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[SOUTH TEXAS DRILLING AND EXPLORATION, INC. LOGO] EXHIBIT 10.2
LOAN AGREEMENT
Between
SOUTH TEXAS DRILLING & THE FROST NATIONAL BANK
EXPLORATION, INC. and 100 W. Houston Street
9310 Broadway, Building 1 San Antonio, Texas 78205
San Antonio, Texas 78217
August 11, 2000
THIS LOAN AGREEMENT (the "Loan Agreement") will serve to set forth the
terms of the financing transactions by and between SOUTH TEXAS DRILLING &
EXPLORATION, INC., a Texas corporation ("Borrower"), and THE FROST NATIONAL
BANK, a national banking association ("Lender"):
1. Credit Facilities. Subject to the terms and conditions set forth in
this Loan Agreement and the other agreements, instruments and documents
evidencing, securing, governing, guaranteeing and/or pertaining to the Loans,
as hereinafter defined (collectively, together with the Loan Agreement,
referred to hereinafter as the "Loan Documents"), Lender hereby agrees to
provide to Borrower the credit facility of facilities hereinbelow (whether one
or more, the "Credit Facilities"):
(a) Borrowing Base Line of Credit. Subject to the terms and
conditions set forth herein, Lender agrees to lend to Borrower,
on a revolving basis from time to time during the period
commencing on the date hereof and continuing through the maturity
date of the promissory note evidencing this Credit Facility from
time to time, such amounts as Borrower may request hereunder;
provided, however, the total principal amount outstanding at any
time shall not exceed the lesser of (i) an amount equal to the
Borrowing Base (as such term is defined hereinbelow), or (ii)
$1,000,000.00 (the "Borrowing Base Line of Credit"). If at any
time the aggregate principal amount outstanding under the
Borrowing Base Line of Credit shall exceed an amount equal to the
Borrowing Base, Borrower agrees to immediately repay to Lender
such excess amount, plus all accrued but unpaid interest thereon.
The sums advanced under the Revolving Line of Credit shall be
used for support of short term operating cash needs.
As used in this Loan Agreement, the term "Borrowing Base" shall have
the meaning set forth hereinbelow:
An amount equal to seventy-five percent (75%) of the
Borrower's Eligible Accounts.
As used herein, the term "Eligible Accounts" shall mean at any time,
an amount equal to the aggregate net invoice or ledger amount owing on
all trade accounts receivable of Borrower for goods sold or leased or
services rendered in the ordinary course of business, in which the
Lender has a perfected, first priority lien, after deducting (without
duplication): (i) each such account that
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is unpaid ninety (90) days or more after the original invoice date thereof,
(ii) the amount of all discounts, allowances, rebates, credits and
adjustments to such accounts (iii) the amount of all contra accounts,
setoffs, defenses or counterclaims asserted by or available to the account
debtors, (iv) all accounts with respect to which goods are placed on
consignment or subject to a guaranteed sale or other terms by reason of
which payment by the account debtor may be conditional, (v) all accounts
with respect to which Borrower has furnished a payment and/or performance
bond and that portion of any account for or representing retainage, if any,
until all prerequisites to the immediate payment of retainage have been
satisfied, (vi) all accounts owing by account debtors for which there has
been instituted a proceeding in bankruptcy or reorganization under the
United States Bankruptcy Code or other law, whether state or federal, now
or hereafter existing for relief of debtors, (vii) all accounts owing by
any affiliates of Borrower, (viii) all accounts in which the account debtor
is the United States or any department, agency or instrumentality of the
United States, except to the extent an acknowledgment of assignment to
Lender of such account in compliance with the Federal Assignment of Claims
Act and other applicable laws has been received by Lender, (ix) all
accounts due Borrower by any account debtor whose principal place of
business is located outside the United States of America and its
territories, (x) all accounts subject to any provision prohibiting
assignment or requiring notice of or consent to such assignment, and (xi)
any other accounts deemed unacceptable by Lender in its sole and absolute
discretion; provided, however, if more than twenty percent (20%) of the
then balance owing by any single account debtor does not qualify as an
Eligible Account under the foregoing provisions, then the aggregate amount
of all accounts owing by such account debtor shall be excluded from
Eligible Accounts.
Borrower agrees to pay Lender a commitment fee at the rate of one-fourth of
one percent (1/4%) per annum on the daily average of the unused amount of
the Borrowing Base Line of Credit during the period from August 11, 2000 to
and including the maturity date of the Borrowing Base Line of Credit
Revolving Promissory Note. Such commitment fee shall be payable quarterly
in arrears on the 11th day of November, February, May and August of each
year commencing November 11, 2000.
(b) Term Loan. Subject to the terms and conditions set forth herein,
Lender agrees to lend to Borrower, and Borrower agrees to borrow from
Lender, the amount of $9,000,000.00 (the "Term Loan") in a single advance
on the date hereof. The sums advanced under the Term Loan shall be for the
purchase of assets and stock of Pioneer Drilling Co.
All advances under the Credit Facilities shall be collectively called the
"Loans". Lender reserves the right to require Borrower to give Lender not less
than one (1) business day prior notice of each requested advance under the
Credit Facilities, specifying (i) the aggregate amount of such requested
advance, (ii) the requested date of such advance, and (iii) the purpose for such
advance, with such advances to be requested in a form satisfactory to Lender.
2. Promissory Notes. The Loans shall be evidenced by one or more
promissory notes or an Application (whether one or more, together with any
renewals, extensions and increases thereof, the "Notes") duly executed by
Borrower and payable to the order of Lender, in form and substance acceptable
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to Lender. Interest on the Notes shall accrue at the rate set forth therein. The
principal of and interest on the Notes shall be due and payable in accordance
with the terms and conditions set forth in the Notes and in this Loan Agreement.
3. Collateral. As collateral and security for the indebtedness evidenced
by the Notes and any and all other indebtedness or obligations from time to time
owing by Borrower to Lender, Borrower shall grant, and hereby grants, to Lender,
its successors and assigns, a first and prior lien and security interest in and
to the property described hereinbelow, together with any and all PRODUCTS AND
PROCEEDS thereof (the "Collateral"):
(a) All present and future accounts, chattel paper, documents,
instruments, deposit accounts and general intangibles (including any right
to payment for goods sold or services rendered arising out of the sale or
delivery of personal property or work done or labor performed by Borrower),
now or hereafter owned, held, or acquired by Borrower, together with any
and all books of account, customer lists and other records relating in any
way to the foregoing.
(b) Equipment consisting of various drilling rigs and related
equipment now owned by Borrower and used or usable in Borrower's business,
together with all replacements, accessories, additions, substitutions and
accessions to all of the foregoing.
(c) Equipment consisting of a drilling rig and related equipment now
owned by Pioneer Drilling Co., together with all replacements, accessories,
additions, substitutions and accessions to all of the foregoing.
The term "Collateral" shall also include all records and data relating to any
of the foregoing (including, without limitation, any computer software on which
such records and data may be located). Borrower agrees to execute such security
agreements, assignments, deeds of trust and other agreements and documents as
Lender shall deem appropriate and otherwise require from time to time to more
fully create and perfect Lender's lien and security interests in the Collateral.
4. Intentionally omitted.
5. Representations and Warranties. Borrower hereby represents and
warrants, and upon each request for an advance under the Credit Facilities
further represents and warrants, to Lender as follows:
(a) Existence. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and all
other states where it is doing business, and has all requisite power and
authority to execute and deliver the Loan Documents.
(b) Binding Obligations. The execution, delivery, and performance of
this Loan Agreement and all of the other Loan Documents by Borrower have
been duly authorized by all necessary action by Borrower, and constitute
legal, valid and binding obligations of Borrower, enforceable in accordance
with their respective terms, except as limited by Bankruptcy,
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insolvency or similar laws of general application relating to the
enforcement of creditors' rights and except to the extent specific remedies
may generally be limited by equitable principles.
(c) No Consent. The execution, delivery and performance of this Loan
Agreement and the other Loan Documents, and the consummation of the
transactions contemplated hereby and thereby, do not (i) conflict with,
result in a violation of, or constitute a default under (A) any provision
of its articles or certificate of incorporation or bylaws, if Borrower is a
corporation, or its partnership agreement, if Borrower is a partnership, or
any agreement or other instrument binding upon Borrower, or (B) any law,
governmental regulation, court decree or order applicable to Borrower, or
(ii) require the consent, approval or authorization of any third party.
(d) Financial Condition. Each financial statement of Borrower
supplied to the Lender truly discloses and fairly presents Borrower's
financial condition as of the date of each such statement. There has been
no material adverse change in such financial condition or results of
operations of Borrower subsequent to the date of the most recent financial
statement supplied to Lender.
(e) Litigation. There are no actions, suits or proceedings, pending
or, to the knowledge of Borrower, threatened against or affecting Borrower
or the properties of Borrower, before any court or governmental department,
commission or board, which, if determined adversely to Borrower, would have
a material adverse effect on the financial condition, properties, or
operations of Borrower.
(f) Taxes; Governmental Charges. Borrower has filed all federal,
state and local tax reports and returns required by any law or regulation
to be filed by it and has either duly paid all taxes, duties and charges
indicated due on the basis of such returns and reports, or made adequate
provision for the payment thereof, and the assessment of any material
amount of additional taxes in excess of those paid and reported is not
reasonably expected.
6. Conditions Precedent to Advances. Lender's obligation to make any
advance under this Loan Agreement and the other Loan Documents shall be subject
to the conditions precedent that, as of the date of such advance and after
giving effect thereto (i) all representations and warranties made to Lender in
this Loan Agreement and the other Loan Documents shall be true and correct, as
of and as if made on such date, (ii) no material adverse change in the financial
condition of Borrower since the effective date of the most recent financial
statements furnished to Lender by Borrower shall have occurred and be
continuing, (iii) no event has occurred and is continuing, or would result from
the request advance, which with notice or lapse of time, or both, would
constitute an Event of Default (as hereinafter defined), and (iv) Lender's
receipt of all Loan Documents appropriately executed by Borrower and all other
proper parties.
7. Affirmative Covenants. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Lender has no further
commitment to lend hereunder, Borrower agrees and covenants that it will,
unless Lender shall otherwise consent in writing:
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(a) Accounts and Records. Maintain its books and records in accordance
with generally accepted accounting principles.
(b) Right of Inspection. Permit Lender to visit its properties and
installations and to examine, audit and make and take away copies or
reproductions of Borrower's books and records, at all reasonable times.
(c) Right to Additional Information. Furnish Lender with such additional
information and statements, lists of assets and liabilities, tax returns, and
other reports with respect to Borrower's financial condition and business
operations as Lender may request from time to time.
(d) Compliance with Laws. Conduct its business in an orderly and
efficient manner consistent with good business practices, and perform and
comply with all statutes, rules, regulations and/or ordinances imposed by any
governmental unit upon Borrower and its businesses, operations and properties
(including without limitation, all applicable environmental statutes, rules,
regulations and ordinances).
(e) Taxes. Pay and discharge when due all of its indebtedness and
obligations, including without limitation, all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower's properties, income, or profits; provided, however,
Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (i) the legality of the same shall be
contested in good faith by appropriate judicial, administrative or other legal
proceedings, and (ii) Borrower shall have established on its books adequate
reserves with respect to such contested assessment, tax, charge, levy, lien or
claim in accordance with generally accepted accounting principles,
consistently applied.
(f) Insurance. Maintain insurance, including but not limited to, fire
insurance, comprehensive property damage, public liability, worker's
compensation, business interruption and other insurance deemed necessary or
otherwise required by Lender.
(g) Notice of Indebtedness. Promptly inform Lender of the creation,
incurrence or assumption by Borrower of any actual or contingent liabilities
not permitted under this Loan Agreement.
(h) Notice of Litigation. Promptly after the commencement thereof, notify
Lender of all actions, suits and proceedings before any court or any
governmental department, commission or board affecting Borrower or any of its
properties.
(i) Notice of Material Adverse Change. Promptly inform Lender of (i) any
and all material adverse changes in Borrower's financial condition, and (ii)
all claims made against Borrower which could materially affect the financial
condition of Borrower.
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(j) Additional Documentation. Execute and deliver, or
cause to be executed and delivered, any and all other agreements,
instruments or documents which Lender may reasonably request in order
to give effect to the transactions contemplated under this Loan
Agreement and the other Loan Documents.
8. Negative Covenants. Until (i) the Notes and all other
obligations and liabilities of Borrower under this Loan Agreement and the other
Loan Documents are fully paid and satisfied, and (ii) the Lender has no further
commitment to lend hereunder, Borrower will not, without the prior written
consent of Lender:
(a) Nature of Business. Make any material change in the
nature of its business as carried on as of the date hereof.
(b) Liquidations, Mergers, Consolidations. Liquidate,
merge or consolidate with or into any other entity.
(c) Sale of Assets. Sell, transfer or otherwise dispose
of any of its assets or properties, other than in the ordinary course
of business.
(d) Liens. Create or incur any lien or encumbrance on any
of its assets, other than (i) liens and security interests securing
indebtedness owing to Lender, (ii) liens for taxes, assessments or
similar charges that are (1) not yet due or (2) being contested in good
faith by appropriate proceedings and for which Borrower has established
adequate reserves, and (iii) liens and security interests existing as
of the date hereof which have been disclosed to and approved by Lender
in writing.
(e) Indebtedness. Create, incur or assume any
indebtedness for borrowed money or issue or assume any other note,
debenture, bond or other evidences of indebtedness, or guarantee any
such indebtedness or such evidences of indebtedness of others in excess
of $3,000,000.00, other than (i) borrowings from Lender, and (ii)
borrowings outstanding on the date hereof and disclosed in writing to
Lender.
(f) Transfer of Ownership. Permit the sale, pledge or
other transfer by Borrower of any of the ownership interests in
Borrower in excess of twenty-five percent (25%) of the market
capitalization value of Borrower's capital stock.
(g) Change in Management. Permit a change in the senior
management of Borrower.
(h) Loans. Make any loans to any person or entity.
(i) Transactions with Affiliates. Enter into any
transaction, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any
Affiliate (as hereinafter defined) or Borrower, except in the ordinary
course of and pursuant to the
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reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to Borrower than would be obtained in a comparable
arm's-length transaction with a person or entity not an Affiliate of
Borrower. As used herein, the term "Affiliate" means any individual or
entity directly or indirectly controlling, controlled by, or under common
control with, another individual or entity.
(j) Dividends. Borrower agrees not to declare or pay any dividends on
any shares of Borrower's capital stock, make any other distributions with
respect to any payment on account of the purchase, redemption, or other
acquisition or retirement of any shares of Borrower's capital stock, or
make any other distribution, sale, transfer or lease of any of Borrower's
assets other than in the ordinary course of business, unless any such
amounts are directly utilized for the payment of principal or interest on
indebtedness and obligations owing from time to time by Borrower to Lender
or to preferred shareholders of Borrower.
9. Financial Covenants. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Lender has no further
commitment to lend hereunder, Borrower will maintain the following financial
covenants:
(a) LEVERAGE RATIO. Borrower will maintain a leverage ratio not to
exceed 3.0:1.0, to be tested annually.
Defined as:
Funded Bank Debt
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Net Income + Interest + Taxes + Depreciation + Amortization
(b) CASH FLOW COVERAGE RATIO. Borrower will maintain a cash flow
coverage ratio of not less than 1.25:1.0, to be tested annually.
Defined as:
Net Income + Interest + Taxes + Depreciation + Amortization -
Dividends - Capital Expenditures
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Current Portion of Long-Term Debt + Interest Expense
(c) CAPITALIZATION RATIO. Borrower will maintain, at all times, a
capitalization ratio not to exceed 0.5:1.0, to be tested quarterly.
Defined as:
Funded Bank Debt
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Net Worth + Funded Bank Debt
Unless otherwise specified, all accounting and financial terms and covenants
set forth above are to be determined according to generally accepted accounting
principles, consistently applied.
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10. Reporting Requirements. Until (i) the Notes and all other
obligations and liabilities of Borrower under this Loan Agreement and the other
Loan Documents are fully paid and satisfied, and (ii) the Lender has no further
commitment to lend hereunder, Borrower will, unless Lender shall otherwise
consent in writing, furnish to Lender:
(a) Interim Monthly Financial Statements. As soon as available, and
in any event within thirty (30) days after the end of each month of each
fiscal year of Borrower, a balance sheet, income statement, and cash flow
statement of Borrower as of the end of such fiscal quarter, all in form and
substance and in reasonable detail satisfactory to Lender and duly
certified (subject to year-end review adjustments) by the President and/or
Chief Financial Officer of Borrower (i) as being true and correct in all
material aspects of the best of his or her knowledge and (ii) as having
been prepared in accordance with generally accepted accounting principles,
consistently applied.
(b) Quarterly Statements. Within sixty (60) days after the end of
each quarter of each fiscal year of Borrower, a 10-Q Report as filed with
the Securities and Exchange Commission ("SEC").
(c) Annual Statements. Within one hundred twenty (120) days after
the end of each fiscal year of Borrower, a 10-K Report as filed with the
SEC.
(d) Compliance Certificate. A certificate signed by the President
and/or Chief Financial Officer of Borrower, within one hundred twenty
(120) days after the end of each fiscal year, stating that Borrower is in
full compliance with all of its obligations under this Loan Agreement and
all other Loan Documents and is not in default of any term or provisions
hereof or thereof, and demonstrating compliance with all financial ratios
and covenants set forth in this Loan Agreement.
(e) Borrowing Base Certificate. A borrowing base certificate signed
by the President and/or Chief Financial Officer of Borrower, within thirty
(30) days after the end of each month of each fiscal year, in form and
detail satisfactory to Lender.
(f) Accounts Receivable Aging. An accounts receivable aging report
within thirty (30) days after the end of each month of each fiscal year,
in form and detail satisfactory to Lender.
11. Events of Default. Each of the following shall constitute an "Event
of Default" under this Loan Agreement:
(a) The failure, refusal or neglect of Borrower to pay when due any
part of the principal of, or interest on, the Notes or any other
indebtedness owing to Lender by Borrower from time to time.
(b) The failure of Borrower or any Obligated Party (as defined
below) to timely and properly observe, keep or perform any covenant,
agreement, warranty or condition required herein or in any other Loan
Documents.
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(c) The occurrence of an event of default under any of the other
Loan Documents or under any other agreement now existing or hereafter arising
between Lender and Borrower.
(d) Any representation contained herein or in any of the other Loan
Documents made by Borrower or any Obligated Party is false or misleading in any
material respect.
(e) The occurrence of any event which permits the acceleration of
the maturity of any indebtedness owing by Borrower to any third party under any
agreement or understanding.
(f) If Borrower or any Obligated Party: (i) becomes insolvent, or
makes a transfer in fraud of creditors, or makes an assignment for the benefit
of creditors, or admits in writing its inability to pay its debts as they
become due; (ii) generally is not paying its debts as such debts become due;
(iii) has a receiver, trustee or custodian appointed for, or take possession
of, all or substantially all of the assets of such party, either in a
proceeding brought by such party or in a proceeding brought against such party
and such appointment is not discharged or such possession is not terminated
within sixty (60) days after the effective date thereof or such party consents
to or acquiesces in such appointment or possession; (iv) files a petition for
relief under the United States Bankruptcy Code or any other present or future
federal or state insolvency, bankruptcy or similar laws (all of the foregoing
hereinafter collectively called "Applicable Bankruptcy Law") or an involuntary
petition for relief is filed against such party under any Applicable Bankruptcy
Law and such involuntary petition is not dismissed within sixty (60) days after
the filing thereof, or an order for relief naming such party is entered under
any Applicable Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is
requested or consented to by such party; (v) fails to have discharged within a
period of thirty (30) days any attachment, sequestration or similar writ levied
upon any property of such party; or (vi) fails to pay within thirty (30) days
any final money judgment against such party.
(g) If Borrower or any Obligated Party is an entity, the liquidation,
dissolution, merger or consolidation of any such entity or, if Borrower or any
Obligated Party is an individual, the death or legal incapacity of any such
individual.
(h) The entry of any judgment against Borrower or the issuance or
entry of any attachment or other lien against any of the property of Borrower
for an amount in excess of $250,000.00, if undischarged, unbonded or
undismissed within thirty (30) days after such entry.
Nothing contained in this Loan Agreement shall be construed to limit the events
of default enumerated in any of the other Loan Documents and all such events of
default shall be cumulative. The term "Obligated Party", as used herein,
shall mean any party other than Borrower who secures, guarantees and/or is
otherwise obligated to pay all or any portion of the indebtedness evidenced by
the Notes.
12. Remedies. Upon the occurrence of any one or more of the foregoing
Events of Default, (a) the entire unpaid balance of principal of the Notes,
together with all accrued but unpaid interest thereon, and all other
indebtedness owing to Lender by Borrower at such time shall, at the option of
Lender,
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become immediately due and payable without further notice, demand, presentation,
notice of dishonor, notice of intent to accelerate, notice of acceleration,
protest or notice of protest of any kind, all of which are expressly waived by
Borrower, and (b) Lender may, at its option, cease further advances under any of
the Notes. All rights and remedies of Lender set forth in this Loan Agreement
and in any of the other Loan Documents may also be exercised by Lender, at its
option to be exercised in its sole discretion, upon the occurrence of an Event
of Default.
13. Rights Cumulative. All rights of Lender under the terms of this Loan
Agreement shall be cumulative of, and in addition to, the rights of Lender under
any and all other agreements between Borrower and Lender (including, but not
limited to, the other Loan Documents), and not in substitution or diminution of
any rights now or hereafter held by Lender under the terms of any other
agreement.
14. Waiver and Agreement. Neither the failure nor any delay on the part
of Lender to exercise any right, power or privilege herein or under any of the
other Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. No waiver of any provision in this Loan Agreement or in any of the
other Loan Documents and no departure by Borrower therefrom shall be effective
unless the same shall be in writing and signed by Lender, and then shall be
effective only in the specific instance and for the purpose for which given and
to the extent specified in such writing. No modification or amendment to this
Loan Agreement or to any of the other Loan Documents shall be valid or
effective unless the same is signed by the party against whom it is sought to
be enforced.
15. Benefits. This Loan Agreement shall be binding upon and inure to the
benefit of Lender and Borrower, and their respective successors and assigns,
provided, however, that Borrower may not, without the prior written consent of
Lender, assign any rights, powers, duties or obligations under this Loan
Agreement or any of the other Loan Documents.
16. Notices. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery service
with proof of delivery, or (iii) United states mail, postage prepaid,
registered or certified mail, return receipt requested, sent to the intended
addressee at the address set forth on the first page hereof and shall be deemed
to have been received either, in the case of personal delivery, as of the time
of personal delivery, in the case of expedited delivery service, as of the date
of first attempted delivery at the address and in the manner provided herein,
or in the case of mail, upon deposit in a depository receptacle under the care
and custody of the United States Postal Service. Either party shall have the
right to change its address for notice hereunder to any other location within
the continental United States by notice to the other party of such new address
at least thirty (30) days prior to the effective date of such new address.
17. Construction. This Loan Agreement and the other Loan Documents have
been executed and delivered in the State of Texas, shall be governed by and
construed in accordance with the laws of the State of Texas, and shall be
performable by the parties hereto in the county in Texas where the Lender's
address set forth on the first page hereof is located.
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18. Invalid Provisions. If any provision of this Loan Agreement or
any of the other Loan Documents is held to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable and the
remaining provisions of this Loan Agreement or any of the other Loan Documents
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.
19. Expenses. Borrower shall pay all costs and expenses
(including, without limitation, reasonable attorneys' fees) in connection with
(i) any action required in the course of administration of the indebtedness and
obligations evidenced by the Loan Documents, (ii) the preparation and
negotiation of the Loan Documents, and (iii) any action in the enforcement of
Lender's rights upon the occurrence of Event of Default.
20. Participation of the Loans. Borrower agrees that Lender may,
at its option, sell interests in the Loans and its rights under this Loan
Agreement to a financial institution or institutions and, in connection with
each such sale, Lender may disclose any financial and other information
available to Lender concerning Borrower to each prospective purchaser.
21. Conflicts. In the event any term or provision hereof is
inconsistent with or conflicts with any provision of the other Loan Documents,
the terms and provisions contained in this Loan Agreement shall be controlling.
22. Counterparts. This Loan Agreement may be separately executed
in any number of counterparts, each of which shall be an original, but all of
which, taken together, shall be deemed to constitute one and the same
instrument.
23. Facsimile Documents and Signatures. For purposes of
negotiating and finalizing this Loan Agreement, if this document or any document
executed in connection with it is transmitted by facsimile machine ("fax"), it
shall be treated for all purposes as an original document. Additionally, the
signature of any party on this document transmitted by way of a facsimile
machine shall be considered for all purposes as an original signature. Any such
faxed document shall be considered to have the same binding legal effect as an
original document. At the request of any party, any faxed document shall be
re-executed by each signatory party in an original form.
BORROWER LENDER:
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SOUTH TEXAS DRILLING & EXPLORATION, INC., THE FROST NATIONAL BANK,
a Texas corporation a national banking association
By: /s/ Michael E. Little By: /s/ James B. Crosby
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Michael E. Little, Chairman & CEO James B. Crosby,
Senior Vice President
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