PROMISSORY NOTE
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$2,000,000.00 Houston, Texas Effective July 31, 2009
For value received, LAZARUS LOUISIANA REFINERY II, LLC ("Borrower"), promises to
pay to the order of BLUE DOLPHIN ENERGY COMPANY ("Lender") at 801 Travis Street,
Suite 2100, Houston, Texas 77002, or at such other address as Lender shall from
time to time specify in writing, the principal sum of TWO MILLION AND NO/100
DOLLARS ($2,000,000.00), in legal and lawful money of the United States of
America, on the outstanding principal from the date advanced until paid at the
rate set out below.
1. Payment Terms. This Note is due and payable as follows: The unpaid
principal balance of this Note shall all be due and payable in full on or before
January 31, 2010.
2. Late Charge. Upon maturity of this Note, if any portion of the
outstanding principal balance (plus all accrued but unpaid interest) is not paid
within 10 days of the maturity date, Borrower will be charged a delinquency
charge of 5% of the sum of the outstanding principal balance (plus all accrued
but unpaid interest). Borrower agrees with Lender that the charges set forth
herein are reasonable compensation to Lender for the handling of such late
payments. All past due installments of principal shall bear interest at the rate
of eighteen percent (18%) per annum, with no compounding. All payments shall
first be applied to accrued interest, if any, with the balance of the payment
reducing the unpaid principal balance hereof.
3. Prepayment. Borrower shall have the right to prepay, prior to maturity,
all or any part of the principal of this Note without penalty. All payments and
prepayments of principal or interest on this Note shall be made in lawful money
of the United States of America in immediately available funds, at the address
of Lender indicated herein, or such other place as the holder of this Note shall
designate in writing to Borrower
4. Default. The occurrence or existence of any of the following events or
conditions shall constitute an "Event of Default":
(a) the failure of the Borrower to pay when due any of the
principal or interest payable pursuant to this Note; provided however, an Event
of Default shall not arise hereunder until the expiration of thirty (30) days
after the maturity date if prior to the maturity date, Borrower provides to
Lender a written loan commitment from a third party lender evidencing its
commitment to loan money to Borrower within thirty (30) days after the maturity
date;
(b) the assignment by the Borrower for the benefit of
creditors or the application by the Borrower to any court for the appointment of
a trustee or receiver for any of the assets of the Borrower that have been
pledged to secure the repayment of the Note or the commencement of any
proceedings relating to the Borrower under any bankruptcy, reorganization,
arrangement, readjustment of debts or other insolvency law of any jurisdiction,
or the entering of an order appointing such trustee or receiver or adjudicating
the Borrower bankrupt or insolvent or approving the petition in any such
proceedings;
(c) the breach or violation by the Borrower of any of its
agreements or covenants contained in this Note, other than the payment of
principal or interest, or in any other document or agreement between the
Borrower and the Lender concerning the indebtedness evidenced by this Note,
including, but not limited to, the Mortgage and Security Agreement described in
Section 13 of this Note.
(d) any prepayment of (i) the indebtedness of the Borrower to
Notre Dame Investors, Inc. ("Notre Dame") existing as of the date hereof or (ii)
the future indebtedness of the Borrower to Rio Vista Energy Partners, L.P. ("Rio
Vista") or any of its affiliates, which is made out of the proceeds of any
future loan received by the Borrower or its affiliates and is not made in
accordance with the following order of repayment on a proportionate basis based
on relative principal balances: (i) first to Notre Dame and (ii) second to the
Lender and Rio Vista or its applicable affiliate.
If an event of default shall occur, the holder hereof may, at the option of the
holder, without demand, notice or presentment, declare the entire unpaid
principal balance of this Note, together with all accrued unpaid interest
thereon, to be due and payable immediately. Upon any such declaration, the
principal of this Note and any such accrued interest shall become and be
immediately due and payable, and the holder hereof may thereupon proceed to
protect and enforce the obligations of the Borrower hereunder either by suit in
equity or by action of law or by other appropriate proceedings, whether for
specific performance (to the extent permitted by law) of any covenant or
agreement contained herein or in aid of the exercise of any power granted
herein, or proceed to enforce the payment of this Note or to enforce any other
legal or equitable right of the holder hereof. In the event default is made in
the prompt payment of this Note when due or declared due, and the same is placed
in the hands of an attorney for collection, or suit is brought on same, or the
same is collected through probate, bankruptcy or other judicial proceedings,
then the Borrower agrees and promises to pay all costs of collection, including
reasonable attorney's fees.
5. Joint and Several Liability; Waiver. Each borrower, maker, signer,
surety and endorser hereof, as well as all heirs, successors and legal
representatives of said parties, shall be directly and primarily, jointly and
severally, liable for the payment of all indebtedness hereunder. Lender may
release or modify the obligations of any of the foregoing persons or entities,
or guarantors hereof, in connection with this loan without affecting the
obligations of the others. Except as specifically provided herein, all such
persons or entities expressly waive presentment and demand for payment, notice
of default, notice of intent to accelerate maturity, notice of acceleration of
maturity, protest, notice of protest, notice of dishonor, and all other notices
and demands for which waiver is not prohibited by law, and diligence in the
collection hereof; and agree to all renewals, extensions, indulgences, partial
payments, releases or exchanges of collateral, or taking of additional
collateral, with or without notice, before or after maturity. No delay or
omission of Lender in exercising any right hereunder shall be a waiver of such
right or any other right under this Note.
6. No Usury Intended; Usury Savings Clause. In no event shall interest
contracted for, charged or received hereunder, plus any other charges in
connection herewith which constitute interest, exceed the maximum interest
permitted by applicable law. The amounts of such interest or other charges
previously paid to the holder of the Note in excess of the amounts permitted by
applicable law shall be applied by the holder of the Note to reduce the
principal of the indebtedness evidenced by the Note, or, at the option of the
holder of the Note, be refunded. To the extent permitted by applicable law,
determination of the legal maximum amount of interest shall at all times be made
by amortizing, prorating, allocating and spreading in equal parts during the
Promissory Note - Page 2
period of the full stated term of the loan and indebtedness, all interest at any
time contracted for, charged or received from the Borrower hereof in connection
with the loan and indebtedness evidenced hereby, so that the actual rate of
interest on account of such indebtedness is uniform throughout the term hereof.
7. Texas Finance Code. In no event shall Chapter 346 of the Texas Finance
Code (which regulates certain revolving loan accounts and revolving tri-party
accounts) apply to this Note. To the extent that Chapter 303 of the Texas
Finance Code and/or Articles 1D.002 and 1D.003 of the Texas Credit Title are
applicable to this Note, the "weekly ceiling" specified in such article is the
applicable ceiling; provided that, if any applicable law permits greater
interest, the law permitting the greatest interest shall apply.
8. Governing Law, Venue. This Note is being executed and delivered, and is
intended to be performed in the State of Texas. Except to the extent that the
laws of the United States may apply to the terms hereof, the substantive laws of
the State of Texas shall govern the validity, construction, enforcement and
interpretation of this Note. In the event of a dispute involving this Note or
any other instruments executed in connection herewith, the undersigned
irrevocably agrees that venue for such dispute shall lie in any court of
competent jurisdiction in Harris County, Texas.
9. Captions. The captions in this Note are inserted for convenience only
and are not to be used to limit the terms herein.
10. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing, and shall be deemed to be
given or delivered when actually received by the party to whom directed, or, if
earlier and regardless of whether actually received, upon deposit in a regularly
maintained receptacle for the United States mail, registered or certified,
postage fully prepaid, addressed to the party to whom directed at its address
set forth below or at such other address as such party may have previously
specified by notice actually received by the other party:
If to Borrower: Lazarus Louisiana Refinery II, LLC
801 Travis Street, Suite 2100
Houston, Texas 77002
If to Lender: Blue Dolphin Energy Company
801 Travis Street, Suite 2100
Houston, Texas 77002
11. No Shop. Until this Note has been paid in full, Borrower agrees that
neither it nor any of its affiliates or members will enter into any discussions
or negotiations, or solicit, encourage or make any offer, relating to the
acquisition of any equity interest or any material assets of Borrower or any of
its affiliates (other than with respect to the Longview, Texas facility, the
Church Point, Louisiana facility, and any transaction with Rio Vista or any of
its affiliates involving the Regional facility), or provide any information to
any party to facilitate or otherwise in connection with the same. Lender agrees
that neither it nor any of its affiliates will enter into any discussions or
negotiations, or solicit, encourage or make any offer, relating to the
acquisition of any equity interest or any material assets of Lender or any of
its affiliates, or provide any information to any party to facilitate or
otherwise in connection with the same, until the first to occur of the
following: (i) an Event of Default pursuant to this Note or (ii) the failure of
the Bridge Loan Closing to occur on or before July 15, 2009, regardless of the
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reason for the failure to close a transaction. Nothing set forth in this Section
shall be construed to mean that the parties have agreed to close any transaction
other than the loan evidenced by this Note, or agreed to agree with respect to
any such other transaction.
12. Original Note. Lazarus Energy Holdings, LLC has previously executed and
delivered to Lender a Promissory Note dated June 2, 2009, in the original
principal amount of $100,000 (the "Original Note"). This Note replaces the
Original Note with respect to the indebtedness represented thereby, and also
evidences the obligation to repay the loan of $200,000 made by the Lender to the
Borrower on July 1, 2009, and the additional loan of $1,700,000 made by the
Lender to the Borrower on the date hereof. This Note shall not be considered a
novation or discharge of the Original Note.
13. Mortgage and Security Agreement. The indebtedness represented by this
Note is secured pursuant to (i) a Mortgage dated the date hereof (the
"Mortgage") granting to Lender a prior and perfected first lien security
interest to secure the payment of this Note against the approximately 3.673
acres of real property located in Jefferson Davis Parish, Louisiana owned by the
Borrower ("Disposal Well Property") and a second lien to secure the payment of
this Note against the approximately 38 acres of real property located in
Jefferson Davis Parish, Louisiana owned by the Borrower ("Refinery Property"),
and (ii) a Security Agreement dated the date hereof (the "Security Agreement")
granting to Lender a prior and perfected first lien security interest to secure
the payment of this Note against the tangible personal property associated with
the Disposal Well Property and owned by the Borrower, and a second lien to
secure the payment of this Note against the tangible personal property
associated with the Refinery Property and owned by the Borrower. As set forth in
the Mortgage and Security Agreement and further acknowledged herein, in the
event that the Borrower grants to Rio Vista or any of its affiliates a future
security interest in the Refinery Property and associated tangible personal
property owned by the Borrower ("Rio Vista Security Interest"), as security for
a loan not in excess of the total aggregate amount of $4,000,000.00 (including
but not limited to all principal advances, interest, default interest, attorneys
fees, costs, collection costs and expenses), then the Rio Vista Security
Interest shall be treated pari passu with the Lender's rights in and to the
Refinery Property and associated personal property owned by the Borrower, as
granted in the Mortgage and Security Agreement.
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BORROWER:
By: LAZARUS LOUISIANA REFINERY II, LLC
By:____________________________________
Jonathan P. Carroll
Director / Manager
THE STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
BEFORE ME, the undersigned authority, on this day personally appeared
JONATHAN P. CARROLL, known to me to be the person(s) whose names are subscribed
to the foregoing instrument, and acknowledged to me that they executed the same
for the purposes and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of July, 2009.
[SEAL]
Notary Public in and for the
State of Texas
Printed Name of Notary
My Commission Expires:
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