EXHIBIT 99.1
REVOLVING CREDIT LOAN AGREEMENT
THIS REVOLVING CREDIT LOAN AGREEMENT, is made this 5th day of May, 2003, by
and between Kestrel Energy, Inc. (the "Borrower"), a Colorado corporation, and
Barry D. Lasker ("Lender"), an individual.
RECITALS
A. WHEREAS, Borrower is desirous of borrowing sums from time to time up to
an aggregate amount of Two Hundred Thousand Dollars ($200,000) from Lender in
the form of a revolving line of credit;
B. WHEREAS, Lender serves as the President and Chief Executive Officer of
Borrower and Borrower is already indebted to Lender on account of unpaid wages
and unreimbursed expenses advanced by Lender on Borrower's behalf in the
approximate amount of $150,000 (the "Existing Debt"); and
C. WHEREAS, Lender is willing to provide the above-described loans to
Borrower on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties agree as follows:
1. Terms of Revolving Credit. Subject to the terms and conditions of this
Agreement, Lender hereby agrees to establish a revolving credit facility
(hereinafter, the "Revolving Credit") in the maximum amount of Two Hundred
Thousand Dollars ($200,000) in favor of Borrower on the following terms and
conditions:
a. The term of the Revolving Credit shall begin on the date hereof and
shall end on the earlier to occur of two (2) years from the date of this
agreement or the date which is mutually agreed upon by the Lender and the
Borrower (the "Repayment Date").
b. Concurrently herewith, Borrower shall execute a Revolving Credit
Master Note of even date herewith in the form attached hereto as Exhibit A in
favor of Lender in the face amount of $200,000 (the "Note"), payable on the
Repayment Date.
c. Advances under the Revolving Credit may be made, upon request of
Borrower in accordance with the terms of this Agreement, at any time prior to
the Repayment Date upon receipt by Lender of a request therefor signed by
Borrower. At no time shall the aggregate obligation of Borrower to Lender,
including the Existing Debt, exceed Two Hundred Thousand Dollars ($200,000) plus
accrued but unpaid interest on amounts previously received. Borrower may at any
time prior to the Repayment Date repay all or any part of said loans under the
Revolving Credit and subsequently receive further advances, consistent with the
terms and conditions hereof.
d. Principal amounts due under the Revolving Credit, including the
Existing Debt, shall bear interest and principal and interest shall be payable
in accordance with the terms of the Note.
e. Borrower may prepay under the Note at any time in any amount without
premium or penalty.
f. Amounts borrowed under the Revolving Credit shall be used for the
purposes specified in Section 8.a(2) of this Agreement.
2. Fees and Expenses. Borrower agrees to bear all legal expenses required
for the preparation of this Agreement, the Note, and other documents in
connection with this Revolving Credit and the making, protection, enforcement
and collection of all amounts advanced under the Revolving Credit. These costs
do not include, however, the fees of separate counsel for Lender, if any, or the
costs and expenses incurred in enforcing the rights of Lender under this
Agreement except upon the occurrence of an Event of Default (hereinafter
defined).
3. Promise to Pay, Conversion and Acceleration upon Termination of
Employment. Borrower promises to pay to Lender when due, whether by normal
maturity, acceleration or otherwise, the entire outstanding principal amount of
the Revolving Credit, including the Existing Debt, together with interest, and
all other amounts payable by Borrower to Lender hereunder, including costs of
collection. Borrower also agrees that Lender may elect to convert all or any
portion of the unpaid principal and interest owed under this Agreement and the
Note into shares of the Borrower's common stock at a conversion price of $.40
per share (the "Conversion Price"). Borrower further agrees that Lender shall
have the right to accelerate the Repayment Date in the event of the termination
of Lender's employment as President of Borrower for any reason to a date not
sooner than six (6) months after the effective date of such termination of
employment. In addition, Borrower agrees that in the event of a Change of
Control of Borrower, Lender shall have the right to accelerate the Repayment
Date to a date not sooner than thirty (30) days after the effective date of such
Change of Control. For purposes hereof, a "Change of Control" shall be deemed to
have occurred (a) if a person or group of persons (other than Lender or its
affiliates) obtains sufficient shares of the Borrower's common stock that such
person or group of persons has the ability, whether or not exercised, to call a
meeting of Borrower's shareholders and elect a majority of the Borrower's board
of directors or (b) if at any meeting of Borrower's shareholders a majority of
the board of directors is elected which were not nominated by the nominating
committee of the Borrower's board of directors or such board itself.
4. Events of Default; Acceleration. Any or all of the liabilities of
Borrower to the Lender in connection with the Revolving Credit shall, at
Lender's option, be due and payable upon the occurrence of any of the following
events of default (each of which shall be hereinafter referred to as an "Event
of Default") ") and the failure by Borrower to cure such Event of Default within
thirty (30) days of receipt of written notice from Lender of its intent to
accelerate the repayment of the Note on account thereof: (a) default in the
payment, when due or payable, of any obligation of Borrower under this Agreement
or the Note; (b) failure of Borrower after reasonable written request by Lender
to permit the inspection of books or records of Borrower at a reasonable time
and place; (c) issuance of any injunction or of an attachment or judgment
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against any property of Borrower securing the Note which is not discharged
within ten (10) business days after issuance; (d) the insolvency of Borrower, or
the filing of any bankruptcy, reorganization, debt arrangement or other
proceeding or case against Borrower under any bankruptcy or insolvency law or
commencement of any dissolution or liquidation proceeding against Borrower, any
of which is either consented to or acquiesced in by Borrower or remains
undismissed for thirty (30) days after the date of entry or the commencement by
Borrower of a voluntary case under the federal bankruptcy laws or any state
insolvency or similar laws, or the consent by Borrower to the appointment of a
receiver, liquidator, assignee, trustee, custodian or similar official for
Borrower or any of its property, as the case may be, or the making by Borrower
of any assignment for the benefit of creditors; or (e) material failure of a
"Condition of Lending" described hereinafter in Section 6. A violation or breach
of a representation or warranty by the Borrower shall not constitute an Event of
Default and will not excuse Lender from performance of its obligations hereunder
but such violation or breach may entitle Lender to seek damages from Borrower
resulting from such violation or breach.
5. Waivers. Borrower waives demand, notice, protest, notice of acceptance
of this Agreement, notice of loans made, credit extended, and all other action
taken in reliance hereon and all other demands and notices of any type.
6. Conditions of Lending. This Agreement and any and all advances under the
Revolving Credit are and shall at all times be subject to the following:
a. The representations and warranties of Borrower to Lender shall be
materially accurate on the date hereof and on and as of the date of each advance
under the Revolving Credit with the same effect as though such representations
and warranties had been made on and as of such date.
b. All covenants and agreements required to be performed by Borrower
under this Agreement and under the Note shall have been materially performed to
the reasonable satisfaction of Lender as and when required.
c. On the date hereof and on and as of the date of each advance under
the Revolving Credit no Event of Default shall have occurred and no condition,
event or act which, with the giving of notice or the lapse of time or both,
would constitute an Event of Default shall have occurred or shall exist.
d. All legal details and proceedings in connection with the transactions
contemplated by this Agreement shall be in form and substance reasonably
satisfactory to Lender and its counsel.
7. Borrower's Representations and Warranties. To induce Lender to enter
into this Agreement, Borrower represents and warrants to Lender as follows:
a. Existence; Power; Authority. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of Colorado.
Borrower is duly and validly authorized by all necessary corporation action and
has full power and authority to enter into this Agreement, to make the
borrowings hereunder, to execute and deliver this Agreement and the
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Note, and to perform and comply with the terms, conditions, and agreements set
forth herein and therein.
b. Binding Agreement. This Agreement constitutes, and the Note, when
made and delivered for value received will constitute, the valid and legally
binding obligations of Borrower, enforceable in accordance with their respective
terms.
c. No Conflicting Agreements. The execution of and performance under
this Agreement and the Note and the borrowings hereunder and thereunder by the
Borrower will not violate: (i) any statute, regulation or other provision of
law; (ii) any order of a court or instrumentality of government having
jurisdiction over the Borrower; (iii) any provision of the Articles of
Incorporation of the Borrower; or (iv) any indenture, contract, agreement or
other instrument to which the Borrower is a party or by which the Borrower or
any of its property is bound. There are no provisions of any existing mortgage,
deed of trust, contract, lease, or other agreement of any kind binding on the
Borrower or affecting its business or property which would prohibit the
execution, delivery or performance of the terms of this Agreement or the Note.
h. Violation of Laws. Neither the consummation of this Agreement nor the
use, directly or indirectly, of all or any portion of the proceeds of the
Revolving Credit will violate or result in a violation of any provision of any
applicable law or of any applicable order of, or restriction imposed by, any
applicable governmental or regulatory entity or authority.
8. Borrower's Covenants. Until all obligations and liabilities of Borrower
to Lender under this Agreement and the Note have been paid and performed in
full, Borrower shall keep and perform the following covenants, and does hereby
covenant, agree and promise to Lender as follows:
a. General Affirmative Covenants. Borrower shall, at all times during
the term of the Revolving Credit and at all times that any advances hereunder
are outstanding, do the following:
(1) Insurance. After acquisition thereof, maintain adequate general
public liability and other insurance on the collateral securing the Note as
is customarily maintained by similar companies operating in the same
vicinities as Borrower, and Borrower will upon request of Lender, deliver
to Lender copies of the policies concerned.
(2) Use of Proceeds. Use any and all amounts advanced under this
Agreement solely for the working capital needs of Borrower.
(3) Information. Furnish to Lender, promptly from time to time, such
non-confidential information concerning the operations, business, affairs,
and financial condition of the Borrower as Lender may reasonably request.
(4) Books, Records, and Inspections. At all times (a) maintain
complete and accurate books and records and (b) permit Lender to examine
and inspect all properties, books, operations and records of Borrower at
any reasonable time and from time to time wherever such properties, books,
and records are located.
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(5) Events of Default. Promptly inform Lender of the occurrence of
any Event of Default or the occurrence of any condition, event or act
which, with the giving of notice or lapse of time or both, would constitute
an Event of Default hereunder.
b. Negative Covenant. Without the prior written consent of Lender,
Borrower shall not at any time during the term of the Revolving Credit sell,
sell and leaseback, mortgage, pledge or otherwise encumber or dispose of any of
the collateral securing the Note, or permit any new liens or security interests
to be placed thereon, except for Permitted Liens, as such term is defined in the
Mortgage, Deed of Trust, Security Agreement, Assignment of Production and
Financing Statement, of even date herewith, by Mortgagor for the use and benefit
of Mortgagee.
9. Jurisdiction and Venue. In any action brought by Lender under this
Agreement, Borrower consents to the exercise of personal jurisdiction over it by
the courts of the State of Colorado and agrees that venue shall be proper in any
County of the State of Colorado or in the City and County of Denver, in addition
to any other court where venue may be proper. Borrower waives and releases, to
the extent permitted by law, all errors and all rights of exemption, appeal,
stay of execution, inquisition and extension upon any levy on real estate or
personal property to which the Borrower may otherwise be entitled under the laws
of the United States of America now in force or which may hereafter be passed,
as well as the benefit of any or every statute, ordinance, or rule of court
which may be lawfully waived conferring upon Borrower any right or privilege of
exemption, stay of exercise, or supplementary proceedings, or other relief from
the enforcement or immediate enforcement of a judgment or related proceedings on
a judgment.
10. Notices. All notices, consents, approvals, requests, demands and other
communications which are required or may be given hereunder shall be in writing
and shall be duly given if personally delivered, sent by telefax, telegram or
overnight courier or posted by U.S. registered or certified mail, return receipt
requested, postage prepaid and addressed to the other parties at the addresses
set forth below.
Lender
Barry D. Lasker
451 Brown Saddle Street
Houston, Texas 77057
Borrower:
Kestrel Energy, Inc.
1726 Cole Boulevard, Suite 210
Lakewood, Colorado 80401
Attention: Timothy L. Hoops
Any party may from time to time change the address to which notices to it are to
be sent by giving notice of such change to the other parties in the manner set
forth herein. Notices shall be deemed given on the next business day following
the day such notice is posted or sent by courier in the manner described above,
and if sent by telefax or telegram, on the date such notice is sent,
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and if delivered in person, on the date so delivered. Any notice period shall
commence on the day such notice is deemed given. For the purposes of this
Agreement, the term "business day" shall include all days other than Saturdays,
Sundays and federal banking holidays.
11. Security and Subordination. The debts evidenced by the Note shall be
secured by a security interest in the oil and gas properties of Borrower listed
on Exhibit B hereto, provided, however, that such security interest shall be
subordinated to the existing security interest of Borrower's primary lender,
currently R&M Oil and Gas, Ltd.
12. Miscellaneous
a. No Waiver. No failure or delay of any party hereto to exercise any
right given to it hereunder, or to insist on strict compliance with any
provision hereunder, shall constitute a waiver of such provision or of any other
provision hereof, or a waiver of any breach, and no waiver of any provision or
breach of any provision shall constitute a waiver of any other provision or
breach or of any subsequent breach of the same provision. No waiver shall be
effective unless in writing and signed by the party having the right to waive
such provision.
b. Survival. All covenants, agreements, representations and warranties
made herein and in any other instruments or documents delivered pursuant hereto
shall survive the execution and delivery of this Agreement and shall continue in
full force and effect so long as any of the amounts due hereunder are
outstanding and unpaid.
c. Entire Agreement; Modification. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
superseding all prior negotiations, correspondence, understandings and
agreements, if any, between the parties; no amendment or modification of this
Agreement shall be binding on the parties unless made in writing and duly
executed by all parties. There are no oral or implied agreements and no oral or
implied warranties between the parties hereto other than those expressed herein.
d. Binding Effect; Assignability. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement shall not be assignable by the Borrower without the
prior written consent of Lender.
e. Headings. The section and other headings in this Agreement are for
reference only and shall not limit or otherwise affect any of the terms hereof.
f. Further Assurances and Corrective Instruments. The parties hereto
agree to execute, acknowledge, seal and deliver, after the date hereof, without
additional consideration, such further assurances, instruments and documents,
and to take such further actions, as the parties hereto shall request in order
to fulfill the intent of this Agreement and the transactions contemplated
hereby.
g. Severability. Any provision in this Agreement 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 or affecting the validity or enforceability of such
provisions in any other jurisdiction.
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h. Expenses of Collection. Should this Agreement be referred to an
attorney for collection, whether or not judgment has been confessed or suit has
been filed, Borrower shall pay all of Lender's actual costs, fees (including
reasonable attorneys' fees) and expenses resulting from such referral.
i. Governing Law. This Agreement is made in and shall be governed by and
construed and interpreted in accordance with this laws of the State of Colorado.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement under seal, with the intention of making it a sealed instrument, as of
the day and year first above written.
BORROWER:
KESTREL ENERGY, INC.
By: /S/TIMOTHY L. HOOPS
------------------------------
Timothy L. Hoops
Operations Manager
LENDER:
/S/BARRY D. LASKER
- ---------------------------------
Barry D. Lasker
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EXHIBIT A
REVOLVING CREDIT MASTER NOTE
$200,000 Lakewood, Colorado
May 5, 2003
FOR VALUE RECEIVED, the undersigned (hereinafter, the "Borrower") promises
to pay to the order of Barry D. Lasker, an individual (hereinafter, "Lender") at
Lender's offices at 451 Brown Saddle Street, Houston, Texas 77057 or at
such other place as the holder of this Note may from time to time designate, in
lawful money of the United States of America, the principal sum of Two Hundred
Thousand Dollars ($200,000) (or so much thereof as has been advanced or
re-advanced hereunder from time to time) together with interest thereon at the
rate and upon the terms hereinafter provided. This promissory note (this "Note")
is issued pursuant to the Revolving Credit Loan Agreement between the Borrower
and the Lender of even date herewith (the "Loan Agreement") and is in all
respect subject to the various terms and conditions described in the Loan
Agreement. In addition, the following terms shall apply to this Note:
1. Interest Rate. For the period from the date of this Note until the date
on which the entire principal balance outstanding is paid in full (at stated
maturity, on acceleration or otherwise), interest shall accrue on the principal
balance from time to time outstanding at the rate of 10% per annum.
2. Repayment. The entire amount of principal outstanding shall be due and
payable on the Repayment Date (as hereafter defined). On the 15th day of each
month that there is an outstanding balance under this Note Borrower shall make a
monthly payment equal to the accrued interest on this Note as of that date. Any
accrued but unpaid interest shall be due and payable on the Repayment Date (as
hereinafter defined). For purposes of this Note, the "Repayment Date" is the
earlier to occur of that date which is two (2) years following the date of this
Agreement or the date which is mutually agreed upon by the Lender and the
Borrower, including but not limited to any requirements for early repayment
found in the Revolving Credit Loan Agreement between the parties of even date
herewith (the "Loan Agreement").
3. Calculation of Interest. Interest shall be calculated on the basis of a
three hundred sixty five (365) days per year factor applied to the actual days
on which there exists an unpaid principal balance. Interest shall be calculated
by Lender and billed to Borrower for each appropriate period; provided, however,
that failure of Lender to bill Borrower shall not relieve Borrower's payment
obligations hereunder.
4. Application of Payments. All payments made hereunder shall be applied
first to late penalties or other sums owing the holder, next to accrued and
unpaid interest, and then to principal.
5. Optional Prepayment. Borrower may prepay this Note in whole or in part
at any time or from time to time without penalty, additional interest or
premium.
6. Event of Default. As used herein the term "Event of Default" shall mean
(a) a failure to make any payment of any amount required to be paid pursuant to
this Note on the date such payment is due under this Note; and (b) an Event of
Default as such term is defined under the Loan Agreement.
7. Late Payment Penalty. Should any payment of interest or principal and
interest due hereunder be received by the holder of this Note more than ten (10)
days after its due date, Borrower shall, in addition to the default interest
rate, pay a late payment penalty equal to five percent (5%) of the amount
overdue.
8. Acceleration Upon Event of Default. Upon the occurrence of an Event of
Default, Lender may, at its option, in its sole and absolute discretion and
without notice or demand, declare the entire unpaid balance of principal plus
accrued interest and any other sums payable hereunder immediately due and
payable.
9. Default Interest Rate. Upon the occurrence of an Event of Default, the
rate of interest accruing on the disbursed unpaid principal balance shall
automatically and without further action by Lender be increased to 18 % per
annum, independent of whether Lender elects to accelerate the unpaid principal
balance as a result of such default.
10. Jurisdiction and Venue. In any action brought by Lender under this
Agreement, Borrower consents to the exercise of personal jurisdiction over it by
the courts of the State of Colorado and agrees that venue shall be proper in any
County of the State of Colorado or in the City and County of Denver, in addition
to any other court where venue may be proper. Borrower waives and releases, to
the extent permitted by law, all errors and all rights of exemption, appeal,
stay of execution, inquisition and extension upon any levy on real estate or
personal property to which Borrower may otherwise be entitled under the laws of
the United States of America now in force or which may hereafter be passed, as
well as the benefit of any or every statute, ordinance, or rule of court which
may be lawfully waived conferring upon Borrower any right or privilege of
exemption, stay of exercise, or supplementary proceedings, or other relief from
the enforcement or immediate enforcement of a judgment or related proceedings on
a judgment.
11. Interest Rate After Judgment. If judgment is entered against Borrower
on this Note, the amount of the judgment entered (which may include principal,
interest, default interest, late charges, fees and costs) shall bear interest at
the highest rate authorized under this Note as of the date of entry of the
judgment.
12. Expenses of Collection. Should this Note be referred to an attorney for
collection, whether or not judgment has been confessed or suit has been filed,
Borrower shall pay all of Lender's actual costs, fees (including reasonable
attorneys' fees) and expenses resulting from such referral.
13. Waiver of Protest. Borrower hereby waives presentment, notice of
dishonor and protest.
14. Commercial Loan. Borrower acknowledges and warrants that this Note
evidences a "commercial loan" and that the proceeds of the Note will be used for
the sole purpose of
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carrying on a business or commercial enterprise and not for personal, family,
household or agricultural purposes.
15. Waiver. No failure or delay by the holder hereof to insist upon the
strict performance of any term, provision, or agreement of this Note, or to
exercise any right, power or remedy consequent upon a breach thereof, shall
constitute a waiver of any such term, provision or agreement or of any such
breach, or preclude the holder hereof from exercising any such right, power or
remedy at any later time or times. By accepting payment after the due date of
any amount payable under this Note, the holder hereof shall not be deemed to
have waived the right either to require prompt payment when due of all other
amounts due under this Note, or to declare a default hereunder.
16. Notices. All notices, consents, approvals, requests, demands and other
communications which are required or may be given hereunder shall be in writing
and shall be duly given if personally delivered, sent by telefax, telegram or
overnight courier or posted by U.S. registered or certified mail, return receipt
requested, postage prepaid and addressed to the other parties at the addresses
set forth below.
If to the Lender:
Barry D. Lasker
451 Brown Saddle St.
Houston, Texas 77057
If to the Borrower:
Kestrel Energy, Inc.
1726 Cole Boulevard, Suite 210
Lakewood, Colorado 80401
Attention: Timothy Hoops
Any party may from time to time change the address to which notices to it are to
be sent by giving notice of such change to the other parties in the manner set
forth herein. Notices shall be deemed given on the next business day following
the day such notice is posted or sent by courier in the manner described above,
and if sent by telefax or telegram, on the date such notice is sent, and if
delivered in person, on the date so delivered. Any notice period shall commence
on the day such notice is deemed given. For the purposes of this Agreement, the
term "business day" shall include all days other than Saturdays, Sundays and
federal banking holidays.
17. Headings. The section headings in this Note are for reference only, and
shall not limit or otherwise affect any of the terms hereof.
18. Choice of Law. This Note is executed in and shall be governed,
construed and enforced in accordance with the laws of the State of Colorado.
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19. Binding Effect. This Note shall be binding upon Borrower and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned has executed this Note under seal, with
the intention that it be a sealed instrument on the day and year first above
written.
BORROWER:
Kestrel Energy, Inc.
By: /S/TIMOTHY L. HOOPS
-------------------------------
Timothy L. Hoops
Operations Manager
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EXHIBIT B
All right title and interest of Kestrel Energy, Inc. in the Pierce, Kicker
Draw, Deep Draw, and Simpson (Neta) Minnelusa Fields, Wyoming.