<PAGE>
EXHIBIT 10.20
SENIOR SUBORDINATED
REVOLVING PROMISSORY NOTE
February 16, 2000 $15,000,000.00
FOR VALUE RECEIVED, the undersigned, Novistar, Inc., a Delaware corporation
(herein called "Maker" whether one or more), jointly and severally, promises to
pay on demand to the order of Torch Energy Advisors Incorporated, a Delaware
corporation (herein called "Payee," which term herein in every instance shall
refer to any owner or holder of this note) the sum of FIFTEEN MILLION AND NO/100
DOLLARS ($15,000,000.00), or so much thereof as may be advanced from time to
time hereunder by Payee, together with interest on the principal hereof from
time to time outstanding from the date of advancement until maturity, at the per
annum rate hereinafter stated (computed on the basis of a year of 360 days and
paid for the actual number of days elapsed), said principal and interest being
payable in lawful money of the United States of America at the offices of Maker,
1221 Lamar, Suite 1600, Houston, Harris County, Texas 77010, or at such other
place as Payee may designate hereafter in writing.
The principal balance hereof advanced and from time to time remaining
unpaid shall bear interest during each day of the loan evidenced hereby at the
rate equal to the lessor of (A) nine percent (9%) per annum (the "Agreed Rate"),
or (B) the Maximum Rate (hereinafter defined). Notwithstanding the foregoing,
if at any time the Agreed Rate shall exceed the Maximum Rate and thereafter the
Agreed Rate shall become less than the Maximum Rate, the rate of interest
payable hereunder shall be the Maximum Rate until the Payee shall have received
the amount of interest it would have received otherwise if the interest payable
hereunder had not been limited by the Maximum Rate during the period of time the
Agreed Rate exceeded the Maximum Rate.
All past due principal and interest of this note, whether due as the result
of acceleration of maturity or otherwise, shall bear interest at the lesser of
(1) a rate that is five (5) percentage points above the Agreed Rate or (2) the
maximum lawful rate of interest permitted by the applicable usury laws, now or
hereafter enacted, which interest rate (herein called the "Maximum Rate") shall
change when and as said laws shall change to the extent permitted by said laws,
effective on the day such change in said laws becomes effective, from the date
the payment thereof shall have become due until the same have been fully
discharged by payment.
The principal and interest of this note are due and payable at the offices
of said Payee in Houston, Harris County, Texas as follows:
(a) Accrued, but unpaid interest hereon shall be due and payable monthly
in arrears on the last day of each month; and
(b) The principal amount hereof then outstanding shall be due and
payable on demand.
Until demand, the undersigned may, at the sole discretion of Payee, borrow,
pay, prepay in whole or in part and reborrow hereunder, so long as not more than
$15,000,000.00 of principal is outstanding at any one time, it being understood
that this note is a master revolving credit note; it being expressly
contemplated that, by reason of prepayments hereon, there may be times when no
indebtedness is owing hereunder, but, notwithstanding such occurrences, this
note shall remain valid and shall be in full force and effect as to loans or
advances made subsequent to such occurrences; and it being understood and agreed
that advances and repayments of principal under this note are not limited to the
face amount of principal, but to a maximum of the face amount of principal at
any one time outstanding. Payee may advance funds pursuant to this note from
time to time, and from time to time the undersigned will make repayments on the
principal of this note, so that no more than the face amount of principal shall
be outstanding at any one time. Each advance and each payment of principal
hereunder shall be reflected by a notation made by Payee in its business
records. The aggregate unpaid principal amount of advances reflected by the
notations made in Payee's business records shall be conclusive evidence of the
principal
Page 1 of 4 Pages
<PAGE>
amount owing under this note, which amount the undersigned unconditionally
promises to pay to the order of Payee under the term hereof.
Senior Indebtedness
a. "Senior Indebtedness" means (i) all present and future indebtedness,
obligations, and liabilities of every kind and character of the Maker which may
be from time to time directly or indirectly incurred by the Maker to commercial
banks or other financial institutions under secured or unsecured credit
facilities (including, without limitation, interest accrued subsequent to the
filing of any petition under any bankruptcy, insolvency or similar law and
interest that would have accrued and been payable but for the commencement of an
insolvency proceeding), whether due and owing or to become due and owing,
howsoever created or arising or evidenced, whether joint or several, whether
absolute or contingent, and all renewals, extensions, increases, and
rearrangements of such indebtedness, obligations or liabilities, including,
without limitation, any and all amounts of principal, interest, attorneys' fees,
costs of collection and other amounts thereunder, and (ii) all present and
future advances, accounts payable and other amounts owed by the Maker to clients
of the Maker pursuant to written agreements under which the Maker provides
services to such clients.
b. The Maker agrees and the holder of the Note, by acceptance thereof,
agrees, expressly for the benefit of the present and future holders of Senior
Indebtedness, that, except as otherwise provided herein, upon (i) maturity of
any Senior Indebtedness by lapse of time acceleration or otherwise, (ii) an
event of default under any Senior Indebtedness, or (iii) any dissolution,
winding up, or liquidation of the Maker, whether or not in bankruptcy,
insolvency or receivership proceedings, the Maker shall not pay, and the holder
of the Note shall not be entitled to receive, any amount in respect of the
principal and interest of the Note unless and until the Senior Indebtedness
shall have been fully paid in cash and any all obligations of the holders of
Senior Indebtedness to extend credit or other financing arrangements (including,
without limitation, any obligation to make advances under lines of credit or to
honor drawings under letters of credit) to or on behalf of the Maker shall have
been terminated. Upon (1) an event of default under any Senior Indebtedness, or
(2) any dissolution, winding up or liquidation of the Maker, any payment or
distribution (whether in cash, securities or other property or assets of the
Maker), which the holder of this Note would be entitled to receive but for the
provisions hereof, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution directly to the holders of Senior
Indebtedness ratably according to the aggregate amounts remaining unpaid on
Senior Indebtedness after giving effect to any concurrent payment or
distribution to the holders of Senior Indebtedness. Subject to the payment in
full of the Senior Indebtedness in cash and the termination of any and all
obligations of the holders of Senior Indebtedness to extend credit or other
financing arrangements (including, without limitation, any obligation to make
advances under lines of credit or to honor drawings under letters of credit) to
or on behalf of the Maker, until this Note is paid in full, the holder of this
Note shall be subrogated to the rights of the holders of the Senior Indebtedness
(to the extent of payments or distributions previously made to the holders of
Senior Indebtedness pursuant to this Section b) to receive payments or
distributions of assets of the Maker applicable to the Senior Indebtedness.
c. This Section is not intended to impair, as between the Maker, its
creditors (other than the holders of Senior Indebtedness) and the holder of this
Note, the unconditional and absolute obligation of the Maker under this Note or
affect the relative rights of the holder of this Note and the other creditors of
the Maker, other than the holders of Senior Indebtedness. Nothing in this Note
shall prevent the holder of this Note from exercising all remedies otherwise
permitted by applicable law after the occurrence and during the continuation of
an event of default under this Note, subject to the rights, if any, of the
holders of Senior Indebtedness in respect to cash, property or securities of the
Maker received upon the exercise of any such remedy. In furtherance of the
provisions of this Section, in the event that, notwithstanding the foregoing
provisions of this Section, any payment with respect to this Note shall be made
by or on behalf of the Maker, and received by the holder of this Note, at a time
when such payment was prohibited by the provisions of this Section, then, unless
and until such payment is no longer prohibited by this Section, such payment
shall be received and held in trust by such holder for
Page 2 of 4 Pages
<PAGE>
the benefit of and shall be immediately paid over to the holders of Senior
Indebtedness, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness, for application to the payment of Senior
Indebtedness in accordance with its terms.
d. This Note shall be pari passu with any other debt of the Maker which
is subordinate to Senior Indebtedness.
Maker may prepay this note in whole or in part at any time without being
required to pay any penalty or premium for such privilege. All prepayments
hereunder, whether designated as payments of principal or interest, shall be
applied to the principal or interest of this note or to expenses provided for
herein, or any combination of the foregoing, as directed by Payee at its option.
If Maker shall file a voluntary petition in bankruptcy, or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking for Maker any arrangement, composition, readjustment, or similar relief
under any present or future statute, law or regulation, or shall file any answer
admitting the material allegations of a petition filed against Maker any
such proceeding, or shall seek or consent to or acquiesce in the appointment of
any trustee or receiver, on all or any substantial part of the properties of
Maker, or if a decree or order by a court having jurisdiction in the premises
shall have been entered adjudging Maker to be bankrupt or insolvent under the
federal bankruptcy laws or any applicable law of the United States of America or
any state law, or appointing a receiver or trustee or assignee in bankruptcy or
insolvency of Maker or any of Maker's properties, and such decree or order shall
have continued undischarged or unstayed for a period of 30 days, or if Maker
shall make an assignment for the benefit of creditors, or if Maker shall fail to
pay this note or any installment hereof, whether principal or interest, when
due, then Payee shall have the option, to the extent permitted by applicable
law, to declare this note due and payable, whereupon the entire unpaid principal
balance of this note and all accrued unpaid interest hereon thereupon at once
shall mature and become due and payable without presentment, demand, protest or
notice of any kind (including, but not limited to, notice of intention to
accelerate or notice of acceleration), all of which hereby are expressly waived
by Maker. The time of payment of this note also is subject to acceleration in
the same manner provided in this paragraph in the event Maker defaults or
otherwise fails to discharge its obligations under any of the instruments
securing payment hereof or relating hereto.
Maker and any and all sureties, guarantors and endorsers of this note
and all other parties now or hereafter liable hereon, severally waive grace,
demand, presentment for payment, protest, notice of any kind (including, but not
limited to, notice of dishonor, notice of protest, notice of intention to
accelerate and notice of acceleration) and diligence in collecting and bringing
suit against any party hereto, and agree (i) to all extensions and partial
payments, with or without notice, before or after maturity, (ii) to any
substitution, exchange or release of any security now or hereafter given for
this note, (iii) to the release of any party primarily or secondarily liable
hereon, and (iv) that it will not be necessary for Payee, in order to enforce
payment of this note, to first institute or exhaust Payee's remedies against
Maker or any other party liable therefor or against any security for this note.
In the event of default hereunder or under any of the instruments
securing payment hereof and this note is placed in the hands of an attorney for
collection (whether or not suite is filed), or if this note is collected by
suite or legal proceedings or through the probate court or bankruptcy
proceedings, Maker agrees to pay all reasonable attorneys' fees and all expenses
of collection and costs of court.
It is the intention of the parties hereto to comply with applicable
usury laws; accordingly, notwithstanding any provision to the contrary in this
note, or in any of the documents securing payment hereof or otherwise relating
hereto, in no event shall this note or such documents require the payment or
permit the collection of interest in excess of the maximum amount permitted by
such laws. If any such excess of interest is contracted for, charged, taken,
reserved or received under this note or under the terms of any of the documents
securing payment hereof or otherwise relating hereto, or in the event the
maturity of the indebtedness evidenced by this
Page 3 of 4 Pages
<PAGE>
note is accelerated in whole or in part, or in the event that all or part of the
principal or interest of this note shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, charged or received under
this note or under any of the instruments securing payment hereof or otherwise
relating hereto, on the amount of principal actually outstanding from time to
time under this note shall exceed the maximum amount of interest permitted by
applicable usury laws, then in any such event (x) the provisions of this
paragraph shall govern and control, (y) any such excess which may have been
collected at final maturity of said indebtedness either shall be applied as a
credit against the then unpaid principal amount of hereof or refunded to Maker,
at Payee's option, and (z) upon such final maturity, the effective rate of
interest shall be automatically reduced to the maximum lawful rate allowed under
applicable usury laws as now or hereafter construed by the courts having
jurisdiction thereof. Without limiting the foregoing, all calculations of the
rate of interest contracted for, charged, taken, reserved or received under this
note or under such other documents which are made for the purpose of determining
whether such rate exceeds the maximum lawful rate, shall be made, to the extent
permitted by law, by amortizing, prorating, allocating and spreading in equal
parts during the period of the full stated term of the loan evidenced hereby,
all interest at any time contracted for, charged, taken, reserved or received
from Maker or otherwise by Payee in connection with such indebtedness.
Except to the extent required by federal law, this note shall be governed
by and construed under the laws of the State of Texas.
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by Payee and handled in collection in the
customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
Maker and Payee agree that Chapter 346 of the Texas Finance Code (which
regulates certain revolving loan accounts and revolving tri-party accounts)
shall not apply to any revolving loan accounts created under this note or
maintained in connection therewith.
To the extent that the interest rate laws of the State of Texas are
applicable to this note, for purposes of Texas Finance Code (S)303.001, as it
may be amended, the "applicable ceiling" shall be the "weekly ceiling" from time
to time in effect as limited by Texas Finance Code (S)303.009, provided,
however, the Payee retains the right to modify the interest rate in accordance
with applicable law.
Maker represents and warrants to Payee and to all other owners and holders
of any indebtedness evidenced hereby that all loans evidenced by this note are
for business, commercial, investment or other similar purpose and not primarily
for personal, family, household or agricultural use, as such terms are used or
defined in Texas Revised Civil Statutes, Article 5069-1.04, Texas Credit Code
and Regulation Z promulgated by the Board of Governors of the Federal Reserve
System and under Titles I and V of the Consumer Credit Protection Act.
Novistar, Inc.
By: /s/ Thomas M. Ray III
-------------------------------
Name: Thomas M. Ray III
---------------------------
Title: President & CEO
---------------------------
Page 4 of 4 Pages
