Document:

Exhibit 10.1

Exhibit 10.1

 

 

FIRST AMENDMENT TO

CREDIT AGREEMENT

dated as of

March 24, 2009

among

PETROQUEST ENERGY, INC.,

as Parent,

PETROQUEST ENERGY, L.L.C.,

as Borrower,

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent,

and

The Lenders Party Hereto

____________________________

CALYON NEW YORK BRANCH,

as Syndication Agent,

and

BANK OF AMERICA, N.A.,

as Documentation Agent

____________________________

J.P. MORGAN SECURITIES INC. and CALYON NEW YORK BRANCH

Co-Lead Arrangers

 

 

 

FIRST AMENDMENT TO CREDIT AGREEMENT

THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “First Amendment”) dated as of March
24, 2009, is among PETROQUEST ENERGY, INC., a Delaware corporation, as the Parent,
PETROQUEST ENERGY, L.L.C., a Louisiana limited liability company, as the Borrower,
JPMORGAN CHASE BANK, N.A., as Administrative Agent, CALYON NEW YORK BRANCH, as
Syndication Agent, and BANK OF AMERICA, N.A., as Documentation Agent, and the Lenders
party hereto.

R E C I T A L S

A. The Borrower, the Administrative Agent and the Lenders are parties to that certain Credit
Agreement dated as of October 2, 2008 (the “Credit Agreement”), pursuant to which the
Lenders have made certain loans to and extensions of credit for the account of the Borrower.

B. The Borrower has requested and the Lenders have agreed to amend certain provisions of the
Credit Agreement in order to clarify certain provisions contained therein.

C. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

Section 1. Defined Terms. Each capitalized term used herein but not otherwise defined
herein has the meaning given such term in the Credit Agreement. Unless otherwise indicated, all
article and section references in this First Amendment refer to articles and sections of the Credit
Agreement.

Section 2. Amendments to Credit Agreement.

2.1 Amendments to Section 1.02.

(a) The definition of “Agreement” is hereby deleted and replaced in its entirety to
read as follows:

“Agreement” means this Credit Agreement, as further amended by the
First Amendment, as the same may from time to time be amended, modified,
supplemented or restated.

(b) The definition of “Alternate Base Rate” is hereby deleted and replaced in its
entirety to read as follows:

“Alternate Base Rate” means, for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1% and (c) the Adjusted LIBO Rate having an
Interest Period with a one month duration on such day (or if such day is not a
Business Day, the immediately preceding Business Day) plus 1%, provided that,

 

 

 

for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on
the rate (rounded upwards, if necessary, to the next 1/100 of 1%) at which dollar
deposits of $5,000,000 with a one month maturity are offered by the principal London
office of the Administrative Agent in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, on such day (or the
immediately preceding Business Days if such day is not a day on which banks are open
for dealings in dollar deposits in the London interbank market). Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective
Rate or the Adjusted LIBO Rate shall be effective from and including the effective
date of such change in the Prime Rate, the Federal Funds Effective Rate or the
Adjusted LIBO Rate, respectively.

(c) The definition of “Applicable Margin” is hereby amended in its entirety to read as
follows:

“Applicable Margin” means, for any day, with respect to any Loan or
with respect to the Commitment Fee Rate, the applicable rate per annum set forth in
the Borrowing Base Utilization Grid below based on the Borrowing Base Utilization
Percentage then in effect on such day:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Borrowing Base
Utilization
Percentage
	 	 	<25	%	 	 	>25% <50	%	 	 	>50% <75	%	 	 	>75% <90	%	 	 	>90	%
	Eurodollar Loans
	 	 	2.500	%	 	 	2.750	%	 	 	3.000	%	 	 	3.250	%	 	 	3.500	%
	ABR Loans
	 	 	1.625	%	 	 	1.875	%	 	 	2.125	%	 	 	2.375	%	 	 	2.625	%
	Commitment Fee Rate
	 	 	0.500	%	 	 	0.500	%	 	 	0.500	%	 	 	0.500	%	 	 	0.500	%

Each change in the Applicable Margin and the Commitment Fee Rate shall apply
during the period commencing on the effective date of such change in the Borrowing
Base Utilization Percentage and ending on the date immediately preceding the
effective date of the next such change; provided, however, that if at any
time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a),
then the “Applicable Margin” and “Commitment Fee Rate” each shall
mean the rate per annum set forth on the grid when the Borrowing Base Utilization
Percentage is at its highest level

(d) The definition of “Defaulting Lender” is hereby amended in its entirety to read as
follows:

“Defaulting Lender” means any Lender that has (a) failed to fund any
portion of its Loans or participations in Letters of Credit within three (3)
Business Days of the date required to be funded by it hereunder, (b) notified the
Borrower, the Administrative Agent, the Issuing Bank or any Lender in writing that
it does not intend to comply with any of its funding obligations under this
Agreement or has made a public statement to the effect that it does not intend to
comply with its funding obligations under this Agreement or under other agreements
in which it

 

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commits to extend credit, (c) failed, within three (3) Business Days after
request by the Administrative Agent, to confirm that it will comply with the terms
of this Agreement relating to its obligations to fund prospective Loans and
participations in then outstanding Letters of Credit, (d) otherwise failed to pay
over to the Administrative Agent or any other Lender any other amount required to be
paid by it hereunder within three (3) Business Days of the date when due, unless the
subject of a good faith dispute, or (e) (i) become or is insolvent or has a parent
company that has become or is insolvent or (ii) become the subject of a bankruptcy
or insolvency proceeding, or has had a receiver, conservator, trustee or custodian
appointed for it, or has taken any action in furtherance of, or indicating its
consent to, approval of or acquiescence in any such proceeding or appointment or has
a parent company that has become the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee or custodian appointed for
it, or has taken any action in furtherance of, or indicating its consent to,
approval of or acquiescence in any such proceeding or appointment.

“First Amendment” means the First Amendment to Credit Agreement dated
as of March 24, 2009 among the Parent, the Borrower, the Administrative Agent, the
Syndication Agent, the Documentation Agent and the Lenders party thereto.

2.2 Amendment to Section 2.08. The following Subsection (k) shall be added to the end
of Section 2.08:

(k) Defaulting Lenders. Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting Lender:

(i) if any LC Exposure exists at the time a Lender is a Defaulting Lender, the
Borrower shall, within five (5) Business Days following notice by the Administrative
Agent, cash collateralize such Defaulting Lender’s LC Exposure in accordance with
the procedures set forth in Section 2.08(j) for so long as such LC Exposure is
outstanding; and

(ii) the Issuing Bank shall not be required to issue, amend or increase any
Letter of Credit unless it is satisfied that cash collateral will be provided by the
Borrower in accordance with Section 2.08(k)(i).

2.3 Liquidity Requirement. Section 8.18 is hereby added which reads as follows:

Section 8.18. Liquidity Requirement. The Borrower shall at all times maintain
Liquidity of not less than $10,000,000. For purposes of this Section 8.18, “Liquidity”
means the sum of (i) cash, (ii) Investments of the type described in Section 9.05(c), (d),
(e) and (f) and (iii) unused availability under this Agreement.

 

3

 

2.4 Redetermination of Borrowing Base. For the period from and including March 24,
2009 to but excluding the first Redetermination Date, the amount of the Borrowing Base shall be
$130,000,000. Notwithstanding the foregoing, the Borrowing Base may be subject to further
adjustments from time to time pursuant to Section 8.13(c), Section 8.16 and Section 9.12(d).

Section 3. Waivers.

3.1 Pursuant to Section 8.12(a), the Borrower was required to deliver a Reserve Report on or
before March 1, 2009 and on or before the delivery of such Reserve Report, the Borrower was also
required to deliver (i) a certificate from a Responsible Officer pursuant to Section 8.12(c) and
(ii) title information pursuant to Section 8.13(a). The Borrower was not timely in delivery of the
required March 1, 2009 Reserve Report or the related certificate and title information, in
violation of Section 8.12(a), Section 8.12(c) and Section 8.13(a) (the “Designated
Defaults”). Therefore, the Borrower hereby requests, and the Administrative Agent and the
Lenders hereby agree to waive the Designated Defaults. Except as expressly waived herein, all
covenants, obligations and agreements of the Borrower contained in the Credit Agreement and the
other Loan Documents shall remain in full force and effect in accordance with their terms.

3.2 Neither the execution by the Administrative Agent or the Lenders of this First Amendment,
nor any other act or omission by the Administrative Agent or the Lenders or their officers in
connection herewith, shall be deemed a waiver by the Administrative Agent or the Lenders of any
other defaults which may exist, which may have occurred prior to the Designated Defaults or which
may occur in the future under the Credit Agreement and/or the other Loan Documents, or any future
defaults of the same provision waived hereunder (collectively “Other Violations”).
Similarly, nothing contained in this First Amendment shall directly or indirectly in any way
whatsoever either: (i) impair, prejudice or otherwise adversely affect the Administrative Agent’s
or the Lenders’ right at any time to exercise any right, privilege or remedy in connection with the
Loan Documents with respect to any Other Violations, (ii) amend or alter any provision of the
Credit Agreement, the other Loan Documents, or any other contract or instrument, or (iii)
constitute any course of dealing or other basis for altering any obligation of the Borrower or any
right, privilege or remedy of the Administrative Agent or the Lenders under the Credit Agreement,
the other Loan Documents, or any other contract or instrument. Nothing in this First Amendment
shall be construed to be a consent by the Administrative Agent or the Lenders to any Other
Violations.

Section 4. Conditions Precedent. This First Amendment shall not become effective until the
date on which each of the following conditions is satisfied (or waived in accordance with Section
12.02 of the Credit Agreement) (the “First Amendment Effective Date”):

4.1 The Administrative Agent shall have received from the Required Lenders, the Borrower and
each Guarantor, counterparts (in such number as may be requested by the Administrative Agent) of
this First Amendment signed on behalf of such Persons.

 

4

 

4.2 The Administrative Agent shall have received such other documents as the Administrative
Agent or special counsel to the Administrative Agent may reasonably request.

4.3 No Default or Event of Default shall have occurred and be continuing, after giving effect
to the terms of this First Amendment.

The Administrative Agent is hereby authorized and directed to declare this First Amendment to
be effective when it has received documents confirming or certifying, to the satisfaction of the
Administrative Agent, compliance with the conditions set forth in this Section 4 or the waiver of
such conditions as permitted hereby. Such declaration shall be final, conclusive and binding upon
all parties to the Credit Agreement for all purposes. Notwithstanding the foregoing, this First
Amendment shall not become effective unless each of the foregoing conditions is satisfied (or
waived pursuant to Section 12.02 of the Credit Agreement) at or prior to 1:00 p.m., New York time,
on March 25, 2009.

Section 5. Miscellaneous.

5.1 Confirmation. The provisions of the Credit Agreement, as amended by this First
Amendment, shall remain in full force and effect following the effectiveness of this First
Amendment.

5.2 Ratification and Affirmation; Representations and Warranties. Each of the
Borrower and each Guarantor hereby (a) ratifies and affirms its respective obligations under, and
acknowledges, renews and extends its respective continued liability under, each Loan Document to
which it is a party and agrees that each Loan Document to which it is a party remains in full force
and effect, except as expressly amended hereby, notwithstanding the amendments contained herein and
(b) represents and warrants to the Lenders that, as of the date hereof, after giving effect to the
terms of this First Amendment: (i) all of the representations and warranties contained in each
Loan Document to which it is a party are true and correct, except to the extent any such
representations and warranties are expressly limited to an earlier date, in which case, such
representations and warranties shall continue to be true and correct as of such specified earlier
date, (ii) no Default has occurred and is continuing, (iii) no Material Adverse Effect shall have
occurred and (iv) attached hereto as Annex A is a true and complete list of all Swap
Agreements of the Parent, each Subsidiary and the Partnerships entered into between the Effective
Date and the First Amendment Effective Date, the material terms thereof (including the type, term,
effective date, termination date and notional amounts or volumes), the net mark to market value
thereof, all credit support agreements relating thereto (including any margin required or supplied)
and the counterparty to each such agreement. 

5.3 Loan Document. This First Amendment is a “Loan Document” as defined and described
in the Credit Agreement and all of the terms and provisions of the Credit Agreement relating to
Loan Documents shall apply hereto.

5.4 Counterparts. This First Amendment may be executed by one or more of the parties
hereto in any number of separate counterparts, and all of such counterparts taken together
shall be deemed to constitute one and the same instrument. Delivery of this First Amendment
by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.

 

5

 

5.5 NO ORAL AGREEMENT. THIS FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND ANY SEPARATE LETTER AGREEMENTS WITH RESPECT TO FEES PAYABLE TO THE ADMINISTRATIVE
AGENT CONSTITUTE THE ENTIRE CONTRACT AMONG THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND
THEREOF AND SUPERSEDE ANY AND ALL PREVIOUS AGREEMENTS AND UNDERSTANDINGS, ORAL OR WRITTEN, RELATING
TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS FIRST AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

5.6 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. 

5.7 Payment of Expenses. The Borrower agrees to pay or reimburse the Administrative
Agent for all of its out-of-pocket costs and expenses incurred in connection with this First
Amendment, any other documents prepared in connection herewith and the transactions contemplated
hereby, including, without limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.

5.8 Severability. Any provision of this First Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

5.9 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and its respective successors and assigns.

[SIGNATURES BEGIN NEXT PAGE]

 

6

 

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

	 	 	 	 	 
	BORROWER: 	PETROQUEST ENERGY, L.L.C.

 	 
	 	By:  	/s/ W. Todd Zehnder
 	 
	 	 	Name:  	W. Todd Zehnder 	 
	 	 	Title:  	Executive Vice President,
Chief Financial Officer and Treasurer 	 
	 
	PARENT: 	PETROQUEST ENERGY, INC.

 	 
	 	By:  	/s/ W. Todd Zehnder
 	 
	 	 	Name:  	W. Todd Zehnder 	 
	 	 	Title:  	Executive Vice President,
Chief Financial Officer and Treasurer 	 
	 
	GUARANTOR: 	TDC ENERGY, LLC

 	 
	 	By:  	/s/ W. Todd Zehnder
 	 
	 	 	Name:  	W. Todd Zehnder 	 
	 	 	Title:  	Executive Vice President,
Chief Financial Officer and Treasurer 	 
	 

[Signature Page to First Amendment]

 

 

 

	 	 	 	 	 
	ADMINISTRATIVE AGENT:
AND LENDER 	JPMORGAN CHASE BANK, N.A.
individually and as Administrative Agent and
Issuing Bank

 	 
	 	By:  	/s/ Jo Linda Papadakis
 	 
	 	 	Name:  	Jo Linda Papadakis 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to First Amendment]

 

 

 

	 	 	 	 	 
	SYNDICATION AGENT:
AND LENDER 	CALYON NEW YORK BRANCH

 	 
	 	By:  	

/s/ Tom Byargeon
 	 
	 	 	Name:  	Tom Byargeon 	 
	 	 	Title:  	Managing Director 	 
	 
	 	 	 
	 	By:  	     /s/ Michael D. Willis
 	 
	 	 	Name:  	Michael D. Willis 	 
	 	 	Title:  	Director 	 
	 

[Signature Page to First Amendment]

 

 

 

	 	 	 	 	 
	DOCUMENTATION AGENT:
AND LENDER 	BANK OF AMERICA, N.A.

 	 
	 	By:  	
/s/ Jeffrey H. Rathkamp
 	 
	 	 	Name:  	Jeffrey H. Rathkamp 	 
	 	 	Title:  	Managing Director 	 
	 

[Signature Page to First Amendment]

 

 

 

	 	 	 	 	 
	LENDER: 	WELLS FARGO BANK, N.A.

 	 
	 	By:  	                              /s/ Scott Hodges
 	 
	 	 	Name:  	Scott Hodges 	 
	 	 	Title:  	Vice President 	 
	 

[Signature Page to First Amendment]

 

 

 

	 	 	 	 	 
	LENDER: 	WHITNEY NATIONAL BANK

 	 
	 	By:  	/s/ William Jochetz
 	 
	 	 	Name:  	William Jochetz 	 
	 	 	Title:  	Officer 	 
	 

[Signature Page to First Amendment]exv10w1

Exhibit
10.1

NEITHER THIS NOTE NOR THE STOCK INTO WHICH THIS NOTE IS CONVERTIBLE (COLLECTIVELY, THE
“SECURITIES”) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

SECURED CONVERTIBLE PROMISSORY NOTE

			
	 	 	 
	$190,000.00
	 	March 20, 2009

FOR VALUE RECEIVED, Steel Vault Corporation, a Delaware corporation located at 1690 South
Congress Drive, Suite 200, Delray Beach, Florida 33445 (the “Borrower”), promises to pay to Blue
Moon Energy Partners LLC, a Florida limited liability company, or any subsequent holder upon a
permitted assignment of this Note (the “Lender”), located at 1690 South Congress Drive, Suite 200,
Delray Beach, Florida 33445, or at such other location designated by the Lender, the principal
amount of ONE HUNDRED NINETY THOUSAND AND NO/100 U.S. DOLLARS (U.S.$190,000.00) (the “Principal
Amount”), upon the terms and conditions specified below. Notwithstanding the foregoing, no payment
of principal or interest shall be required to the extent that such principal and interest has been
converted into equity securities of the Borrower pursuant to the terms hereof.

1. Repayment or Conversion.

(a) Repayment. The entire unpaid Principal Amount under this Note and all accrued and
unpaid interest thereon shall be due and payable ON DEMAND of the Lender, which demand may be made
at any time on or after March 20, 2011 (the “Maturity Date”), unless the Principal Amount and all
accrued but unpaid interest thereon is converted pursuant to the provisions of Section 1(b) below.

(b) Conversion.

(i) By Lender. Lender shall have the right, at any time, in its sole discretion to
convert all of the unpaid Principal Amount and accrued and unpaid interest thereon into that number
of shares of the Borrower’s common stock (the “Conversion Shares”) determined as follows (the
“Conversion Formula”):

The unpaid Principal Amount and accrued and unpaid interest on the date of conversion
divided by 120% of the Price (as defined below), subject to equitable adjustment for any
stock split, combination, recapitalization, reorganization or other similar event. For
example, if Lender elects to convert this Note into shares of Borrower’s common stock on
June 1, 2009 and the unpaid Principal Amount and accrued and unpaid interest on such date is
$191,000 and the Price multiplied by 120% is $0.44, Borrower shall issue 434,091 Conversion
Shares to Lender.

 

 

 

(ii) By Borrower. Upon the occurrence of a Change in Control of Borrower (as defined
in Borrower’s 2009 Stock Incentive Plan), or if the average of the high and low trading prices of
Borrower’s common stock as quoted on the Over The Counter Bulletin Board (or any other applicable
trading exchange) is greater than 120% of the Price for any twenty consecutive trading days,
Borrower shall have the right at any time thereafter in its sole discretion to convert all of the
unpaid Principal Amount and accrued and unpaid interest thereon into Conversion Shares pursuant to
the Conversion Formula.

(iii) In the event that Lender or Borrower, as applicable, elect to effect a conversion
hereunder, Lender shall deliver to Borrower the original of this Note, and Borrower shall deliver
to Lender a certificate representing the Conversion Shares into which this Note was converted.

(iv) For purposes herein, “Price” means the average of the high and low trading prices of
Borrower’s common stock as quoted on the Over The Counter Bulletin Board (or any other applicable
trading exchange) for the twenty consecutive trading day period immediately preceding the date of
this Note. Price is $0.37.

2. Prepayment. This Note may be prepaid in whole or in part at any time without
penalty.

3. Interest. This Note shall accrue interest at a rate equal to five percent (5%) per
annum compounded monthly.

4. Events of Default. The entire unpaid Principal Amount and all accrued and unpaid
interest shall become immediately due and payable upon (i) admission by the Borrower of its
inability to pay its debts generally as they become due or otherwise acknowledges its insolvency,
(ii) the filing of a petition in bankruptcy by the Borrower, (iii) the execution by the Borrower of
a general assignment for the benefit of creditors, (iv) the filing against the Borrower of a
petition in bankruptcy or a petition for relief under the provisions of the federal bankruptcy code
or another state or federal law for the relief of debtors and the continuation of such petition
without dismissal for a period of ninety (90) days or more, or (v) in the event that the Principal
Amount and all accrued and unpaid interest thereon shall not have been paid in full on or before
the Maturity Date.

5. Collection. If action is instituted to collect this Note, the Borrower promises to
pay to the Lender all reasonable costs and expenses (including reasonable attorneys’ fees) incurred
in connection with such action.

6. Security. This Note and the obligations hereunder are secured by that certain
Security Agreement (the “Security Agreement”) of even date herewith in the form attached hereto as
Exhibit A, between Lender and Borrower, which encumbers Borrower’s real and personal
property as more particularly described therein.

7. Waivers. No delay on the part of the Lender in exercising any right or remedy
hereunder shall operate as a waiver of such right or remedy. No single or partial exercise of a
right or remedy shall preclude other or further exercise of that or any other right or remedy. The
failure of the Lender to insist upon the strict performance of any term of this Note, or to
exercise any right or remedy hereunder, shall not be construed as a waiver or relinquishment by
the Lender for the future of that term, right or remedy. No waiver of any right of the Lender
hereunder shall be effective unless in writing executed by the Lender.

 

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8. Severability. The unenforceability or invalidity of any provision or provisions of
this Note as to any persons or circumstances shall not render that provision or those provisions
unenforceable or invalid as to any other provisions or circumstances, and all provisions hereof, in
all other respects, shall remain valid and enforceable.

9. Warrant. The Borrower shall, simultaneous with the execution of this Note, execute
and deliver to Lender a common stock purchase warrant in the form attached hereto as Exhibit
B (the “Warrant”) for 108,000 shares (the “Warrant Shares”).

10. Registration. If at any time Borrower proposes to register shares of its common
stock under the Securities Act, in connection with the public offering of such shares for cash (a
“Proposed Registration”) other than a registration statement on Form S-8 or Form S-4 or any
successor or other forms promulgated for similar purposes, Borrower shall, at such time, promptly
give Lender written notice of such Proposed Registration. Lender shall have ten (10) days from its
receipt of such notice to deliver to Borrower a written request specifying the amount of
Registrable Securities that Lender intends to sell and Lenders’ intended method of distribution.
Upon receipt of such request, Borrower shall use its commercially reasonable efforts to cause all
Registrable Securities which Borower has been requested to register to be registered under the
Securities Act to the extent necessary to permit their sale or other disposition in accordance with
the intended methods of distribution specified in the request of Lender; provided,
however, that the Company shall have the right to postpone or withdraw any registration
effected pursuant to this Section 10 without obligation to Lender. If, in connection with any
underwritten public offering for the account of Borrower or for stockholders of Borrower that have
contractual rights to require Borrower to register shares of common stock, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of common stock which may
be included in a registration statement because, in the judgment of such underwriter(s), marketing
or other factors dictate such limitation is necessary to facilitate such offering, then Borrower
shall be obligated to include in the registration statement only such limited portion of the
Registrable Securities with respect to which Lender has requested inclusion hereunder as such
underwriter(s) shall permit. For purposes herein, “Registrable Securities” means the Conversion
Shares and the Warrant Shares and any other shares of common stock issuable pursuant to the
exercise of the Warrants (without regard to any limitation on such exercise), and any shares of
capital stock issued or issuable from time to time (with any adjustments) in replacement of, in
exchange for or otherwise in respect of the Conversion Shares or the Warrant Shares;
provided, however, that “Registrable Securities” shall not include any such shares
that have been sold pursuant to Rule 144 of the Securities Act.

11. Amendment. This Note and the Warrant shall not be amended without the express
written consent of Borrower and Lender.

12. No Impairment. The Borrower will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of capital stock or assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms set forth herein or in the Warrant, but
will at all times in good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the rights of Lender
hereunder.

 

- 3 -

 

13. Interest Savings Clause. If any interest payment (or other payment which is
deemed by law to be interest) due hereunder is determined to be in excess of the then legal maximum
rate, then that portion of each interest payment representing an amount in excess of the then legal
maximum rate shall instead be deemed a payment of principal and applied against the principal of
the obligations evidenced by this Note.

14. Assignment. This Note is assignable and transferable by Lender with the
Borrower’s written consent, which consent shall not to be unreasonably withheld.

15. Notices. All notices, demands and requests of any kind to be delivered to any
party in connection with this Agreement shall be in writing and shall be deemed to have been duly
given if personally delivered, sent by facsimile or if sent by nationally-recognized overnight
courier or by registered or certified mail, return receipt requested and postage prepaid, to the
address set forth herein or to such other address as the party to whom notice is to be given may
have furnished to the other parties hereto in writing in accordance with the provisions of this
Section 15. Any such notice or communication shall be deemed to have been received (i) in the case
of personal delivery, on the date of such delivery, (ii) in the case of facsimile, when receipt is
confirmed, (iii) in the case of nationally-recognized overnight courier, on the next business day
after the date when sent and (iv) in the case of mailing, on the third business day following that
on which the piece of mail containing such communication is posted.

16. Legal Matters. The validity, construction, enforcement, and interpretation of
this Note are governed by the laws of the State of Florida and the federal laws of the United
States of America, excluding the laws of those jurisdictions pertaining to resolution of conflicts
with laws of other jurisdictions. The parties hereby expressly waive presentment, demand for
payment, dishonor, notice of dishonor, protest, notice of protest, and any other formality. The
Borrower and the Lender (a) consent to the personal jurisdiction of the state and federal courts
having jurisdiction in Palm Beach County, Florida, (b) stipulate that the proper, exclusive, and
convenient venue for any legal proceeding arising out of this Agreement is Palm Beach County,
Florida, for state court proceedings, and the Southern District of Florida, for federal district
court proceedings, and (c) waive any defense, whether asserted by a motion or pleading, that Palm
Beach County, Florida, or the Southern District of Florida, is an improper or inconvenient venue.

17. Further Assurances. From time to time, the Lender, at the Borrower’s reasonable
request, shall execute and deliver such other instruments and do and perform such other acts and
things in connection with the exercise of this Note.

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, this Note has been executed by the Borrower and delivered to the Lender as
of the date first above written.

	 	 	 	 	 
	 	
BORROWER:

STEEL VAULT CORPORATION

 	 
	 	By:  	/s/ William J. Caragol
 	 
	 	 	William J. Caragol 	 
	 	 	Chief Executive Officer 	 

 

- 5 -

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