Document:

ex10-31.htm

Exhibit 10.31

 

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made as of  the 1st day of April, 2013, (the “Effective Date”) by and between TOWER FINANCIAL CORPORATION, an Indiana corporation, and RICHARD R. SAWYER (the “Executive”).

 

Recitals

	
  

	
1.

	
The Company is engaged in the business of operating a bank.

	
  

	
2.

	
The Executive has demonstrated his ability to serve as Executive Vice President, Chief Financial Officer.

	
  

	
3.

	
The parties desire to set forth in writing the terms and conditions upon which the Executive’s employment with the Company will continue.

Agreement

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions set forth herein, the Company and the Executive agree as follows:

ARTICLE I

Employment Term

Section 1.01.  Term.  The term of this Agreement (the “Employment Term”) shall be for a period of two (2) year(s), commencing on the Effective Date and terminating on April 1, 2015.  Notwithstanding the foregoing, the Employment Term is subject to termination prior to the expiration thereof under the terms and conditions set forth in Article VIII.

Section 1.02.  Renewal.  The term of this Agreement shall automatically be renewed for successive terms of equal duration to the initial Employment Term (which period shall also be referred to as the “Employment Term”), unless either party provides the other written notice of its intent not to renew for a successive term at least sixty (60) days prior to the last day of the then current term.

ARTICLE II

Employment

During the Employment Term, the Executive shall be employed by the Company as its Executive Vice President, Chief Financial Officer or in such other capacity as shall be approved by the Board of Directors of the Company.  In such capacity, the Executive shall have the duties, authority and powers granted to the Executive by the Company’s Chief Executive Officer/President from time to time.

ARTICLE III

Devotion to Duties

During the Employment Term, the Executive shall devote his full time, attention, skill and effort to the operations of the Company and shall not engage in any other business activity requiring any substantial amount of his time (whether or not such business activity is pursued for gain, profit, or pecuniary advantage).  With prior written approval from the highest ranking officer of the Company, the Executive may engage in other business interests which materially prevent the Executive from performing his contemplated services hereunder on behalf of Company.

 

  

  

  

ARTICLE IV

Regular Compensation

The Company shall pay to the Executive as compensation for his services and for his covenants and other obligations hereunder an annual base salary (the “Salary”) in the amount of One Hundred Fifty-Five Thousand Dollars ($155,000.00), payable in accordance with the regular and customary payroll practices of the Company.  The Salary may be increased from time to time by action of the CEO/President or the Compensation Committee of the Board of Directors of the Company.

ARTICLE V

Bonus Compensation

The Compensation Committee of the Board of Directors of the Company may authorize the payment to the Executive of additional compensation by way of salary, bonus, or otherwise, as it deems appropriate, during the term of this Agreement or any extension hereof.  All compensation shall be subject to customary withholding and other employment taxes required with respect to compensation paid by a corporation to an employee.

ARTICLE VI

Stock Based Compensation

The Executive shall be eligible to participate in such stock based compensation programs or related incentive plans as may be adopted by the Company from time to time; provided, however, the Company reserves the right to determine the number of stock grants, if any, and the terms and type of such grant.

ARTICLE VII

Expenses and Fringe Benefits

The Company shall reimburse the Executive for all ordinary and necessary business expenses incurred by him while carrying out his employment responsibilities under this Agreement.  The Executive shall be entitled to participate in such vacation policies, medical, dental, life and disability insurance programs; 401(k), profit sharing and any other retirement plans, and other fringe benefit plans or programs as the Company from time to time shall establish for its senior management and/or other full time employees, provided he is otherwise qualified to participate in such plans or programs.  The Company retains the right to establish limits on the types or amounts of business expenses that the Executive may incur and to abolish or alter the terms of any fringe benefit plan or program that it may establish.

ARTICLE VIII

Termination

Section 8.01.  Reasons for Termination.  The Employment Term of the Executive shall be terminated upon the occurrence of any of the following events:

(a)           Immediately upon the death of the Executive.

 

  

  

  

(b)           At the Company’s option, upon the Executive’s (i) violation of a material company policy or failure to perform any of the material duties or obligations under this Agreement; or (ii) upon any dishonesty or any kind of willful misconduct of the Executive, including but not limited to, theft of or other unauthorized personal use of company funds (termination under (i) or (ii) shall mean “for Cause”).  The Executive may be terminated under paragraph 8.01(b)(i) only following thirty (30) days’ written notice to the Executive explaining the basis of the termination and his failure to cure such breach within thirty (30) days of the date of the Company’s notice.  The Executive may be terminated under paragraph 8.01(b)(ii) only following ten (10) days’ written notice to the executive of the basis for the termination and an opportunity to dispute the same.

(c)           At the Company’s option, if the Executive shall suffer a permanent disability.  For purposes of this Agreement, “permanent disability” shall be defined to mean if Executive becomes eligible to receive benefits under company’s long term disability plan.  If there is no such long term disability plan, Executive will be deemed to be disabled if the Executive is disabled for purposes of the federal Social Security Act.

(d)           At the Company’s option, without Cause, upon thirty (30) days’ prior written notice.

(e)           At the Executive’s option, without cause, at any time.

(f)           At the Executive’s option, upon the Company’s breach of any of its material obligations under this Agreement or for Good Reason; provided that Executive has given the Company at least ten (10) days’ prior written notice of the nature of such breach and the Company has failed to cure such breach within a thirty (30) day period.  For purposes herein, “Good Reason” means without the Executive’s express written consent, the assignment to the Executive of any duties or responsibilities inconsistent with the Executive’s position, or a material change in the Executive’s reporting responsibilities, titles, or offices as described under Article II, or any removal of the Executive from, or any failure to re-elect the Executive to, and such positions, except in connection with the termination of the Executive for Cause, or his disability, retirement, or death.

 

Section 8.02.  Compensation Upon Termination.

(a)           Should the employment of the Executive be terminated under subsection (a) or (c) of Section 8.01 of this Agreement, the Company shall pay to the Executive (or his personal representative), a sum equal to the aggregate amount of Salary that was paid to the Executive under this Agreement for the one-month period preceding such date of termination, excluding any payments under Article V.

(b)           Should the employment of the Executive be terminated under subsection (b) or (e) of Section 8.01 of this Agreement, the Executive shall be paid his Salary up to the date of termination and any bonus compensation accrued but unpaid for any prior Employment Year, which amount should be paid in a single sum payment.

(c)           Should the employment of the Executive be terminated under subsection (d) or (f) of Section 8.01 of this Agreement, the Company shall pay to the Executive, a sum equal to two (2) years’ Salary at the then-effective rate paid to Executive.

(d)           Should the employment of the Executive be terminated under subsection (a), (c), (d), or (f) of Section 8.01 of this Agreement, the Company shall pay to the Executive (or his personal representative) in addition to the Salary specified in subsection (a) or (c), as applicable, of this Section 8.02, any bonus compensation accrued but unpaid for any prior Employment Year.  Except for a termination as a result of Executive’s death, no pro-rated portion of any bonus compensation for the current Employment Year shall be payable.  In the event of death, Executive’s estate shall be eligible to receive a pro-rated bonus, subject to the terms of the bonus program.

(e)           If the Company provides notice under Section 1.02 of its intent not to renew without Cause, then the Executive shall receive one hundred percent (100%) of the amount determined under Section 8.02(c) provided, however, that the Executive must continue to work until the last day of the Employment Term, which amount should be paid in a single sum payment.

 

(f)           Payments to the Executive under this Section 8.02 shall be considered severance pay in consideration of the Executive’s past service and in consideration of his continued service from the date hereof.  The Company may, at its discretion, withhold from such payments any federal, state, city, county, or other taxes.  In the event of termination of the employment of the Executive for any reason described in Section 8.01 of this Agreement, the severance pay provided for by this Section 8.02 shall constitute the entire obligation of the Company to the Executive in full settlement of any claim under law or in equity that the Executive might otherwise assert against the Company or any of its employees, officers, or directors on account of such termination, except for any compensation or other payments to which the Executive may be entitled to under any termination benefits or similar agreement then in effect between the Company and the Executive.

 

  

  

  

(g)           In order to receive any benefit under this Section 8.02, Executive must execute a Release Agreement in the form attached as Exhibit A.  Such release must be executed within twenty one (21) days after Executive’s termination of employment and Executive shall have seven (7) days after such execution to revoke such release.

(h)           Notwithstanding any of the foregoing, upon termination, the Executive shall be entitled to any accrued but unused vacation days in accordance with Company policy.

(i)           Any payments due under this section 8.02 shall be payable in a single sum payment, and should be paid on the 30th day following the Executive’s termination of employment; provided, however, with respect to the payment of any bonus for a prior Employment Year such bonus shall be payable on the later of the thirtieth (30th) day following the Executive’s termination of employment or the sixtieth (60th) day after the end of the prior Employment Year; provided, further, with respect to the payment of a bonus for the current Employment Year in the event of an Employee’s death, such bonus shall be payable on the sixtieth (60th) day after the end of the current Employment Year.

(j)           For purposes of this Agreement, the term Employment Year shall mean the same as the Company’s fiscal year which commences each January 1st and ends each December 31st.

Section 8.03.  Reimbursement for Certain Litigation Expenses.  In the event of litigation to determine whether the Executive’s employment was properly terminated under subsection (b) or (f) of Section 8.01, the prevailing party shall be entitled to recover all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in connection with such litigation.

Section 8.04.  Clawback.  Notwithstanding the foregoing:

(a)           In the event that, following the Executive’s termination (other than for Cause), within six (6) months following the date of termination, it is later discovered that Cause to terminate the Executive existed, the Executive shall forfeit any right to payments or benefits under this Agreement and, at the discretion of the Board, shall repay any payments made by the Company to the Executive pursuant to this agreement within 30 days following the determination by the Board that Cause existed, upon receipt of written notice of the same.

(b)           If the Company is required to prepare an accounting restatement due to material non-compliance of the Company, as a result of misconduct by the Executive, with any financial reporting requirement under any applicable laws, the Executive shall reimburse the Company for all amounts received under any incentive compensation plans, programs or arrangement from Company during the 12 month period preceding the date of such restatement.

(c)           The Executive agrees that the Company shall be entitled to recovery of its reasonable costs in enforcing any right described in this Section 8.04.

  

  

  

ARTICLE IX

Confidential Business Information

The Executive agrees and covenants that all confidential information regarding the practices and procedures of the Company and its affiliates, their methods of marketing, know-how, trade information, trade secrets, customer or client lists, licensing arrangements, accounts and requirements, and other information regarding the affairs of the Company and its affiliates (collectively, the “Confidential Business Information”) shall be received and held in the strictest confidence.  The Executive agrees not to divulge any such Confidential Business Information to any person or entity except as authorized in the normal execution of assigned duties on behalf of the Company, without the prior consent of the Company.  The Executive further agrees to surrender to the Company any and all documents and records in whatever form that may be in his possession or control containing Confidential Business Information upon the expiration or termination of the Employment Term.  The provisions of this Article IX shall survive any termination or expiration of this Agreement.

ARTICLE X

Non-Competition

Section 10.01.  Non-Competition.

(a)           During the Employment Term and for a period of two (2) year(s) immediately following any termination of the Employment Term pursuant to Section 8.01 of this Agreement (except subsection (a) or (c) of Section 8.01), the Executive shall not, directly or indirectly, anywhere within the following counties: Indiana counties (Allen, Adams, DeKalb, Huntington, Kosciusko, Noble, Wells, Whitley) or Ohio counties (Defiance, Paulding, Van Wert), have any material (defined for purposes of this Section to include any investment representing one percent (1%) or more of the equity interest of any entity described in this Section) investment in, or engage, directly or indirectly, whether as an individual or sole proprietor or as owner, partner, principal, shareholder, officer, director, manager, agent, consultant, formal or informal advisor, or by or though the lending of any form of assistance, in any business offering products or services the same as or competitive with the products or services that, during the Employment Term, are (or are planned to be) offered or supplied by the Company or its subsidiaries.

(b)           An Executive may request in writing that the Company allow Executive to accept a position with another employer if his duties or responsibilities with such employer are materially different than any of those duties performed for the Company during the Employment Term.  The Company shall respond to any written request within ten (10) business days of its receipt; provided such request is sent by U.S. certified mail.  The Company must use its reasonable discretion to determine whether such duties are materially different.  The Company may, from time to time, request that the Executive certify in writing that his duties for the new employer have not changed.  If the Company fails to respond, the request, as submitted, shall be deemed approved.

(c)           During the Employment Term for a period of two (2) years immediately following any termination of the Employment Term pursuant to Section 8.01 of this Agreement (except subsection (a) or (c) of Section 8.01), the Executive shall not, directly or indirectly, anywhere within the following counties: Indiana counties (Allen, Adams, DeKalb, Huntington, Kosciusko, Noble, Wells, Whitley) or Ohio counties (Defiance, Paulding, Van Wert), be employed in any capacity that is similar to or the same as any capacity Executive held with Company during Executive’s last five (5) years of employment with Company.

 

  

  

  

(d)           During the Employment Term and for a period of two (2) years immediately following any termination of the Employment Term pursuant to Section 8.01 of this Agreement (except subsection (a) or (c) of Section 8.01), the Executive shall not, directly or indirectly, anywhere within the following counties: Indiana counties (Allen, Adams, DeKalb, Huntington, Kosciusko, Noble, Wells, Whitley) or Ohio counties (Defiance, Paulding, Van Wert) as an employee, consultant, or in any other relationship engage in assisting any business or any entity offering products or services the same as or competitive with the products and services that, during the Employment Term, are, or plan to be, offered or supplied by the Company or its subsidiaries, in any capacity wherein Executive is capable of utilizing the trade secrets, confidential information, or other proprietary information of the Company in competition with the Company.

Section 10.02.  Non-Solicitation.  During the Employment Term and for a period of two (2) year(s) immediately following any termination of the Employment Term pursuant to Section 8.01 of this Agreement (except subsection (a) or (c) of Section 8.01), the Executive shall not, directly or indirectly, (i) solicit, take away, hire, employ, or endeavor to employ any person employed by the Company, or (ii) solicit, take away, or attempt to take away any of the existing or prospective customers or clients, vendors, or licensors of the Company or any of its affiliates as of the date of termination for the purpose of conducting any business which directly or indirectly provides financial services similar in nature to the financial services provided by Tower Bank & Trust Company.  As used herein, the term “prospective customers or clients” shall mean individuals or entities whom the Company or its affiliates have contacted within the twelve (12) months immediately preceding the termination of the Employment Term for the purpose of conducting business with the Company or such affiliate.

Section 10.03.  Specific Enforcement.  The Executive acknowledges that any violation of any provision of this Article X by him will cause irreparable damage to the Company, that such damage will be incapable of precise measurement, and that, as a result, the Company will not have an adequate remedy at law to redress the harm which such violation will cause.  Therefore, in the event of any violation of any provision of this Article by the Executive, he agrees that in addition to all other remedies that the Company may have at law or in equity, the Company shall be entitled to injunctive relief, including, without limitation, temporary restraining orders and temporary injunctions to restrain any violation of the Article.  If a court of competent jurisdiction finds that the Executive has violated any of the restrictions set forth in this Article, then the period of all restrictions set forth in this Article automatically shall be extended by the number of days that the court determines the Executive to have been in violation of such restriction.  In addition to other relief to which it shall be entitled, the Company shall be entitled to recover from the Executive the reasonable costs and reasonable attorneys’ fees incurred by the Company in seeking enforcement of this Article.  In addition, if the Executive should breach section 10.01 or 10.02, as determined by a court of competent jurisdiction, Executive shall repay any and all benefits paid under Section 8.02 or Section 12.01(b).

ARTICLE XI

General

Section 11.01.  Severability.  Should any clause, portion or section of this Agreement be unenforceable or invalid for any reason, such unenforceability or invalidity shall not affect the enforceability or validity of the remainder of this Agreement.  Should any particular covenant in this Agreement be held unreasonable or unenforceable for any reason, including, without limitation, the time period, geographical area, and scope of activity covered by such covenant, then such covenant shall be given effect and enforced to whatever extent would be reasonable and enforceable.

Section 11.02.  Assignment; Successors in Interest.  This Agreement, being personal to the Executive, may not be assigned by him.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company, and the heirs, executors, and personal representatives of the Executive.

 

  

  

  

Section 11.03.  Successors of the Company.  The Company will require any successor (whether director or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive terminated the Executive’s employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed as the Date of Termination.  As used in this Agreement, “Company” as hereinbefore and/or assets as aforesaid which executes and delivers the agreement provided for in this Article 11.03 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

Section 11.04.  Governing Law.  This Agreement and the performance of the parties under this Agreement shall be construed in accordance with the laws of Indiana, and any action or proceeding that may be brought, arising out of, in connection with, or by reason of this Agreement shall be governed by the laws of Indiana, to the exclusion of the law of any other forum, and regardless of the jurisdiction in which the action or proceeding may be instituted.

Section 11.05.  Waiver.  Failure to insist upon strict compliance with any of the terms, covenants, or conditions of this Agreement shall not be deemed a waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.

Section 11.06.  Modification and Entire Agreement.  No modification, amendments, extension or alleged waiver of this Agreement or any provision thereof will be binding upon the Executive or the Company unless in writing and signed by the Executive and a duly authorized officer of the Company.  From and after the Effective Date, this Agreement and any termination benefits agreement or similar agreement between the Company and the Executive shall constitute the entire employment arrangement between the Executive and the Company and shall supersede and replace any and all prior agreements and understandings, written or oral, relative to such employment.

Section 11.07.  Notices.  All notices and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been properly given if delivered by hand, sent by telecopy, or mailed, certified or registered mail with postage and fees prepaid:

 

	 	If to the Company, to:	Tower Bank & Trust Company	 
	 	 	
116 East Berry Street, Suite 100

Fort Wayne, Indiana, 46802

	 
	 	 	 	 
	 	If to the Executive, to:	Mr. Richard R. Sawyer	 
	 	 	

8214 Grand Forest Court

 
Fort Wayne, Indiana, 46815

	 

 

or to such other person or address as the party to whom such notice or communication is to be given shall have notified the other party in accordance with Section 11.06.  Any mailed communication shall be deemed to have been given on the third “business day” (such term excluding, for purposes of this Agreement, Saturdays, Sundays, and legal holidays) after the mailing.  Any communication sent by telecopy shall be deemed to have been given on the date receipt of the telecopy transmission is confirmed.

ARTICLE XII

Change in Control

 

Section 12.01.  Termination after Change in Control Benefit.  If within four (4) months before or twenty four (24) months and one (1) day after a Change of Control of the Company as defined in Section 12.01(a), the Company shall terminate the Executive’s employment other than pursuant to Section 8.01(a), (b) or (c) hereof, or give notice under Section 1.02 of its intent not to renew without Cause, or if the Executive shall terminate his employment for Good Reason, then in any of such events, the Company shall pay to the Executive a benefit as defined in subsection 12.01(b).

 

  

  

  

(a)           Change of Control.  The term Change of Control shall have the following meaning:

(i)           A reorganization, merger, consolidation, or other form of corporate transaction or series of transactions, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, directly or indirectly, own less than fifty percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged, or consolidated entity’s then outstanding voting securities;

(ii)           A liquidation or dissolution of the Company;

(iii)           The acquisition by any person, entity or “group” within the meaning of Section 13 (d) or 14(d)(2) of the Securities Exchange Act of 1934, (excluding any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of more than fifty percent (50%) of either the then outstanding shares of common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; or

 

(iv)           As the result of, or in connection with, any tender or exchange offer, merger, consolidation or other business combination, sale, or disposition of all or substantially all of the Company’s assets, or contested election, or any combination of the foregoing transactions (a “Transaction”), the persons who were the directors of the Company immediately before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or any successor of the Company.

(b)           Amount.  Upon termination of the Executive’s employment under the circumstances described in this section 12.01, the Executive will receive the amount payable under Section 8.02(c), plus an amount equal to two (2) times his Average Bonus.  For purposes herein, “Average Bonus” shall be determined by adding the Executive’s bonuses awarded by the Company under its incentive plan for the three (3) complete calendar years prior to his termination (or such fewer complete years if he has been employed less than three (3) complete calendar years) and dividing by three (or such fewer complete years if he has been employed less than three (3) complete calendar years).

No other benefits or amounts shall be payable under Section 8.02.

(c)           Time of Payment.  Any amount owed under this article XII shall be paid in a single sum payment, which payment shall be made on the 30th day following the Executive’s termination of employment.

(d)           Limitation of Benefit.  Notwithstanding anything to the contrary in this Agreement, if there are payments to the Executive which constitute “parachute payments,” as defined in Section 280G of the Code, then the payments made to the Executive shall be limited to the greater of (x) One Dollar ($1.00) less than the amount which would cause the payments to the Executive (including payments to the Executive which are not included in this Agreement) to be subject to the excise tax imposed by Section 4999 of the Code, and (y) the payments to the Executive (including payments to the Executive which are not included in this Agreement) after taking into account the excise tax imposed by section 4999 of the Code.  The calculations shall be done by an outside party directed by the Company.

(e)           Release.  Such release must be executed within twenty one (21) days after Executive’s termination of employment and Executive shall have seven (7) days after such execution to revoke such release.

(f)           Attorney’s Fees.  To the extent that the Executive prevails in a court of competent jurisdiction regarding such dispute, the Company shall reimburse Executive his reasonable attorney’s fees and costs incurred in such action.  Any amounts to be reimbursed hereunder will be paid to the Executive within fifteen (15) days of a written consent for the same.

 

  

  

  

ARTICLE XIII

409A

Section 13.01.  Special Provision Regarding Section 409A of the Internal Revenue Code.  This Agreement is intended to comply with the applicable requirements of IRC Section 409A and shall be limited, construed, and interpreted in accordance with such intent (including final regulations or any other guidance).  Notwithstanding anything hereunder to the contrary, any provision to the Agreement that is inconsistent with said Section 409A shall be deemed to be amended to comply with IRC Section 409A and to the extent such provision cannot be amended to comply with IRC Section 409A, such provision shall be null and void.

Section 13.02.  Definition of Separation of Service.  The terms “termination of employment” or words to that affect mean the same as a complete “separation from service” within the meaning of IRC 409A.

Section 13.03.  Compliance with Section 409A.  Notwithstanding anything herein to the contrary, (i) if at the time of Employee’s Separation from Service, Employee is a “specified employee” as defined in §409A of the Code and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such Separation from Service is necessary in order to prevent any accelerated or additional tax under §409A of the Code, then Tower will defer the commencement of the payment of any such amounts or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Employee) until the date that is six (6) months and one (1) day after Employee’s Separation from Service (or the earliest date as is permitted under §409A of the Code) and (ii) if any other payments of money or other benefits due to Employee hereunder could cause the application of an accelerated or additional tax under §409A of the Code such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under §409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by Tower, that does not cause such an accelerated or additional tax. The Employee will be considered to have terminated employment hereunder for purposes of receiving payments subject to §409A of the Code only if such termination of employment constitutes a “Separation from Service” within the meaning of §409A of the Code.  “Specified Employee” means a key employee as defined in IRC §416(i) without regard to Paragraph 5 thereof. For purposes of determining whether an Employee is a Specified Employee hereunder, such determination shall be made as of the December 31st preceding the date an Employee is due a payment hereunder.

 

IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.

 

 

	NAME	 	TOWER FINANCIAL CORPORATION	 
	 	 	 	 	 	 
	By:	
/s/ Richard R. Sawyer

	 	By:	
/s/ Michael D. Cahill

	 
	 	Richard R. Sawyer	 	 	Michael D. Cahill,

Chief Executive Officer

	 
	 	
 

 

(“Executive”)  

	 	 	

 

 

(“Company”)ex10-2.htm

Exhibit 10.2

 

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement, dated as of September 14, 2010 (this "Agreement"), is by and between Global Energy Development PLC, a company registered in England and Wales ("Borrower"), and HKN, Inc., a Delaware corporation ("Lender").

The parties hereto agree as follows:

1.           Certain Definitions.  As used herein, the following terms shall have the following meanings:

(a)          “Collateral” shall mean 50% of the future  revenues generated immediately following the date of default of the Borrower and its Subsidiaries (and related accounts) arising from the Rio Verde Concession Contract in Colombia, South America provided as security to the Lender to secure unpaid and accrued amounts of principal and interest due and payable to the Lender under the Loan.

 (b)        "Distribution" shall mean, with respect to any Person, (i) the retirement, redemption, purchase or other acquisition for value of any shares, units, capital stock or other equity security interests issued by such Person or (ii) the declaration or payment of any dividend or distribution on or with respect to any such shares, units, capital stock or other equity security interests (other than a share or stock dividend payable only in the shares or capital stock of such Person or as a result of the exercise of options under the Borrower’s Employee Share Option Plan); provided, however, that Distribution shall not include any salary, bonus, expense reimbursement or similar payment.

(c)           “Guarantors” shall mean Colombia Energy Development Company, Harken de Peru Holdings, Ltd., Harken del Peru Limitada, and Global Energy Management Resources, Inc., all of which are Subsidiaries of the Borrower.

(d)           “Guaranty Agreement” shall mean the Guaranty Agreement, executed by the Guarantors in favor of the Lender and substantially in the form of Exhibit B hereto.

(e)           “Indebtedness” shall mean, with respect to the Borrower or its Subsidiaries, (i) all indebtedness (including principal, interest, fees and charges) for borrowed money or for the deferred purchase price of property or services; (ii) any other indebtedness which is evidenced by a promissory note, bond, debenture or similar instrument; and (c) any obligation under or in respect of outstanding letters of credit, acceptances, guarantees and similar obligations.

(f)           "Lien" shall mean any claim, lien, mortgage, deed of trust, security interest, pledge, charge, encumbrance or other right of a creditor to have its claim satisfied out of any property or assets, or the proceeds therefrom, prior to the general creditors of the owner thereof.

(g)           "Loan" shall mean the extension of credit by Lender to Borrower pursuant to Section 2.1 hereof in the amount of U.S. $5.0 million.

 

  

1

  

 

(h)           "Loan Papers" shall mean this Agreement, the Note, the Guaranty Agreement and such other instruments and certificates deemed necessary by the Borrower and Lender to carry out the intent of this Agreement executed by the Borrower in connection with the Loan.

(i)            “Material Adverse Effect” shall mean any change, development, occurrence or event that is or would reasonably be expected, at the sole determination of the Lender, to be materially adverse to (i) the business, properties, assets, liabilities, consolidated results of operations or financial condition of the Borrower or its Subsidiaries or (b) the ability of the Borrower to consummate the transactions contemplated hereby.

(j)           "Maturity Date" shall mean the earlier of (i) September 14, 2011 or (ii) the date on which an Event of Default shall have occurred (subject the cure period provided herein).

(k)           “Note” shall mean the Note, in the form of Exhibit A, evidencing the Loan.

(l)            "Permitted Lien" shall mean: (i) Liens for taxes or assessments and similar charges, which either are not delinquent or being contested diligently and in good faith by appropriate proceedings, and as to which Borrower has set aside adequate reserves on its books; (ii) statutory Liens, such as mechanic’s, materialman’s, warehouseman’s, carrier’s or other like Liens incurred in good faith in the ordinary course of business; (iii) zoning ordinances, easements, licenses, reservations, provisions, covenants, conditions, waivers or restrictions on the use of property and other title exceptions that do not materially and adversely affect the use or value of a person’s property; (iv) Liens in respect of judgments or awards with respect to which no Event of Default would exist; (v) Liens to secure payment of insurance premiums in connection with workers’ compensation, unemployment insurance and similar programs; (vi) Liens to secure capital leasing or financing used in the acquisition of new equipment or new properties; (vii) Liens asserted by government agencies on the Borrower’s properties under applicable regulations, concession or association contracts, (viii) Liens related to or otherwise required under the Borrower’s existing letters of credit or such future letters of credit that may be required in the ordinary course of the Borrower’s operations provided that they are not placed on the Collateral,  (ix) Liens securing Indebtedness existing as of the date of this Agreement, or (x) Liens incurred in the ordinary course of the Borrower’s business provided that they are not placed on the Collateral.

(m)           “Person” shall mean any individual, company, corporation, trust, unincorporated organization, governmental authority or any other form of entity.

(n)           “Subsidiary” of any Person shall mean any company, corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than fifty percent (50%) of (a) the issued and outstanding shares or capital stock having ordinary voting power to elect a majority of the board of directors of such company or corporation (irrespective of whether at the time shares or capital stock of any other class or classes of such company or corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

 

  

2

  

(o)           “2009 Report” means the Borrower’s Annual Report and Accounts 2009, distributed to the Borrower’s shareholders and publicly available on the Borrower’s corporate website.

2.             The Loan.

2.1           Loan Commitment.  Subject to and upon the terms, conditions, covenants and agreements contained in this Agreement, Lender agrees to make the Loan to Borrower in the principal amount of U.S. $5.0 million.  The Loan will be evidenced by the Note, or any renewal thereof.

2.2           Repayment of Principal and Interest.  Accrued and unpaid interest on the outstanding principal amount of the Loan shall be due and payable on the last day of each month, commencing October 31, 2010.  Borrower shall repay the entire unpaid principal amount of the Loan, together with all accrued and unpaid interest thereon, on the Maturity Date.  Subject to Section 2.3, Borrower shall have the right to prepay the principal amount of the Loan, in whole or in part, at any time prior to the Maturity Date.  All prepayments shall be credited first against unpaid and accrued interest and second against unpaid principal.  Any prepayment may not be reborrowed.

2.3           Interest Rate.  Interest shall accrue on the unpaid principal balance of the Loan at the rate of 10.0% per annum; provided, however, that (i) in the event that Borrower prepays the Loan prior to the Maturity Date, additional interest of 1.0% on the prepaid principal amount (accrued from the date of this Agreement through the date of prepayment) shall be due and payable at such time, and (ii) during the continuance of an Event of Default, the Loan shall bear interest, payable on demand, equal to the rate of 13.0% per annum.  All computations of interest shall be made by Lender on the basis of a year of 360 days.

2.4           Place of Payment; Taxes.  Any and all payments by Borrower hereunder shall be made in U.S. dollars at the office of Lender set forth herein (or as otherwise advised in writing by Lender), free and clear of and without deduction for any and all present or future levies, deductions, stamp or documentary taxes or similar charges or withholdings and all liabilities with respect thereto (excluding taxes measured by the net income or capital of Lender).

2.5           Grant of Security Interest.  To secure the payment, performance and observance of the Obligations, Borrower grants, and hereby assigns and pledges, to Lender, all of the Collateral, and grants to Lender a continuing security interest in, and a Lien upon, and a right of set off against, all of the Collateral.  The security interest granted by the Borrower shall at all times be valid and enforceable against the Borrower and all third parties in accordance with the terms of this Agreement, as security for the payment of the Loan.  The Borrower shall mark its books and records to evidence and protect the security interest and shall cause its financial statements to reflect the security interest by appropriate footnote.  Provided, however, that nothing in this Agreement is intended and shall not be interpreted to bar the Borrower’s use of the Collateral in the ordinary course of business unless an Event of Default occurs in which case any use by Borrower of the Collateral shall first be authorized by the Lender while such Event of Default continues.

 

  

3

  

2.6           Transaction Fee.  Borrower shall pay to Lender a transaction fee in the amount of $60,000 (1.20% of the principal amount of the Note) upon the execution and delivery of this Agreement.

3.              Representations and Warranties.  To induce Lender to enter into this Agreement, Borrower represents and warrants to Lender as follows:

3.1.           Organization and Good Standing.  Each of the Borrower and the Guarantors is duly organized, validly existing and in good standing under the laws of its domicile of organization.

3.2.           Power and Authority.  Borrower has the corporate power and authority to consummate the transactions contemplated by the Loan Papers.

3.3.           Binding Effect.  Each of the Loan Papers to which Borrower is a party has been duly authorized, executed and delivered by Borrower, and each is the legal, valid and binding obligation of the Borrower enforceable in accordance with its terms except that (i) enforceability may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights and (ii) the availability of equitable remedies.

3.4.           Consents; Compliance with Other Instruments.  Borrower has obtained all consents, approvals and authorizations from, and has made all filings with, each governmental instrumentality or other agency required as a condition to the execution, delivery and performance of the Loan Papers.  Neither the execution and delivery of the Loan Papers by Borrower nor the consummation by it of the transactions contemplated thereby will violate, breach, be in conflict with, or constitute a default under, or permit the termination or the acceleration or maturity of, or result in the imposition of any Lien upon any of the assets of Borrower and its Subsidiaries.

3.5           Financial Statements; Adverse Changes. The financial statements of the Borrower and its Subsidiaries on a consolidated basis for each of the periods included in the 2009 Report fairly present in all material respects the financial condition and the results of operations of the Borrower and its Subsidiaries as of the dates and for the periods indicated.  The Borrower and its Subsidiaries do not have any liabilities or obligations (accrued, absolute, contingent or otherwise), other than liabilities or obligations (i) reflected on, reserved against, or disclosed in the notes to, the financial statements in the 2009 Report or (ii) that were incurred in the ordinary course of business since December 31, 2009 and would not, individually or in the aggregate, reasonably be expected to have a materially detrimental impact on the Borrower’s operations in the reasonable opinion of the Borrower.  Since December 31, 2009, and except as described in the 2009 Report, no event or circumstance has occurred that, individually or in the aggregate, has had or would reasonably be expected to have in the Borrower’s reasonable opinion a material adverse effect on the Borrower’s operations.

 

  

4

  

3.6           Litigation.

  There is no action, suit, proceeding or investigation pending or, to the knowledge of the Borrower, overtly threatened against, nor any outstanding judgment, order or decree against, the Borrower or any of its Subsidiaries before or by any governmental authority or arbitral body which in the aggregate have, or if adversely determined, would reasonably be expected to have, a Material Adverse Effect in the opinion of the Borrower.  Neither the Borrower nor any of its Subsidiaries is in default with respect to any judgment, order or decree of any governmental authority in a materially adverse manner.  The Borrower is not a party or subject to, and none of its assets is bound by, the provisions of any material order, writ, injunction, judgment, or decree of any court or government agency or instrumentality.

4.              Covenants.  From the date hereof until the Maturity Date, Borrower covenants and agrees to:

4.1.           Inspection..  Permit Lender to visit and inspect its properties and to discuss its affairs and finances with its officers, all at such reasonable times during business hours as may be requested not less than 15 business days in advance by Lender.

4.2.           Maintenance of Licenses and Properties.  Maintain and preserve all of the material licenses, contracts or properties which are used in the conduct of its business to the extent the failure to maintain and preserve such material licenses, contracts or properties would reasonably be expected to have a Material Adverse Effect.

4.3.           Distributions.  Not make or pay any Distribution without obtaining the Lender’s approval which shall not be unreasonably withheld.

4.4.           Liens.  Not create, incur or suffer or permit to be created or incurred or to exist any lien or encumbrance upon any of the assets of Borrower and its Subsidiaries except Permitted Liens.

4.5.           Acquisitions, Mergers and Dissolutions.  Not, and not permit any Guarantor to (i) merge or consolidate with any entity or (ii) liquidate, wind up or dissolve itself without first satisfying the indebtedness owed and outstanding to the Lender.

4.6.           Sales of Assets.  Except in the ordinary course of business not, and not permit any Subsidiary to, sell, lease, transfer or otherwise dispose of any material assets from which the Collateral is derived.

 

  

5

  

 

4.7           Use of Proceeds.  Use the proceeds of the Loan for development activities of the Borrower’s existing properties and for working capital purposes.

4.8           Senior Indebtedness.  Not incur any Indebtedness purporting to be senior in right of payment to the Note or purporting to grant a Lien in any of the Collateral.

5.             Events of Default.  Should any of the following events (each of which is herein called an "Event of Default") occur, Borrower shall be in default hereunder:

(a)           the Borrower defaults in the performance of any provision of this Agreement, and such default continues for a period of 15 days after written notice of such default is given; or

(b)           the Borrower makes an assignment for the benefit of creditors or admits in writing its inability to pay its debts generally as they become due; or an order, judgment or decree is entered into adjudicating the Borrower or any Subsidiary bankrupt or insolvent; or any order for relief with respect to the Borrower or any Subsidiary is entered under the Federal Bankruptcy Code; or the Borrower or any Subsidiary petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator, or commences any proceeding relating to the Borrower or any Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Borrower or any Subsidiary and either (i) the Borrower by any act indicates its approval thereof, consent thereto or acquiescence therein or (ii) such petition, application or proceeding is not dismissed within 60 days; or

(c)           if any of the representations or warranties hereunder were not true and correct in any material respect on the date made.

6.              Remedies.

 

(a)           Borrower agrees that upon the occurrence and continuance of any Event of Default, the Lender may, at its option (i) declare the outstanding principal balance of and accrued but unpaid interest on the Loan at once due and payable, (ii) pursue any and all other rights, remedies and recourses available to the Lender at law or in equity, (iii) take possession of all or any portion of the Collateral, (iv) require Borrower or any Subsidiary with rights and interests to the Collateral to assemble the Collateral and make such Collateral available to Lender at such location as requested by Lender, (v) sell or otherwise dispose of the Collateral in accordance with applicable laws (it being understood that Borrower will remain liable for any deficiency owing to the Lender after the proceeds of any disposition of the Collateral have been applied to the Loan) or (vi) pursue any combination of the foregoing.

 

  

6

  

 

(b)           Upon the occurrence of an Event of Default which is not waived by Lender,  Borrower further agrees to pay to Lender, in addition to all other sums payable hereunder, all costs and expenses of collection, including but not limited to reasonable attorneys' fees.

 

(c)           The failure to exercise the option to accelerate the maturity of the Loan or any other right, remedy or recourse available to the Lender upon the occurrence and continuance of an Event of Default hereunder shall not constitute a waiver of the right of the Lender to exercise the same at that time or at any subsequent time with respect to such uncured Event of Default or any other Event of Default.  The rights, remedies and recourses of the Lender shall be cumulative and concurrent and may be pursued separately, successively or together as often as occasion therefore shall arise, at the sole discretion of the Lender.  The acceptance by the Lender of any payment which is less than the payment in full of all amounts due and payable at the time of such payment shall not (i) constitute a waiver of or impair, reduce, release or extinguish any right, remedy or recourse of the Lender, or nullify any prior exercise of any such right, remedy or recourse except with respect to such partial payment, or (ii) impair, reduce, release or extinguish the obligations of any party liable with respect to the Loan except with respect to such partial payment.

 

7.              Release and Indemnification.

 

(a)           Borrower hereby releases and exculpates Lender and its officers, employees and designees, and Lender shall not have any liability to Borrower or any Subsidiary (whether in contract, tort, equity or otherwise) for losses suffered by Borrower or such Subsidiary in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Lender, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct.  In any such litigation, Lender shall be entitled to the benefit of the rebuttable presumption that it acted at all times in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement.

 

(b)           In no event shall Lender have any liability to Borrower or any Subsidiary for lost profits or other special, consequential, incidental, exemplary or punitive damages in connection with this Agreement or any of the other Loan Papers or the transactions contemplated hereby or thereby, and Borrower expressly waives any and all right to assert any such claims.  No officer of Lender has any authority to waive, condition, or modify the provisions of this section.

 

(c)           Borrower agrees to indemnify, save and hold harmless Lender and its respective directors, officers, agents, attorneys and employees from and against: (i) the use or contemplated use of the proceeds of the Loan, any transaction contemplated by this Agreement or the other Loan Papers, or any relationship with Borrower or any Subsidiary; (ii) any administrative or investigative proceeding by any governmental agency arising out of or related to a claim, demand, action or cause of action described in clause (i) above; and (iii) any and all liabilities, losses, costs or expenses (including reasonable attorneys’ fees and disbursements and other professional services) that any party indemnified hereunder suffers or incurs as a result of any foregoing claim, demand, action or cause of action; provided, however, that no such indemnitee shall be entitled to indemnification for any loss caused by any indemnitee’s gross negligence or willful misconduct.  Any obligation or liability of Borrower to any such indemnitee under this section shall survive the expiration or termination of this Agreement and the repayment of the Loan.

 

  

7

  

 

8.              Miscellaneous.

(a)           The headings, captions and arrangements used in the Loan Papers, unless specified otherwise, are for convenience only and shall not be deemed to limit, amplify or modify the terms of the Loan Papers, nor affect the meaning thereof.

(b)           Any notice, consent, demand, request, approval or other communication to be given hereunder by any party to another shall be deemed to have been duly given if given in writing and personally delivered or sent by overnight delivery service, or United States mail, registered or certified, postage prepaid, with return receipt requested, to the address set forth under the parties' signature hereto.  Notice so given shall be deemed to be given and received on the date of actual delivery.

(c)           The laws (other than conflict-of-laws provisions thereof) of the State of Texas and of the United States of America shall govern the rights and duties of the parties hereto and the validity, construction, enforcement and interpretation of this Agreement, except to the extent otherwise specified therein.  The Borrower irrevocably waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Loan Papers, or in any way connected with or related or incidental to the dealings of the parties in respect of this Agreement or the other Loan Papers or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute with respect to any such matters shall be heard only in the courts described above (except that Lender shall have the right to bring any action or proceeding against Borrower or any Subsidiary or its property in the courts of any other jurisdiction which Lender deems necessary or appropriate in order to realize on the Collateral or otherwise enforce its rights against Borrower or any Subsidiary or its property).

(d)           If any provision in the Loan Papers is held to be illegal, invalid or unenforceable, such provision shall be fully severable; the applicable Loan Paper shall be construed and enforced as if such provision had never comprised a part thereof; and the remaining provisions thereof shall remain in full force and effect and shall not be affected by such provision or by its severance therefrom.

(e)           THE LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES OR ANY TERM SHEETS BETWEEN BORROWER AND LENDER (ALL THE TERMS AND CONDITIONS OF WHICH ARE SUPERSEDED BY THE LOAN PAPERS).  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

  

8

  

(f)           Except as otherwise specifically provided, the Loan Papers may only be amended by an instrument in writing executed jointly by Borrower and Lender and supplemented only by documents delivered or to be delivered in accordance with the express terms thereof.

(g)           This Agreement may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

 

	 	

Global Energy Development PLC

	 
	 	 	 	 
	
 

	
By: 

	/s/ Steve C. Voss	 
	 	 	 	 
	 	Address: 	

26 Dover Street

London W1S 4LY

United Kingdom

Attn:  Mr. Stephen C. Voss,

Vice Chairman

	 
	 	 	 	 
	 	

Telecopy Number:  (44) (20) 3178 5157

	 

 

 

	 	
HKN, Inc.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Anna Williams	 
	 	 	 	 
	 	Address: 	

180 State Street, Suite 200

Southlake, Texas 76092

Attn:  Ms. Anna Williams

Senior Vice President and Chief Financial Officer

	 
	 	 	 	 
	 	

Telecopy Number:  (817) 410-1884

	 

 

  

9

  

 

Exhibit A

SENIOR SECURED PROMISSORY NOTE

September 14, 2010

FOR VALUE RECEIVED, Global Energy Development PLC ("Borrower") promises to pay to the order of HKN, Inc. ("Lender"), at such place as the Lender may designate from time to time, in lawful money of the United States of America, the sum of U.S. $5,000,000, together with interest, as described in the below referenced Loan Agreement.

This Promissory Note evidences the Loan made pursuant to, and has been executed and delivered under, and is subject to the terms and conditions of, that certain Loan and Security Agreement (as hereafter amended, modified, supplemented, renewed, extended, restated, substituted or replaced, the "Loan Agreement") dated as of the date hereof, between Borrower and Lender.  Unless otherwise defined herein or unless the contexts hereof requires, each term used herein with its initial letter capitalized has the meaning given to such term in the Loan Agreement.  Reference is made to the Loan Agreement and the other Loan Papers for provisions affecting this Promissory Note regarding payments and prepayments, acceleration of maturity, payment of attorneys' fees, court costs, and other costs of collection, certain waivers by Borrower and others now or hereafter obligated for payment of any sums due hereunder, and security for the payment hereof.

Principal of and interest on this Promissory Note shall be due and payable, and shall be secured, in the manner specified in the Loan Agreement and the Loan Papers defined therein.  All payments due to Lender hereunder shall be made at the place, in the type of money and funds, and in the manner specified in the Loan Agreement.

EXECUTED as of the day and year first above written.

 

 

	 	

Global Energy Development PLC

	 
	 	 	 	 
	
 

	
By: 

	/s/ Steve C. Voss	 

 

  

A-1

  

Exhibit B

GUARANTY AGREEMENT

This Guaranty Agreement (this “Guaranty”) is made and delivered as of September 14, 2010, by  (“Guarantor”), and HKN, Inc. (“Lender”).

WHEREAS, Lender has entered into a Loan and Security Agreement, dated as of even date herewith (the “Loan Agreement”), with Global Energy Development PLC (the “Borrower”); and

WHEREAS, all capitalized terms used but not elsewhere defined in this Guaranty shall have the respective meanings ascribed to such terms in the Loan Agreement; and

WHEREAS, each Guarantor is a subsidiary of the Borrower and will benefit from the extension of the Loan to Borrower by the Lender; and

WHEREAS, one of the conditions precedent to Lender’s obligations under the Loan Agreement is that each Guarantor shall have executed and delivered this Guaranty;

NOW, THEREFORE, for value received, each Guarantor hereby agrees as follows:

1.           Guarantor irrevocably and unconditionally guarantees to Lender the prompt performance and payment when due of all of the Borrower’s Obligations under the Loan Agreement.

2.           The obligations of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable, and shall remain in full force and effect until the Obligations shall have been satisfied in full, it being the express purpose and intent of Guarantor that its obligations hereunder shall not be discharged except by payment, performance, discharge or other satisfaction in full of all of Guarantor’s obligations hereunder.  Such obligations shall not be in any manner whatsoever affected, modified or impaired by the happening from time to time of any assignment of Borrower’s obligations to a third party or any event or action that would, in the absence of this clause, result in the release or discharge of Guarantor, by operation of law or otherwise, from the performance of observance of any obligation, covenant or agreement contained in this Guaranty, or the default or failure of Guarantor to perform fully any obligations set forth in this Guaranty.

3.           Guarantor waives diligence, presentment, protest, notice, demand, dishonor and notice of dishonor and any other defenses available to it hereunder as a surety and agrees to be bound to the Obligations as fully as if it were a co-obligor. The parties to the Loan Agreement may enter into any amendment, waiver or modification of the Loan Agreement, whether or not such amendment, waiver or modification would in any way increase or decrease the extent of Guarantor’s obligations hereunder, without notice to or consent of Guarantor and without thereby releasing Guarantor hereunder or incurring any liability to Guarantor.

 

  

B-1

  

4.           No failure or delay or lack of demand, notice or diligence in exercising any right under this Guaranty shall operate as a waiver thereof, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right under this Guaranty.

5.           This Guaranty is an absolute, unconditional and continuing guaranty of payment and performance and not of collection.  Lender need not exhaust or pursue any remedy or take any action in respect of the default of any obligation guaranteed hereby prior to or as a condition to proceeding directly under this Guaranty against Guarantor.

6.           Guarantor represents and warrants to Lender that it has the corporate power and authority to enter into this Guaranty and that this Guaranty is a legal and valid obligation binding upon it and is enforceable in accordance with its terms.

7.           Guarantor agrees that the obligation of Guarantor as a guarantor shall not be impaired, modified, changed, released, or limited in any manner whatsoever by any impairment, modification, change, release, or limitation of the liability of Borrower or its estate in bankruptcy, resulting from the operation of any present or future provision of the bankruptcy laws or other similar statute, or from the decision of any court.

8.           Guarantor agrees to pay all reasonable costs, expenses and fees which may be incurred by Lender in enforcing this Guaranty or in protecting the rights of Lender following any default on the part of Guarantor hereunder, whether the same shall be enforced by suit or otherwise.

9.           This Guaranty is and shall be in every particular available to the successors and assigns of Lender and is and shall always be fully binding upon the successors and assigns of Guarantor, provided that Guarantor shall not assign any of its rights or obligations hereunder without the written consent of Lender.

10.         This Guaranty shall be governed by and construed in accordance with the laws of the State of Texas.

 

  

B-2

  

Executed as of the date first written above.

 

	 	

Colombia Energy Development Company

	 
	 	 	 	 
	
 

	
By: 

	/s/ Steve C. Voss	 

 

 

	 	
Harken de Peru Holdings, Ltd.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Steve C. Voss	 

 

 

	 	

Harken de Peru Limitada

	 
	 	 	 	 
	
 

	
By: 

	/s/ Steve C. Voss	 

 

 

	 	
Global Energy Management Resources, Inc.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Steve C. Voss	 

 

 

  

B-3

  

 

Accepted:

 

HKN, Inc.

 

By:   /s/ Anna Williams                                  

 

 

B-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00210-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00210-of-00352.parquet"}]]