respect of any such Advance or Letter of Credit (including fees pursuant to Section 2.08(b) of the Credit Agreement and reimbursements of Lender’s expenses pursuant to Section 10.04 of the Credit Agreement) notwithstanding the fact that all Parties may be required to sign a Notice of Borrowing.  The use of proceeds of any such Advance and the benefit of any such Letter of Credit shall be utilized solely by and for the benefit of the Requesting Party.  The Parties agree and acknowledge that any prepayments or payments by a Party of its Obligations shall reduce the liability of such Party for such Obligations by the amount of such prepayment or payment.  

 

  

  

  

 

Engineering fees and expenses incurred from time to time in furnishing Engineering Reports prepared by an Independent Engineer pursuant to the Loan Documents shall be paid by the Party providing such Engineering Report; provided, that if one or more Parties jointly provides an Engineering Report prepared by an Independent Engineer, such Parties shall agree upon an allocation of the fees and expenses incurred in furnishing such Engineering Report; provided, further, that if such Parties are unable to agree upon an allocation of such fees and expenses following negotiations among such Parties, such fees and expenses shall be allocated among such Parties in the ratio of the value assigned to each such Party’s Proved Reserves for purposes of the calculation of the Borrowing Base to the total Proved Reserves of such Parties for purposes of the calculation of the Borrowing Base, unless otherwise approved by the Boards of Directors of Red Mountain and Cross Border.  The costs of preparing and furnishing pursuant to the Loan Documents any Engineering Reports which are prepared by internal staff engineers will be allocated based on the shared corporate services agreement between the Parties.

 

(b)         The Parties agree that the Notices of Borrowing delivered on the Closing Date shall be in the aggregate principal amount of approximately $16,500,000 (the “Initial Advance”) as follows:  $8,900,000 to Cross Border; $7,600,000 to Red Mountain; $0 to Black Rock; and $0 to RMR Operating.  Cross Border will use a portion of the proceeds of its Advance on the Closing Date to repay in full its existing credit facility in the principal amount of $8,750,000.  Red Mountain will use a portion of the proceeds of its Advance and cash on hand on the Closing Date to repay in full its existing secured indebtedness in the principal amount of $8,000,000.  The remaining $3,500,000 of the initial Borrowing Base will be allocated among the Parties as provided in Section 2(a) of this Agreement; provided, that, subject to the final approvals of the Boards of Directors of Red Mountain and Cross Border, the Parties contemplate as of the date hereof that Cross Border will be allowed to draw the remaining $3,500,000 of the initial Borrowing Base under the Credit Agreement and use the proceeds of such Advance to pay other Cross Border expenses.

 

(c)         (i) Each Party shall be responsible for providing Hedge Agreements for its Oil and Gas Properties which are included in the Borrowing Base.  Such Hedge Agreements shall comply with the requirements set forth in the Credit Agreement.  The Party providing any Hedge Agreement shall be solely liable for the Obligations and Non-Lender Swap Counterparty Obligations in respect of such Hedge Agreement, including any costs or expenses of such Party in connection with such Hedge Agreement.  (ii) Notwithstanding the foregoing clause (i), as of the Closing Date, Red Mountain will enter into a Hedge Agreement by and between with BP Energy Company and Red Mountain. Red Mountain shall cause the allocation of the hedging transactions under such Hedge Agreement to be made on the accounting books and records of each Party in a manner that is in conformance with the hedging requirements under the Credit Agreement and as approved or ratified by the Boards of Directors of Cross Border and Red Mountain.  (iii) The Parties agree to cooperate with each other in developing a process and procedure for monitoring and managing the hedging program required to be entered into pursuant to the Loan Documents.  Each Party agrees to cooperate with the other Parties in connection with such monitoring and management.

 

  

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(d)         Except as set forth in Section 1(a), Section 1(c), Section 1(e) and Section 1(g) of this Agreement, all fees and expenses incurred by the Parties under the Credit Agreement and the other Loan Documents shall be allocated as follows:  (i) all fees or expenses payable under Article 2.08 of the Credit Agreement, capital adequacy payments under Section 2.11(a) of the Credit Agreement, and any other expenses required to be reimbursed to the Secured Creditors by the Parties under the Loan Documents shall be allocated to Cross Border in the ratio of the then outstanding aggregate principal amount of Advances and Letter of Credit Exposure of Cross Border to the then outstanding Aggregate Outstanding Exposure of all Borrowers (the “Cross Border Ratio”); provided, that Cross Border shall pay 53.93 % of the fees and expenses incurred to enter into the Credit Agreement as of the Closing Date; and (ii) all fees or expenses payable under Article 2.08 of the Credit Agreement, capital adequacy payments under Section 2.11(a) of the Credit Agreement, and any other expenses required to be reimbursed to the Secured Creditors by the Parties under the Loan Documents shall be allocated to the Red Mountain Parties in the ratio of the then outstanding aggregate principal amount of Advances and Letter of Credit Exposure of the Red Mountain Parties to the then outstanding Aggregate Outstanding Exposure of all Borrowers (the “Red Mountain Ratio”); provided, that the Red Mountain Parties shall pay 46.07 % of the fees and expenses incurred to enter into the Credit Agreement as of the Closing Date.  To the extent approved of by the Boards of Directors of Cross Border and Red Mountain, the allocations set forth in clauses (i) and (ii) of this Section 1(d) may be modified to take into account reasonable business considerations.  Any approval by the Boards of Directors of Cross Border and Red Mountain must specify that any such modification of the expense allocation under this Section 1(d) is in compliance with this Section 1(d).

 

(e)         Each Party shall be responsible for curing any Borrowing Base Deficiency (including making any deposits required to be made into the Cash Collateral Account as a result of such Borrowing Base Deficiency) which is attributable to such Party as a result of the diminished value of such Party’s Oil and Gas Properties which are included in the Borrowing Base, impairment or loss of such Oil and Gas Properties, or sale of such Oil and Gas Properties.

 

(f)          Except as set forth in Section 1(e), to the extent any Party is required to post cash to the Cash Collateral Account, such Party shall post cash to the Cash Collateral Account in accordance with the Cross Border Ratio or the Red Mountain Ratio, as applicable, or as otherwise approved by the Boards of Directors of Cross Border and Red Mountain.

 

(g)         Except as otherwise specified in this Agreement, the Obligations incurred under Section 10.07 of the Credit Agreement shall be allocated to each Party in proportion as is appropriate to reflect the relevant fault of each indemnifying Party in connection with the act or omission which results in a claim by an indemnified party under Section 10.07 of the Credit Agreement.  To the extent the loss relates to information supplied by an indemnifying Party, the relative fault shall be determined by reference to intent, knowledge, access to information, and opportunity to correct or prevent a misstatement or omission of a material fact.

 

  

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Section 2.         Consent to Advances and Letters of Credit.

 

(a)         No Party shall deliver a Notice of Borrowing to Lender or otherwise seek an Advance or request a Letter of Credit without the prior approval of the Boards of Directors of Red Mountain and Cross Border.  The Parties agree that the factors to be considered by the respective Boards of Directors in connection with the approval of a Notice of Borrowing or request for a Letter of Credit shall include:  (i) whether the Requesting Party’s Aggregate Outstanding Exposure giving effect to the proposed Advance or issuance of Letter of Credit would exceed the latest determined value of its contribution to the Borrowing Base; (ii) whether the Unused Commitment Amount would be sufficient after giving effect to the proposed Advance or issuance of Letter of Credit for each Party to increase such Party’s Aggregate Outstanding Exposure to equal such Party’s contribution to the Borrowing Base; and (iii) such other factors as the respective Board of Directors of Red Mountain and Cross Border shall determine should be considered in order to make a prudent decision.

 

(b)         Red Mountain will monitor and report on a monthly basis to the Boards of Directors of Red Mountain and Cross Border the aggregate principal amounts of all outstanding Advances and Letters of Credit under the Credit Agreement, the current status of the hedging program under the Loan Documents and such other information as either such Board of Directors may reasonably request regarding the Obligations incurred or to be incurred under the Credit Agreement.  Such reports will allocate the Obligations in respect of Advances and Letters of Credit by the responsible Party.

 

Section 3.         Rights at Law or in Equity; Events of Default; Indemnification.

 

(a)         The Parties agree and acknowledge that, subject to the terms and conditions of this Agreement (1) each Party shall maintain all rights at law or in equity, to subrogation, to reimbursement, to exoneration, to contribution, to setoff or to any other rights that could accrue to a surety against a principal, to a guarantor against a maker, to an accommodation party against the party accommodated, or to a lender or transferee against a maker and which any Party may have or hereafter acquire against each other Party or any other party in connection with or as a result of the execution, delivery and/or performance of the Loan Documents to which such Party is a party and that the Parties have agreed to subordinate such rights pursuant to Section 2.14 of the Credit Agreement and (2) so long as the Obligations remain outstanding, pursuant to Section 2.14 of the Credit Agreement, each Party agrees that it shall not have or assert any such rights against one another or their respective successors and assigns or any other party (including any surety) either directly or as an attempted setoff to any action commenced against any Party by another Party (in any capacity) or any other party.  Following the indefeasible payment in cash in full of the Obligations, and subject to the terms and conditions of this Agreement, each Party shall be entitled to all rights at law or in equity, to subrogation, to reimbursement, to exoneration, to contribution, to setoff or to any other rights that could accrue to a surety against a principal, to a guarantor against a maker, to an accommodation party against the party accommodated, or to a lender or transferee against a maker and which any Party may have or hereafter acquire against each other Party or any other party in connection with or as a result of the execution, delivery and/or performance of the Loan Documents to which such Party is a party.

 

  

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(b)         The Parties acknowledge and agree that the intent of the provisions of Section 1 of this Agreement includes setting forth the relative liability of each Party in relation to each other Party with respect to the Obligations under the Loan Documents.  To the extent not expressly addressed in this Agreement or otherwise approved by the Boards of Directors of Red Mountain and Cross Border, each Party agrees that to the extent that a Party shall have paid more than its proportionate share of any Obligation under the Loan Documents as determined under Applicable Law, such Party shall be entitled to seek and receive contributions from and against any other Party hereunder which has not paid its proportionate share of such Obligation.

 

(c)         THE RED MOUNTAIN PARTIES SHALL INDEMNIFY AND HOLD HARMLESS CROSS BORDER AND ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES (COLLECTIVELY, THE “CROSS BORDER INDEMNIFIED PARTIES”) FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, LOSSES, CAUSES OF ACTION, COSTS AND EXPENSES (“LOSSES”) DIRECTLY OR INDIRECTLY RESULTING FROM, RELATING TO, ARISING OUT OF OR ATTRIBUTABLE TO ANY ACTS OR OMISSIONS OF THE RED MOUNTAIN PARTIES OR THEIR SUBSIDIARIES WHICH RESULT IN AN EVENT OF DEFAULT UNDER THE LOAN DOCUMENTS, EXCEPT TO THE EXTENT RESULTING FROM THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR BAD FAITH OF SUCH CROSS BORDER INDEMNIFIED PARTY OR BREACH BY SUCH CROSS BORDER INDEMNIFIED PARTY OF ANY LOAN DOCUMENT PROVISIONS APPLICABLE TO SUCH CROSS BORDER INDEMNIFIED PARTY.

 

(d)         CROSS BORDER SHALL INDEMNIFY AND HOLD HARMLESS THE RED MOUNTAIN PARTIES AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES (COLLECTIVELY, THE “RED MOUNTAIN INDEMNIFIED PARTIES”) FROM AND AGAINST ANY AND ALL LOSSES DIRECTLY OR INDIRECTLY RESULTING FROM, RELATING TO, ARISING OUT OF OR ATTRIBUTABLE TO ANY ACTS OR OMISSIONS OF CROSS BORDER OR ITS SUBSIDIARIES WHICH RESULT IN AN EVENT OF DEFAULT UNDER THE LOAN DOCUMENTS, EXCEPT TO THE EXTENT RESULTING FROM THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR BAD FAITH OF SUCH RED MOUNTAIN INDEMNIFIED PARTY OR BREACH BY SUCH RED MOUNTAIN INDEMNIFIED PARTY OF ANY LOAN DOCUMENT PROVISIONS APPLICABLE TO SUCH RED MOUNTAIN INDEMNIFIED PARTY.

 

  

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(e)         The aggregate liability of the Red Mountain Parties under Section 3(c), on the one hand, and the aggregate liability of Cross Border under Section 3(d), on the other, under this Agreement shall not exceed the aggregate Commitment under the Credit Agreement.  In no event shall any Red Mountain Party be liable for any Losses pursuant to Section 3(c) in excess of the amount of any such Loss such Red Mountain Party is required to pay pursuant to Section 1.  In no event shall Cross Border be liable for any Losses pursuant to Section 3(d) in excess of the amount of any such Loss such Party is required to pay pursuant to Section 1.  ALL INDEMNIFICATION LOSSES HEREUNDER WILL BE LIMITED TO ACTUAL DAMAGES AND IN NO EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES (INCLUDING ANY DAMAGES ON ACCOUNT OF LOST PROFITS OR OPPORTUNITIES OR LOST OR DELAYED PRODUCTION) SUFFERED OR INCURRED BY SUCH OTHER PARTY HEREUNDER.  THE INDEMNIFICATION PROVIDED IN SECTIONS 3(C) AND SECTION 3(D) WILL BE APPLICABLE WHETHER OR NOT THE SOLE, JOINT, OR CONTRIBUTORY NEGLIGENCE OF THE INDEMNIFIED PARTY IS ALLEGED OR PROVEN.  THE PARTIES AGREE THE PRECEDING SENTENCE IS COMMERCIALLY CONSPICUOUS.

 

Section 4.         Representations and Warranties of Cross Border.

 

Cross Border represents and warrants to each Red Mountain Party as follows:

 

(a)         Cross Border is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada.  Cross Border has the requisite corporate power and authority necessary to own or lease its properties and to carry on its businesses as currently conducted.  There is no pending or, to Cross Border’s knowledge, threatened action, suit, arbitration, mediation, investigation or similar proceeding for the dissolution, liquidation, insolvency or rehabilitation of Cross Border.

 

(b)         The execution, delivery and performance by Cross Border of this Agreement and the consummation of the transactions contemplated hereby (a) are within the corporate or other governing power of Cross Border, (b) have been duly authorized by all necessary corporate or other governing action of Cross Border, (c) do not contravene the Governing Agreements of Cross Border, and (d) do not contravene any law binding on or affecting Cross Border or any agreement to which it is a party.

 

(c)         This Agreement has been duly authorized, executed and delivered by Cross Border and constitutes the valid and legally binding obligation of Cross Border, enforceable against Cross Border in accordance with its terms.

 

(d)         Each representation and warranty made by Cross Border or its Subsidiaries contained in any Loan Document is true and correct in all respects.

 

(e)         No Default or Event of Default has occurred and is continuing under any Loan Document.

 

(f)         Each of Cross Border and each of its Subsidiaries is Solvent, before and after giving effect to the Debt under the Loan Documents.

 

Section 5.         Representations and Warranties of the Red Mountain Parties.

 

Each Red Mountain Party represents and warrants to Cross Border as follows:

 

  

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(a)         Such Red Mountain Party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation.  Such Red Mountain Party has the requisite corporate power and authority necessary to own or lease its properties and to carry on its businesses as currently conducted.  There is no pending or, to such Red Mountain Party’s knowledge, threatened action, suit, arbitration, mediation, investigation or similar proceeding for the dissolution, liquidation, insolvency or rehabilitation of such Red Mountain Party.

 

(b)         The execution, delivery and performance by such Red Mountain Party of this Agreement and the consummation of the transactions contemplated hereby (a) are within the corporate or other governing power of such Person, (b) have been duly authorized by all necessary corporate or other governing action of such Person, (c) do not contravene the Governing Agreements of such Person, and (d) do not contravene any law binding on or affecting such Person or any agreement to which it is a party.

 

(c)         This Agreement has been duly authorized, executed and delivered by such Red Mountain Party and constitutes the valid and legally binding obligation of such Person, enforceable against such Person in accordance with its terms.

 

 Each representation and warranty made by such Red Mountain Party or its Subsidiaries contained in any Loan Document is true and correct in all respects.

 

(e)         No Default or Event of Default has occurred and is continuing under any Loan Document.

 

(f)         Such Red Mountain Party and each of its Subsidiaries is Solvent, before and after giving effect to the Debt under the Loan Documents.

 

Section 6.         Covenants.  Party covenants as follows:

 

(a)         Each Party agrees to maintain books and records relating to (i) the accounting treatment of the Obligations in accordance with GAAP and (ii) the tax treatment of the Obligations in accordance with tax Applicable Law.

 

(b)         Subject to any reasonable confidentiality agreement, each Party (an “Audited Party”) will permit each other Party and its representatives (including auditors) (a “Reviewing Party”) to have reasonable access during normal business hours, upon at least 24 hours advance notice, to all books and records of the Audited Party relating to the Obligations for the purpose of inspection, examination, investigation or audit.  The Audited Party will permit the Reviewing Party to make copies of or extracts from such books and records.  In the event that a Reviewing Party indentifies deficiencies in the books and records of the Audited Party, not later than three Business Days after the Reviewing Party identifies such deficiencies, the Reviewing Party will request a meeting among members of the senior management of the Audited Party and the Reviewing Party for the purposes of discussing such deficiencies and such meeting shall take place not later than 10 Business Days following such request.  The members of the senior management will negotiate in good faith to resolve any disputes regarding such deficiencies.  

 

  

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Any action plans agreed to by the parties to such negotiations shall be implemented within a reasonable time period following the conclusion of such negotiations.  Each Party shall bear its own costs and expenses in connection with any inspection, examination, investigation or audit conducted by such Party pursuant to this Section 6(b), any negotiations among senior management pursuant to this Section 6(b) and the implementation of any action plan by such Party as a result of such negotiations, unless otherwise approved by the Boards of Directors of Red Mountain and Cross Border.  For the avoidance of doubt, the proceedings pursuant to this Section 6(b) shall be an auditing process and shall not be an arbitration or a “proceeding or action” for the purposes of Section 11.

 

(c)         Each Party shall take, or shall refrain from taking, and each Party shall cause its Subsidiaries to take, or refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure of any such Party or its Subsidiaries to take such action or to refrain from taking such action.

 

Section 7.         Survival.  Each representation, warranty, and covenant in this Agreement will survive the Effective Date forever; provided, that (1) the obligations set forth in Section 2(a) and Section 2(b) shall survive until the Final Payment Date; (2) the covenants set forth in Section 6(a)(i) and Section 6(b) shall survive until five years after the Final Payment Date; (3) the covenant set forth in Section 6(a)(ii) shall survive until the date that is 60 days after the expiration of all applicable statutes of limitations (including extensions) for the tax year with respect to which such books and records relate; and (4) the covenant set forth in Section 6(c) shall survive until the Final Payment Date.

 

Section 8.         Notices.

 

All notices, requests and other communications provided for or permitted to be given under this Agreement must be in writing and given by personal delivery, by certified or registered United States mail (postage prepaid, return receipt requested), by United States Express Mail or a nationally recognized overnight delivery service for next day delivery, or by facsimile transmission, as follows (or to such other address as any Party may give in a notice given in accordance with the provisions hereof):

If to the Red Mountain Parties:

2515 McKinney Avenue, Ste. 900

Dallas, Texas 75201

Attention:  Alan Barksdale

Facsimile:  214.871.0406

If to Cross Border:

2515 McKinney Avenue, Ste. 900

Dallas, Texas  75201

Attention:  John Hawkins, Ted LaRoche

Facsimile:  214.871.0406

  

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All notices, requests or other communications will be effective and deemed given only as follows:  (i) if given by personal delivery, upon such personal delivery, (ii) if sent by certified or registered mail, on the fifth business day after being deposited in the United States mail, (iii) if sent for next day delivery by United States Express Mail or overnight delivery service, on the date of delivery as confirmed by written confirmation of delivery, (iv) if sent by facsimile, upon confirmation by the transmitting equipment of successful transmission, except that if such confirmation occurs after 5:00 p.m. (in the recipient’s time zone) on a business day, or occurs on a day that is not a business day, then such notice, request or communication will not be deemed effective or given until the next succeeding business day.  Notices, requests and other communications sent in any other manner, including by electronic mail, will not be effective, unless a Party consents to notices, requests and other communications being sent under this Agreement in such manner.

 

Section 9.         Modification or Waiver. No modification or amendment of this Agreement will be deemed effective unless in writing and signed by the Parties, and any waiver granted will not be deemed effective unless in writing, signed by the Party against whom enforcement of the waiver is sought.  No waiver by any Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, may be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising because of any prior or subsequent such occurrence.  Neither the failure nor any delay on the part of any Party to exercise any right or remedy under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right or remedy preclude any other or further exercise of the same or of any other right or remedy.

 

Section 10.       Third Party Beneficiaries.    Nothing in this Agreement, express or implied, confers or is intended to confer on any Person other than the Parties hereto any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 11.       Attorneys’ Fees.  If any proceeding or action is brought to recover any amount, or seek injunctive relief, under this Agreement, or for or on account of any breach of, or to enforce or interpret any of the terms, covenants, or conditions of this Agreement, the prevailing party will be entitled to recover from the other party, as part of the prevailing party’s costs, reasonable attorneys’ fees, the amount of which will be fixed by the court, and will be made a part of any award or judgment rendered.

 

Section 12.       Expenses.  Except as otherwise set forth herein, whether or not the Closing Date occurs, all costs and expenses incurred in connection with this Agreement and the transactions contemplated in this Agreement will be paid by the Party incurring such expense.

 

Section 13.       Counterparts. This Agreement may be executed in one or more counterparts, each of which shall, for all purposes, be deemed an original and all of such counterparts, taken together, shall constitute one and the same agreement.

 

Section 14.       Further Acts. If any further action is necessary or reasonably desirable to carry out this Agreement’s purposes, each Party will take such further action (including executing and delivering any further instruments and documents and providing any reasonably requested information) as the other Party or Parties reasonably may request.

 

  

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Section 15.       Entire Agreement.  This Agreement, together with the exhibits and schedules hereto, contain the entire agreement between the Parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties, written or oral, between the Parties other than those described or expressly referred to herein.

 

Section 16.       Section References; Captions.  The captions are for convenience only and will not control or affect the meaning or construction of the provisions of this Agreement.

 

Section 17.       Representation by Counsel.  Each of the Parties has been represented by or has had the opportunity to be represented by legal counsel of its own choice.  This Agreement has been negotiated among the Parties and if there is any ambiguity, no presumption construing the Agreement against a Party will be imposed because this Agreement was prepared by counsel for the Party or counsel for any other Party.

 

Section 18.       Construction.  Whenever the neuter gender is used in this Agreement and when required by the context, the same will include the masculine and feminine genders and vice versa.  Any reference to any law will be deemed to refer to such law as amended and all rules and regulations promulgated thereunder, unless the context requires otherwise.  The words “include,” “includes,” and “including” will be deemed to be followed by “without limitation.”  The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited.

 

Section 19.       Severability.  If any one or more of the provisions of this Agreement are held or found to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired by such invalidity, illegality or unenforceability.

 

Section 20.       Assignment; Binding Effect.  No Party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other Parties, and any such assignment by a Party without prior written approval of the other Parties will be deemed null and void and invalid and not binding on such other Parties.  This Agreement will be binding upon the Parties and their legal representatives, successors, and assigns.

 

Section 21.         Exhibits. All exhibits, schedules, annexes and other attachments referenced in this Agreement are incorporated herein by reference and made a part hereof.

 

  

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Section 22.       Governing Law and Jurisdiction.  This Agreement and all claims and causes of action arising hereunder or relating hereto will be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any conflict of law principles that would result in the application of the laws of any other jurisdiction.  Each Party agrees that any action or proceeding (whether based on contract, tort or otherwise) between any of the Parties seeking to enforce any provision of, or arising out of or relating to, this Agreement or the transactions contemplated hereby must be brought and determined exclusively in any Texas state or federal court sitting in Dallas, Texas.  Each Party (a) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of such courts (and of the appropriate appellate courts therefrom) in any such action or proceeding, (b) agrees that it will not bring any such action or proceeding other than in the aforesaid courts and will not attempt to deny or defeat such jurisdiction by motion or other request for leave from any such court, and (c) irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such action or proceeding in any such court or that any such action or proceeding brought in any such court has been brought in an inconvenient forum.  Each Party agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Process in any such action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each Party irrevocably consents to service of process being made by U.S. registered mail pursuant to the notice procedures set forth in Section 8, and agrees that, to the fullest extent permitted by law, service in such manner shall be effective service of process for any such action or proceeding.  The consents to jurisdiction set forth in this Section 22 do not constitute general consents to service of process in the State of Texas and shall have no effect for any purpose except as provided in this Section 22 and shall not be deemed to confer rights on any Person other than the Parties hereto.

 

Section 23.       Waiver of Jury Trial.EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION OR PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY CERTIFIES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT IN THE EVENT OF ANY ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) SUCH PARTY UNDERSTANDS AND WITH THE ADVICE OF COUNSEL HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND (iii) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY.  EACH PARTY ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 23.

 

Section 24.       Specific Performance; Remedies.

 

Each Party acknowledges and agrees that the other Parties would be damaged irreparably and would not have an adequate remedy at law if any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached.  Accordingly, in addition to any other remedy to which it may be entitled at law or in equity, each Party will be entitled to an injunction or injunctions to prevent breaches or threatened breaches of the provisions of this Agreement and to enforce specifically this Agreement and its provisions, without bond or other security being required.  Except as expressly provided herein, the rights and remedies created by this Agreement are cumulative and in addition to any other rights and remedies otherwise available at law or in equity.  Except as expressly provided herein, nothing herein will be considered an election of remedies or a waiver of the right to pursue any other right or remedy to which such party may be entitled.

 

  

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Section 25.       Joint and Several Obligations.

 

Notwithstanding anything to the contrary in this Agreement, the covenants, obligations and indemnities of, and the representations and warranties made by or attributable to, any Red Mountain Party pursuant to this Agreement will be deemed to be made by and attributable to each Red Mountain Party jointly and severally, and Cross Border will have the right to pursue remedies against any one or more of the Red Mountain Parties without any obligation to give notice to or pursue all Red Mountain Parties or to give notice to or pursue any individual Red Mountain Party before pursuing any other Red Mountain Party.

 

[Signature pages follow]

 

  

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The Parties have executed this Agreement effective as of the day and year first above written.

 

	 	
RED MOUNTAIN RESOURCES, INC.

	  
	 	  	  
	 	
By:

	/s/Alan W. Barksdale
	 	
Name:

	Alan W. Barksdale
	 	
Title:

	President & CEO
	 	  	  
	 	
RMR OPERATING LLC

	  
	 	  	  
	 	
By:

	/s/ Alan W. Barksdale   
	 	
Name:

	Alan W. Barksdale   
	 	
Title:

	President
	 	
 

BLACK ROCK CAPITAL, INC.

	  
	 	  	  
	 	
By:

	/s/Alan W. Barksdale    
	 	
Name:

	Alan W. Barksdale    
	 	
Title:

	President 
	 	
 

CROSS BORDER RESOURCES, INC.

	  
	 	  	  
	 	
By:

	/s/ Earl M. Sebring      
	 	
Name:

	Earl M. Sebring  
	 	
Title:

	Interim - President  

 

Signature Page to Inter-Borrower Agreementex-10_3.htm

Red Mountain Resources, Inc. 8-K

 

 

Exhibit 10.3

 

THIS NOTE IS SUBJECT TO THAT CERTAIN SUBORDINATION AGREEMENT DATED FEBRUARY 6, 2013 BETWEEN RED MOUNTAIN RESOURCES, INC., HYMAN BELZBERG, WILLIAM BELZBERG, CADDO MANAGEMENT, INC. AND INDEPENDENT BANK.

UNSECURED SUBORDINATED PROMISSORY NOTE

OF

RED MOUNTAIN RESOURCES, INC.

	
$ 500,000.00

	
February 6, 2013

                                                                      

FOR VALUE RECEIVED, the undersigned, RED MOUNTAIN RESOURCES, INC., a Florida corporation (“Borrower”), having an address at 2515 McKinney Avenue, Suite 900, Dallas, Texas 75201, promises to pay to the order of HYMAN BELZBERG (“HB”), as to an undivided $187,500/$500,000, WILLIAM BELZBERG  (“WB”), as to an undivided $187,500/$500,000 and CADDO MANAGEMENT, INC., a Louisiana corporation as to an undivided $125,000/$500,000 (“Caddo”, and together with HB and WB, “Lender”), collectively, having an office for payment at: 9665 Wilshire Blvd., Suite M-10, Beverly Hills, CA 90212 (or such other place as the Lender may designate in writing), the principal amount up to and not to exceed FIVE HUNDRED THOUSAND United States Dollars (U.S. $500,000), to the extent advanced hereunder and then outstanding, with interest on the unpaid principal balance from the date of this Unsecured Subordinated Promissory Note (this “Promissory Note”), until paid, at the Interest Rate (as hereinafter defined) provided herein.

Simultaneously with the issue of this Promissory Note, the Borrower has repaid in full all obligations under and in respect of that certain Amended and Restated Senior Secured Promissory Note of Red Mountain Resources, Inc., dated December 10, 2012 (the “Original Note”), in the original principal amount of $6,000,000.00, which note was given by Borrower in favor of HB, WB, Caddo and RMS Advisors, Inc. (collectively, the “Original Lenders”) and the Original Lenders have executed a release of the liens which secured the Original Note in a form agreed to by the Borrower and the Original Lenders.  Simultaneously with the issue of this Promissory Note, the Borrower has entered into a $100,000,000 senior first lien secured revolving credit facility with Independent Bank (the “Independent Bank Facility”).  The payment of this Promissory Note is subordinated to the payment of the Independent Bank Facility pursuant to the terms of the Subordination Agreement dated the date hereof between Borrower, Lender and Independent Bank (the “Subordination Agreement”).

 

1.           Rate of Interest.  The outstanding principal balance of this Promissory Note shall bear interest at a rate of twelve percent (12%) per annum (the “Interest Rate”).   Interest on the principal amount hereof and all other Obligations shall be computed on the basis of a 360-day year and shall be charged for the actual number of days elapsed during any month or other accrual period.

 

2.           Date and Time of Payment.   Commencing on April 1, 2013 and on the first day of each month thereafter through and until the Maturity Date (as defined below), Borrower shall pay to Lender consecutive monthly installments of interest only in an amount equal to the Monthly Payment Amount.  The “Monthly Payment Amount” shall equal interest only on the outstanding principal balance, calculated at an annual interest rate equal to the Interest Rate or the Default Rate, as applicable.  The first Monthly Payment Amount shall include “stub” interest for the period commencing on the date hereof through and including February 28, 2013.

 

All accrued and unpaid interest and the unpaid principal balance hereof are due and payable on the earlier to occur of (a) the Maturity Date or (b) the date of termination of this Promissory Note, whether by its terms, by prepayment, or by acceleration.  If any payment of principal or interest on this Promissory Note shall become due and payable on a day other than a business day, such payment shall be made on the next succeeding business day.  All amounts outstanding under this Promissory Note shall constitute Borrower’s obligations and shall include, without limitation, all principal, interest (including all interest which accrues after the commencement of any case or proceeding by or against Borrower in bankruptcy whether or not allowed in such case or proceeding), expenses, reasonable attorneys’ fees and any other sum chargeable to Borrower hereunder and owing to Lender under this Promissory Note (all such obligations and all other obligations of Borrower under this Promissory Note being hereinafter referred to as the “Obligations”).

 

  

  

  

 

3.           Use of Proceeds.  On February 6, 2013, the Lender shall advance the sum of U.S. $500,000 to the Borrower by wire transfer(s) of immediately available funds to an account designated by the Borrower.  Borrower represents and warrants that the loan evidenced by this Promissory Note is for commercial purposes, and not for personal, household or consumer purposes.

 

4.           Default Rate.  Notwithstanding Section 1, after the occurrence of any Event of Default and for so long as such Event of Default continues, and in any event from and after the Maturity Date, all outstanding principal under this Promissory Note shall bear interest until paid in full at a rate of interest equal to the lesser of (i) eighteen percent (18%) per annum or (ii) the maximum rate permitted by applicable law (the “Default Rate”).

 

5.           Maturity.  To the extent not sooner due and payable in accordance with this Promissory Note, the Obligations shall be due and payable on July 31, 2013 (the “Maturity Date”).  Upon payment of the Obligations hereunder in full by or on behalf of Borrower, this Promissory Note shall be deemed paid in full.

 

6.           Prepayment. This Promissory Note may be prepaid, in whole or in part at any time, without the payment of a premium, provided that (i) Borrower gives the holder of this Promissory Note written notice of Borrower’s intention to prepay this Promissory Note or a portion thereof and (ii) such prepayment is accompanied by payment of all interest accrued hereunder and unpaid through the date of prepayment.

 

7.           Application of Payments.  All payments shall be made by Borrower in lawful money of the United States without setoff, counterclaim or any other deduction whatsoever and shall be applied to amounts then due and payable in the following order:  (a) to Lender’s costs and expenses reimbursable in connection herewith; (b) to interest accrued on the outstanding principal balance of this Promissory Note; (c) to the principal amount hereof; and (d) to all other Obligations, or in such other manner as Lender shall determine in its sole and exclusive discretion.

 

8.           Intentionally Deleted.  

 

9.           Representations and Warranties.  Borrower makes the following representations and warranties to Lender, which representations and warranties are true, correct, and complete as of the date hereof.

 

(a)         Due Organization and Qualification.  Borrower is duly organized and validly existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any jurisdiction where it is required to be so qualified, and has all requisite power and authority to (i) own its assets and carry on its business, and (ii) execute, deliver and perform the Obligations.

 

(b)         Due Authorization; No Conflict.  The execution, delivery, and performance by Borrower of this Promissory Note have been duly authorized by all necessary action on the part of Borrower.  This Promissory Note has been duly executed and delivered by Borrower.  The execution, delivery, and performance by Borrower of this Promissory Note and the consummation of the transactions contemplated hereby, do not and will not (i) violate any provision of federal, state, provincial or local law or regulation applicable to Borrower, its organizational documents, or any order, judgment, or decree of any court or other governmental authority, (ii) conflict with, result in a breach or termination of, or constitute (with any required due notice or lapse of time or both) a default under any material contractual obligation of Borrower, (iii) result in or require the creation or imposition of any lien of any nature whatsoever upon any properties or assets of Borrower or (iv) require any approval of any of Borrower’s stockholders or any approval or consent of any other person or entity, other than consents or approvals that have been obtained and that are still in force and effect.  The execution, delivery, and performance by Borrower of this Promissory Note do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any governmental authority, other than consents or approvals that have been obtained and that are still in force and effect.  This Promissory Note when executed and delivered by Borrower will be the legally valid and binding obligation of Borrower, enforceable against Borrower in accordance with its term, except as enforcement may be limited by (A) the Subordination Agreement, (B) equitable principles or (C) bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally, but (subject to the limitations set forth in the immediately preceding clauses (A) and (B)) such unenforceability will not render this Promissory Note invalid as a whole or substantially interfere with realization of the principal benefits provided thereby.

 

  

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(c)         No Litigation.  No litigation, investigation or proceeding of or before any arbitrator or government authority is (i) pending or, to the knowledge of Borrower (after due and diligent inquiry), threatened with respect to this Promissory Note or any of the transactions contemplated hereby or (ii) pending or, to the knowledge of Borrower (after due and diligent inquiry), threatened by or against Borrower, its properties or revenues which, if adversely determined, would have a material adverse effect on its business, operations, property or financial condition, when taken as a whole.

 

(d)         No Default.  Borrower is not in default under or with respect to any contractual obligation and no event of default has occurred or is continuing with respect to Borrower.

 

(e)         Taxes.  Borrower has filed or caused to be filed all tax returns required to be filed by it and has paid all taxes due and payable on said returns or on any assessments made against Borrower or any of its property.   All other taxes, fees or other charges on Borrower or any of its property by any governmental authority have been paid and no tax liens have been filed.

 

10.         Covenants of Borrower.  As of the date hereof and so long as the Obligations hereunder, or any portion thereof, shall be outstanding:

 

(a)         Borrower will preserve and keep in force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business;

 

(b)         Borrower will promptly pay and discharge, all taxes, assessments, charges or levies imposed upon Borrower, or upon or in respect of all or any part of the property or business of Borrower, all trade accounts payable in accordance with usual and customary business terms and all claims for work, labor or materials, which if unpaid might become a lien or charge upon any property of Borrower; provided, Borrower shall not be required to pay such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate action or proceeding which will prevent the forfeiture or sale of any property of Borrower, and (ii) Borrower shall set aside on its books, adequate reserves with respect thereto; and

 

(c)         Borrower will promptly comply with all laws, ordinances or governmental rules and regulation to which it is subject, the violations of which would materially or adversely affect its properties, business, prospects, profits or condition or would result in any material lien or charge upon any property of Borrower.

 

11.        Events of Default; Remedies; Acceleration.

 

(a)         The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an “Event of Default” hereunder:

 

         Borrower fails to make any payment of the outstanding principal balance of this Promissory Note, any payment of interest due hereunder, or any payment of any of the other Obligations as and when due and payable, and such failure continues for a period of 5 days after written notice thereof from Lender;

 

(ii)         Any representation or warranty of Borrower made in this Promissory Note or in the Subordination Agreement proves to have been false or incorrect in any material respect;

 

  

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(iii)        Borrower shall violate any material provision of this Promissory Note or the Subordination Agreement which violation continues for a period of 30 days after written notice thereof from Lender;

 

(iv)        A case or proceeding is commenced against Borrower seeking a decree or order (A) under Title 11 of the United States Bankruptcy Code (11 U.S.C. §§101 et seq., as amended, and any successor statute, the “Bankruptcy Code”), or any other applicable federal, state or foreign bankruptcy or other similar law, rule or regulation, (B) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for Borrower or for any material part of Borrower’s assets (or for any subsidiary or any material part of a subsidiary’s assets), or (C) ordering the winding-up or liquidation of the affairs of Borrower or any subsidiary, and such case or proceeding shall remain undismissed or unstayed for sixty (60) days or more or a decree or order granting the relief sought in such case or proceeding shall be entered by a court of competent jurisdiction; or

 

(v)         Borrower, without the prior written consent of Lender (A) files a petition seeking relief under the Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or other similar law, rule or regulation, (B) consents to or fails to contest in a timely and appropriate manner the institution of proceedings thereunder or the filing of any such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for Borrower or for any material part of Borrower’s assets, (C) makes an assignment for the benefit of creditors, (D) takes any action in furtherance of the foregoing or (E) admits in writing its inability to pay its debts as such debts become due.

 

(vi)         If either of the following conditions occur, as determined by the Lender in the exercise of its reasonable discretion:  (A) Borrower is unable in the ordinary course of business to pay its debts as they are due; or (B) the sum of Borrower's debts exceeds the fair market value of all of Borrower's assets and property.  Prior to a default being declared under this sub-paragraph, Lender shall provide Borrower written notice of Lender’s determination.  Borrower shall, thereafter, have thirty (30) days to provide evidence of its ability to pay its debts satisfactory to Lender.  A default under this sub-paragraph shall only then occur if, subsequent to the conclusion of such 30-day period and after consideration of any evidence provided by Borrower, Lender continues to believe, in the exercise of its reasonable discretion, that Borrower is in imminent danger of being unable to timely pay any amounts due to Lender under this Promissory Note as such amounts become due; or

 

        If Borrower shall default on any material obligations of Borrower or an event of default shall occur with respect to any material agreement of Borrower, whether such agreement shall be in effect or effective subsequent to this Promissory Note.

 

(b)         Subject to the terms of the Subordination Agreement, immediately upon the occurrence of any Event of Default, Lender may (i) in its sole and absolute discretion elect to accelerate and declare as immediately due any and all Obligations owed hereunder; (ii) proceed to protect and enforce Lender’s rights by suit in equity, action at law and/or other appropriate proceeding, either for specific performance of any covenant or condition contained in this Promissory Note or in any instrument or document delivered to Lender pursuant to this Promissory Note, or in aid of the exercise of any power granted in this Promissory Note or any such instrument or document, and (iii) proceed to enforce payment of the Obligations in such manner as Lender may elect and to realize upon any and all rights of Lender hereunder.  All of Lender’s rights hereunder shall be cumulative.  Lender shall have all other rights and remedies not inconsistent herewith as provided under applicable law or in equity, and no exercise by Lender of one right or remedy shall be deemed an election, and no waiver by Lender of any Event of Default shall be deemed a continuing waiver.  No delay by Lender shall constitute a waiver, election or acquiescence by it and no waiver in one circumstance shall be deemed to be a waiver in any other.

 

  

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(c)         In the event that the Obligations hereunder shall be paid in full by or on behalf of Borrower, after the acceleration of this Promissory Note but prior to the Maturity Date, then this Promissory Note shall be deemed paid in full.

 

12.         Certain Rights and Waivers.  To the maximum extent permitted by applicable law, Borrower hereby expressly waives: (a) all presentments, demands for performance, notices of nonperformance (except to the extent expressly required by this Promissory Note), protests, notices of protest and notices of dishonor; (b) any requirement of diligence or promptness on the part of Lender in the enforcement of its rights under this Promissory Note; and (c) any defense (other than indefeasible payment in full) which it may now or hereafter have with respect to its liability under this Note.  No release of any person liable for payment of the Obligations, no extension of time for payment of this Promissory Note or any installment hereof, and no alteration, amendment or waiver of any provision of the other documents executed in connection herewith made by agreement between Lender and any other person or party shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower, and any other person or party who may become liable under the documents executed in connection herewith, for the payment of all or any part of the Obligations.

 

13.         Assignments.  Borrower may not assign or transfer any of its rights or obligations hereunder without the express, written consent of Lender first had and obtained, which consent may be granted or withheld in Lender’s reasonable discretion.  Any such purported assignment or transfer by Borrower without the express, written consent of Lender shall be null and void ab initio.

 

14.         Costs and Expenses.  Borrower agrees to pay all reasonable costs and expenses of Lender, including without limitation all reasonable fees and disbursements of counsel, advisors, consultants, examiners and appraisers for Lender, in connection with (a) the issuance of this Promissory Note and advancement of the principal amount hereunder (which fees and disbursements associated with the origination of this Promissory Note shall not exceed $5,000), (b) any enforcement (whether through negotiations, legal process or otherwise) of this Promissory Note, (c) any workout or restructuring of this Promissory Note during the pendency of one or more Events of Default, and (d) any bankruptcy case or proceeding of Borrower or any appeal thereof.

 

15.         Excess Interest.  It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply strictly with the applicable Texas law governing the maximum rate or amount of interest payable on the indebtedness evidenced by this Promissory Note and the “Related Indebtedness” (as defined below) (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law).  If the applicable law is ever judicially interpreted so as to render usurious any amount (a) contracted for, charged, taken, reserved or received pursuant to this Promissory Note or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of this Promissory Note, (b) contracted for, charged, taken, reserved or received by reason of Lender's exercise of the option to accelerate the maturity of this Promissory Note and/or any and all indebtedness paid or payable by Borrower to Lender pursuant to any loan document other than the Promissory Note (such other indebtedness being referred to in this Section as the "Related Indebtedness"), or (c) Borrower will have paid or Lender will have received by reason of any voluntary prepayment by Borrower of this Promissory Note and/or the Related Indebtedness, then it is Borrower's and Lender's express intent that all amounts charged in excess of the maximum lawful rate shall be automatically canceled, ab initio, and all amounts in excess of the maximum lawful rate theretofore collected by Lender shall be credited on the principal balance of this Promissory Note and/or the Related Indebtedness (or, if this Promissory Note and the Related Indebtedness have been or would thereby be paid in full, refunded to Borrower), and the provisions of this Promissory Note and any other documents ancillary to the loan evidenced by this Promissory Note shall immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder; provided, however, if this Promissory Note has been paid in full before the end of the stated term of this Promissory Note, then Borrower and Lender agree that Lender shall, with reasonable promptness after Lender discovers or is advised by Borrower that interest was received in an amount in excess of the maximum lawful rate, either refund such excess interest to Borrower and/or credit such excess interest against the principal amount of this Promissory Note then owing by Borrower to Lender.  Borrower hereby agrees that as a condition precedent to any claim or counterclaim (in which event such proceeding shall be abated for such time period) seeking usury penalties against Lender, 

 

  

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Borrower will provide written notice to Lender, advising Lender in reasonable detail of the nature and amount of the violation, and Lender shall have sixty (60) days after receipt of such notice in which to correct such usury violation, if any, by either refunding such excess interest to Borrower or crediting such excess interest against this Promissory Note then owing by Borrower to Lender.  All sums contracted for, charged, taken, reserved or received by Lender for the use, forbearance or detention of any debt evidenced by this Promissory Note and/or the other loan documents shall, to the extent permitted by applicable law, be amortized or spread, using the actuarial method, throughout the stated term of this Promissory Note (including any and all renewal and extension periods) until payment in full so that the rate or amount of interest on account of this Promissory Note does not exceed the maximum lawful rate from time to time in effect and applicable to this Promissory Note for so long as the debt evidenced thereby is outstanding.  In no event shall the provisions of Chapter 346 of the Texas Finance Code apply to this Promissory Note.  To the extent that Lender is relying on Chapter 303 of the Texas Finance Code to determine the maximum lawful rate payable on the Promissory Note, Lender will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303, as amended.  To the extent United States federal law permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law, Lender will rely on United States federal law instead of such Chapter 303 for the purpose of determining the maximum lawful rate.  Additionally, to the extent permitted by applicable law now or hereafter in effect, Lender may, at its option and from time to time, utilize any other method of establishing the maximum lawful rate under such Chapter 303 or under other applicable law by giving notice, if required, to Borrower as provided by applicable law now or hereafter in effect.

 

16.         CHOICE OF LAW.  THE VALIDITY OF THIS PROMISSORY NOTE, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE BORROWER AND LENDER WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO CONFLICTS OF LAW PRINCIPLES EXCEPT TO THE EXTENT NECESSARY TO ENFORCE THIS CHOICE OF LAW PROVISION.

 

17.         Notices.  All communications hereunder shall be in writing and shall be deemed to be duly given and received (a) upon delivery if delivered personally, (b) upon confirmed transmittal if by facsimile, (c) on the next business day if sent by nationally recognized overnight courier, or (d) four (4) business days after mailing if mailed by prepaid certified or registered mail, return receipt requested, in each case to the appropriate notice address or facsimile number.

 

18.         Independent Arm’s Length Transaction.  It is understood and agreed that this Promissory Note and the transactions contemplated hereby and thereby were negotiated in an arms-length transaction separate and distinct from any other transaction or contractual obligations and are independent of any transaction or transactions between Borrower, on the one hand, and Lender and any of its affiliates or related entitles on the other hand.   Borrower further agrees that the contractual obligations of Borrower hereunder are in no way dependent or conditioned upon any other agreements, contracts or transactions whatsoever unless expressly stated herein.

 

19.         Parties.  Nothing herein is intended to create or stipulate any benefit for any third party.

 

20.         Further Assurances.  Upon request of Lender, Borrower will promptly correct any defects, errors, or omissions in the execution or acknowledgment of this Promissory Note, and execute, acknowledge, and deliver such other assurances and instruments as shall, in the opinion of Lender, be necessary to fulfill the terms of this Promissory Note.

 

21.         Severability.  In the event that any one or more of the provisions contained in this Promissory Note shall for any reason be held invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Promissory Note.

 

22.         No Waiver by Lender.  No course of dealing on the part of Lender, its officers or employees, nor any failure or delay by Lender with respect to exercising any of its rights or remedies hereunder, nor any extension of time to Borrower to cure any Event of Default hereunder, shall operate as a waiver thereof, nor shall the exercise or partial exercise of any such right or remedy preclude the exercise of any other right or remedy.

 

23.         Time of the Essence.  Time shall be of the essence with respect to all provisions of this Promissory Note.

 

  

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24.         Amendment.  This Promissory Note cannot be changed, modified, amended, waived, extended, discharged or terminated orally or by estoppel or waiver, regardless of any claimed partial performance referable thereto, or by any alleged oral modification or by any act or failure to act on the part of Borrower or Lender.

 

25.         Construction.  If any paragraph, clause or provision of this Promissory Note is construed or interpreted by a court of competent jurisdiction to be void, invalid or unenforceable, such voidness, invalidity or unenforceability will not affect the remaining paragraphs, clauses and provisions of this Promissory Note, which shall nevertheless be binding upon the parties hereto with the same effect as though the void or unenforceable part had been severed and deleted.

 

26.         JURY WAIVER.  THE BORROWER HEREBY WAIVES THE RIGHT TO ANY JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY LENDER OR BORROWER AGAINST THE OTHER.

 

27.         JURISDICTION.  BORROWER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF TEXAS, AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS PROMISSORY NOTE IN ACCORDANCE WITH THE LAWS OF SUCH JURISDICTION.

 

[End of text; signature on next page]

 

  

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IN WITNESS WHEREOF, the undersigned has executed this Unsecured Subordinated Promissory Note as of the date first written above.

 

	  	RED MOUNTAIN RESOURCES, INC., 

A FLORIDA CORPORATION
	 	 	 
	 	By:	/s/Alan W. Barksdale 
	 	Name: Alan W. Barksdale

Title: Chief Executive Officer

 

[Signature Page to Unsecured Subordinated Promissory Note]

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