TEXSTAR PETROLEUM, INC.
BENZ ENERGY LTD.
CALIBRE ENERGY, L.L.C.
December 16, 1998
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, X.X.
Xxxxx Energy Partners, L.P.
EnCap Investments L.C.
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Gentlemen:
In this letter the following terms have the following definitions:
"Bank One" means Bank One, Texas, National Association.
"Bank One Credit Facility" means the loan facility extended by
Bank One to Borrower under the Bank One Loan Agreement.
"Bank One Loan Agreement" means that certain Loan Agreement
dated as of July 17, 1997, between Borrower and Bank One, as from time
to time amended or supplemented (including without limitation, any
amendment made concurrently herewith). "Tranche A" and "Tranche B" have
the meanings given such terms in the Bank One Loan Agreement.
"Benz" means Benz Energy Ltd., a corporation existing under
the laws of the Yukon Territory, Canada.
"Benz Entities" means Borrower, the Guarantors/Shareholders,
and all of their respective past or present shareholders, members,
partners, officers, directors, employees, attorneys, agents,
representatives, subsidiaries, parents, investors, participants,
successors, assigns, and affiliates or associated entities of whatever
kind.
"BOCP" means BOCP Energy Partners, L.P.
"Borrower" and "Texstar" both mean Texstar Petroleum, Inc., a
Texas corporation.
"Calibre" means Calibre Energy, L.L.C., a Texas limited
liability company.
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 2
"Collateral" means all collateral or security given by
Borrower or any Guarantor/Shareholder under any of the Loan Documents
to secure the payment or performance of any indebtedness or obligations
owing by Borrower or any Guarantor/Shareholder under any of the Loan
Documents.
"EnCap III LP" means EnCap Energy Capital Fund III, L.P.
"EnCap LC" means EnCap Investments L.C.
"EnCap Credit Agreement" means that certain Credit Agreement
made as of October 9, 1997, as from time to time amended or
supplemented, by and among Borrower, as borrower, Benz and Calibre, as
guarantors, and EnCap III LP, as lender.
"Guarantors/Shareholders" means Benz, Calibre, Benz Properties
Ltd., Xxxxxxx X. Xxxxxxxxx, Xx., individually, Texstar Holdings,
L.L.C. (f/ka Texstar Petroleum, L.L.C.), Xxxxxxx X. Xxxxxxxxx, Xx.,
Trustee of and on behalf of The Xxxxxxxx Trust, Xxxxxxx X. Xxxxxxxxx,
Xx., Trustee of and on behalf of The Ruston Trust, Xxxxxxx X.
Xxxxxxxxx, Xx., Trustee of and on behalf of The Houston Trust and
Xxxxxxx X. Xxxxxxxxx, Trustee of and on behalf of The Starbucks Trust.
"Investor Entities" means BOCP, EnCap III LP, Lasco, EnCap LC,
Bank One, the EnCap Designees, and all of their respective past or
present members, partners, shareholders, officers, directors,
employees, attorneys, agents, representatives, subsidiaries, parents,
investors, participants, successors, assigns, and affiliates or
associated entities of whatever kind.
"Lasco" means Lasco Energy Partners, L.P.
"Loan Documents" means all "Loan Documents" as defined in the
EnCap Credit Agreements, all "Loan Documents" as defined in the Bank
One Loan Agreement, and all other documents or instruments at any time
given or entered into by Borrower or any Guarantor/Shareholder in
connection with any of the foregoing.
"November Letter Agreement" means that certain letter
agreement dated November 4, 1998, entered into by the parties hereto.
"Oakvale Drilling Success" means that Xxxxx Xxxxx Company,
Netherland Xxxxxx, or X. Xxxx issues a written opinion that the Oakvale
Xxxxx have economically recoverable proved developed producing reserves
and/or proved developed non-producing gas reserves attributed thereto
which equal or exceed ten billion cubic feet.
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 3
"Oakvale Xxxxx" means (a) Borrower's well named the "Xxxxxx
Petroleum 32-4 No. 1" that, as of October 26, 1998, was being drilled
on Borrower's Xxxxxx Petroleum Co. lease in Xxxxxxxxx Xxxxx County,
Mississippi, and (b) Borrower's well named the "Xxxxxxxxxxx 32-13 No.
1" that, as of October 26, 1998, was being drilled on Borrower's
Xxxxxxxxxxx lease in Xxxxxxxxx Xxxxx County, Mississippi.
"Released Claims" means any and all claims, demands, and
causes of action of whatever kind or character which any Benz Entity
has, or may have in the future, based on any actions, failures to act,
or events that have occurred prior to the effective date hereof, which
in any way relate to or are based upon any of the following: (1) the
EnCap Credit Agreement or any other Loan Document, (2) the making of
any loans or advances thereunder or the failure or refusal to make any
loans or advances thereunder, (3) any actual, claimed, threatened, or
alleged exercise by any Investor Entity of any of its rights or
remedies under or in connection with the EnCap Credit Agreement, any of
the other Loan Documents, or any Collateral, (4) any other transactions
of any kind among any of the Benz Entities and any of the Investor
Entities, or (5) any actual or alleged negotiations, discussions,
representations, warranties, promises, or other undertakings by any
Investor Entity in connection with any of the foregoing.
"Voting Securities" means any common shares or other
securities of Benz entitled to vote generally for the election of
directors of Benz and any preferred shares of Benz entitle to vote for
the election of directors of Benz upon the satisfaction of certain
conditions, and the "beneficial ownership" of Voting Securities shall
be determined in accordance with Rule 13d-3 under the U.S. Securities
and Exchange Act of 1934, as amended.
In consideration of the covenants and agreements set out below, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower, the Guarantors/Shareholders, BOCP, Lasco, EnCap
III LP and EnCap LC hereby agree as follows for the benefit of each other and
for the benefit of each of the Investor Entities and the Debenture
Holder Designees:
1. BOCP hereby agrees to purchase an additional participation interest in
Tranche B under the Bank One Credit Facility of $1,000,000 on the
terms set out in the amendment to participation agreement attached
hereto as Exhibit A, provided that (a) Borrower and Bank One
concurrently enter into a Fourth Amendment to Letter Loan Agreement in
the form attached as Exhibit B hereto and (b) Borrower satisfies the
conditions set out in paragraph 3 of such Fourth Amendment. Borrower
agrees to use all proceeds of the additional advance pursuant to
Tranche B which is funded by Bank One as a result of such
participation only for the purposes described in Exhibit F hereto.
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 4
2. Borrower has requested that EnCap III LP consent to Borrower's sale of
a dollar denominated production payment for $10,000,000 prior to
December 31, 1998, upon the terms described in the term sheet attached
hereto as Exhibit C, burdening only those properties with respect to
which Bank One presently has a first lien to secure the Bank One
Credit Facility. EnCap III LP hereby gives such consent, provided
that: (a) the other terms of such production payment, and the terms of
any subordination requested from EnCap III LP with respect to its
second lien on such properties, are satisfactory to EnCap III LP in
the reasonable exercise of its discretion, (b) concurrently with such
sale the EnCap Credit Agreement is amended to replace the references
to the Bank One Credit Facility in Sections 7.1(b) and 7.2(b) thereof
with references to such production payment, (c) a portion of the
proceeds from the sale of such production payment are used to repay in
full and terminate the Bank One Credit Facility (including both
Tranche A and Tranche B thereunder), and (d) as a part of such sale
Borrower agrees to use the remainder of such proceeds only for the
purposes described in Exhibit F hereto.
3.
(a) Benz covenants, agrees, represents and warrants that, until
January 1, 2001:
(i) Neither Benz nor Texstar will enter into any new
financial commitments of more than $50,000 without
approval of the Benz Board of Directors (excluding any
existing contractual commitment and any commitment
entered into in the future to deal with well blowouts
and other operational emergencies), provided that such
approval may be given generally for particular projects
rather than on an item-by-item basis. Neither Benz nor
Texstar will enter into any transactions any of the
other Guarantors/Shareholders without approval of the
Benz Board of Directors. In connection with their
resolutions authorizing this letter agreement, the Board
of Directors of Benz has adopted standing resolutions
providing for the foregoing.
(ii) The authorized size of Benz's Board of Directors on the
date hereof is six persons, and the Board has the
authority to appoint up to two additional directors.
Benz agrees not to increase the size of the Board to
more than seven. Benz has six incumbent directors, who
are Xxxxxxx X. Xxxxxxxxx, Xx., Xxxxxx X. Xxxxxx, Yale
Xxxxxx, Xxxxxx XxXxxxx, Xxxxxx Xxxxxx, and X. X. Xxxxxx.
(iii) A true and correct copy of its articles of incorporation
and bylaws, as amended to date, are attached hereto as
Exhibits H and I.
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 5
(iv) Prior to the occurrence of a Stakeholder Election, as
defined below, EnCap III LP will be entitled to have
Xxxx Xxxxxxxx or Xxxxx Xxxxxxxx (in addition to Xxxxxx
X. Xxxxxx) attend and observe any meeting of the Benz or
Texstar Board of Directors.
(v) As soon as reasonably possible hereafter, Benz will
cause its bylaws (or, in the case of the following
subparagraph (1), its articles of incorporation) to be
amended to provide that until January 1, 2001:
(1) The size of the Board will be fixed at seven
directors (rather than the current
arrangement allowing the size of the Board
to vary between three and ten).
(2) Board decisions will be made by a majority
of the board members, provided that (A)
sales or acquisitions of assets for more
than $5,000,000, sales of substantially all
assets, sales of equity or of rights to
acquire equity, bankruptcy filings, new
financings, changes to the size or
composition of the Executive Committee of
Benz's Board, and recommendations to the
shareholders with respect to mergers will
require the affirmative vote of 60% or more
of the directors, (B) all votes of the
Executive Committee of Benz's Board will be
required to be unanimous, and (C) amendment
or elimination of the requirements of the
foregoing clauses (A) or (B) will require
the affirmative vote of all directors or
approval of Benz's shareholders.
(3) Board approval will be required for (A) new
financial commitments of more than $50,000
(excluding any existing contractual
commitment and any commitment entered into
in the future to deal with well blowouts and
other operational emergencies), provided
that such approval may be given generally
for particular projects rather than on an
item-by-item basis, and (B) transactions
between Benz and Texstar or between either
Benz or Texstar and any of the other
Guarantors/Shareholders.
Benz has consulted with its Canadian counsel and has been
informed that the above changes to its bylaws can all be
properly made by Benz's existing Board of Directors,
provided that such changes will be effective only until the
next meeting of Benz's shareholders, at which time such
changes will cease to be effective unless ratified by the
shareholders. Benz shall present such changes to its bylaws
and articles of incorporation to Benz's shareholders for
ratification and adoption at
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 6
or before its next scheduled shareholders meeting, and in no
event later than February 28, 1999.
(b) Benz covenants, agrees, represents and warrants that it has
obtained executed letters from Xxxxxx Xxxxxx and X. X. Xxxxxx
(the "Director Resignations), true and correct copies of which
are attached hereto as Exhibit D, that Benz has not yet
accepted or rejected the Director Resignation from Xxxxxx
Xxxxxx and that Benz has accepted the Director Resignation
from X. X. Xxxxxx.
(c) Benz covenants and agrees that it will, provided an Oakvale
Drilling Success has occurred, accept the Director
Resignations immediately upon request that it do so made by
EnCap LC prior to January 1, 2001. Any such request by EnCap
LC after the occurrence of an Oakvale Drilling Success is
herein called a "Stakeholder
Election".
(d) Benz warrants and covenants that if a Stakeholder Election
occurs, its Board of Directors (who have approved this
letter agreement) will immediately appoint to the Board (i)
one EnCap Designee (as defined below) and (ii) two Debenture
Holder Designees (as defined below), provided that the same
have been designated, to fill the vacancies arising from the
Director Resignations and to hold the position of a seventh
director. As used herein, the term "EnCap Designee" means a
person designated by EnCap LC, the term "Debenture Holders"
means the holders of Benz's largest issue (at each time in
question) of outstanding unsecured debt securities (which
currently is Benz's 9% Convertible Debentures, Series 1 due
March 31, 2003), and the term "Debenture Holder Designee"
means a person designated by a majority of the Debenture
Holders.
(e) Benz warrants and covenants that, with respect to any vote of
the Benz shareholders or the Benz Board of Directors that
occurs after a Stakeholder Election and prior to January 1,
2001, concerning the election or appointment of persons to
serve on its Board of Directors:
(i) Benz's Board of Directors will nominate for election
to the Board, or appoint to the Board, two EnCap
Designees, two Debenture Holder Designees, and three
persons designated by the Guarantors/Shareholders
other than Benz and Calibre (the "Guarantor/
Shareholder Designees"), provided that the same have
been designated and further provided that at least one
Guarantor/Shareholder Designee must be an independent
director not associated or affiliated with the
Guarantor/Shareholders, EnCap LC, or the Debenture
Holder Designees (the "Independent Nominee").
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 7
(ii) Benz will use its best efforts to cause the EnCap
Designees, the Debenture Holder Designees, and the
Guarantor/Shareholder Designees to be elected or
appointed to the Benz Board of Directors.
The independence of the Independent Nominee must be consented
to by EnCap LC, which consent may not be unreasonably
withheld. EnCap LC hereby consents to Yale Xxxxxx as the
Independent Nominee.
(f) Each Guarantor/Shareholder covenants and agrees that it
will use its best efforts to cause Benz to comply with its
covenants and agreements contained in this paragraph 3.
Each Guarantor/Shareholder and Lasco covenants and agrees
that it will support the nomination and election of the
EnCap Designees, the Debenture Holder Designees and the
Guarantor/Shareholder Designees to Benz's Board of
Directors. Each Guarantor/Shareholder and Lasco covenants
and agrees that, with respect to any vote of the Benz
shareholders that occurs after a Stakeholder Election and
prior to January 1, 2001, concerning the election of
persons to serve on Benz's Board of Directors:
(i) It (i.e., such Guarantor/Shareholder or Lasco) will
vote or cause to be voted all Voting Securities
beneficially owned by it in favor of the election of
the EnCap Designees, the Debenture Holder Designees,
and the Guarantor/Shareholder Designees to Benz's
Board of Directors, provided that the same have been
designated, and in favor of any merger or sale
requiring shareholder consent which has been approved
by the affirmative vote of 60% or more of Benz's
Directors.
(ii) It will, upon request made by EnCap LC after a
Stakeholder Election has occurred, enter into a Voting
Agreement substantially in the form attached as
Exhibit G hereto, providing for the granting of an
irrevocable proxy to an unaffiliated bank or trust
company chosen by EnCap LC to vote such
Guarantor/Shareholder's or Lasco's shares as provided
herein. The Guarantors/Shareholders can sell up to a
total of 20% of the aggregate number of shares of Benz
common stock held by the Guarantor/Shareholders on the
date the Voting Agreement is executed without the
assignee or transferee being subject to the terms of
the Voting Agreement. If, however, the
Guarantors/Shareholders sell any shares of Benz common
stock that exceed such amount, the assignee or
transferee of such shares must agree to be subject to
the terms of this letter agreement and the Voting
Agreement as a condition to the sale.
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 8
(iii) Such Guarantor/Shareholder and Lasco will otherwise
use its best efforts to cause the EnCap Designees, the
Debenture Holder Designees and the Guarantor/Shareholder
Designees to be elected to Benz's Board of Directors.
(g) Benz, each Guarantor/Shareholder and Lasco warrants and
agrees that, in the event of the death, incapacity,
resignation or removal of an EnCap Designee, a Debenture
Holder Designee or a Guarantor/Shareholder Designee after a
Stakeholder Election and prior to January 1, 2001,
preventing his or her serving on the Benz Board of
Directors, it will promptly use its best efforts to cause
the election or appointment of another EnCap Designee,
Debenture Holder Designee or Guarantor/Shareholder Designee
(as applicable) to fill the vacancy created thereby.
(h) Each Guarantor/Shareholder represents and warrants to BOCP
that as of the date hereof such Guarantor/Shareholder is the
record and beneficial owner of the number of shares of
Common Shares of Benz, no par value per share, set forth
opposite its name in Exhibit E attached hereto.
4. BOCP, EnCap III LP and EnCap LC consent to Benz and Texstar entering
into an employment agreement with Xxxxxxx X. Xxxxxxxxx, Xx., providing
for the following benefits if Xx. Xxxxxxxxx'x employment is ever
terminated except for "cause" (as hereafter defined):
(a) a $1,000,000 cash severance payment, payable within 30 days after
termination;
(b) a consulting contract with a term of three years after
termination, providing for Xx. Xxxxxxxxx to receive payments of
$185,000 per annum and to devote a substantial portion of his
time, as requested, to assisting Benz and Texstar with their
oil and gas activities, restricting Xx. Xxxxxxxxx from
competing with Benz and Texstar with respect to their active
oil and gas prospects during such period, and requiring Xx.
Xxxxxxxxx to hold in confidence all confidential, proprietary,
non-public information at any time in his possession concerning
Benz or Texstar or their properties or prospects; and
(c) the grant of an overriding royalty interest equal to 1%,
proportionately reduced to Texstar's working interest in
Texstar's Oakvale, LaHinch, and Xxxxxxx/Plum Grove properties,
and equal to a .25% net revenue interest (calculated on an
8/8ths basis), in Texstar's Old Ocean properties (subject in
each case to all liens, burdens and encumbrances on Texstar's
title at such time and reduced by the amount of any royalties
already existing on such properties in favor of Xx. Xxxxxxxxx,
his
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 9
family members, or any Guarantors/Shareholders other than Benz
or Texstar, excluding only an overriding royalty of
approximately .38% presently owned by Xxxxxxx Xxxxxxxxx in the
Oakvale Dome properties.
BOCP, EnCap III LP and EnCap LC further consent to Texstar granting the
foregoing overriding royalties to Xx. Xxxxxxxxx at any time. Regardless of
when such overriding royalties are granted, if a Stakeholder Election
occurs and thereafter Xx. Xxxxxxxxx'x employment with Benz is terminated by
Benz (except for cause) prior to January 1, 2001, then BOCP and EnCap III
LP will release any liens which they may have on such overriding royalties
at the time of such termination. As used in this paragraph 4 and the
following paragraph 5, "cause" means any of the following: (i) a material
failure of Xx. Xxxxxxxxx to follow or comply with any lawful directive of
the requisite majority of the Benz Board of Directors; (ii) a material
failure of Xx. Xxxxxxxxx to perform his duties as the chief executive
officer of Benz; (iii) conduct by Xx. Xxxxxxxxx which constitutes an act of
fraud, theft, dishonesty, or violation of any statutory or common law duty
of loyalty to Benz; (iv) Xx. Xxxxxxxxx'x conviction of a felony or any
crime of moral turpitude, or (v) Xx. Xxxxxxxxx'x unreasonable absence from
employment without excuse or justification.
5. EnCap III LP agrees that, if a Stakeholder Election occurs and thereafter
Xx. Xxxxxxxxx'x employment with Benz is terminated by the shareholders or
Board of Directors of Benz (except for cause) prior to January 1, 2001,
then EnCap III LP will make the cash severance payment to Xx. Xxxxxxxxx
described in paragraph 4(a) above on behalf of Benz if Benz fails to make
such payment within 30 days after becoming obligated to do so. If EnCap III
LP makes such payment after Benz fails to do so, such payment will be
deemed an advance to Texstar under the EnCap Credit Agreement that is
secured by all liens and security interests given by Texstar to EnCap III
LP, and Texstar and Benz will immediately reimburse EnCap III LP for the
amount of such payment. EnCap III LP's obligation to make such payment on
behalf of Benz will not be affected by Benz or Texstar having inadequate
funds to make such reimbursement, but EnCap III LP will not be obligated to
make such payment if Benz or Texstar is, at the time in question, in
bankruptcy proceedings, and EnCap III LP's obligation will also be limited
by any affirmative defense, offset or other limitation on Benz's obligation
to Xx. Xxxxxxxxx. At such time as a Stakeholder Election occurs, Benz and
Texstar will execute such instruments as EnCap III LP may reasonably
request to more fully provide for the foregoing.
6. Borrower will, on or before December 31, 1998, amend its articles of
incorporation to provide that no bankruptcy or insolvency proceedings can
be initiated on behalf of Borrower without the express consent of at least
two-thirds of its shareholders of record. At the same time, Benz will amend
its bylaws to provide that no such consent will be
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 10
given with respect to Borrower except upon the affirmative vote of 60% or
more of Benz's directors.
7. If and when the EnCap Designee (other than Xxxxxx X. Xxxxxx) and the two
Debenture Holder Designees become members of the Benz Board of Directors,
each Guarantor/Shareholder (other than Benz, Calibre, and Benz Properties
Ltd.) shall be deemed automatically released from any personal liability
under its respective guaranty agreement executed in favor of EnCap III LP
(although any pledges of its stock in Benz or Benz's subsidiaries or
affiliates will remain in effect), and EnCap III LP and each such
Guarantor/Shareholder will execute appropriate instruments to confirm such
release and confirm that such pledges remain in effect, but without
personal liability to such Guarantor/Shareholder. At the same time,
Borrower, Benz, Calibre and Benz Properties Ltd. will consent to such
instruments and ratify and confirm their obligations under the Loan
Documents. Prior to the time, if any, that such automatic releases occur,
EnCap III LP will not enforce such guaranty agreement against such
Guarantor/Shareholder (other than Benz, Calibre, and Benz Properties Ltd.)
until 180 days after EnCap III LP has either (a) commenced enforcement of
its remedies against Texstar under one or more Loan Documents following the
occurrence of an "Event of Default" under the EnCap Credit Agreement or (b)
been stayed from commencing such enforcement, provided that EnCap III LP
shall not be prevented from filing any claim or otherwise acting to
preserve its rights under such guaranty agreement from becoming
unenforceable due to any statute of limitations, filing deadline or similar
requirement.
8. BORROWER AND THE GUARANTORS/SHAREHOLDERS -- ON BEHALF OF THEMSELVES AND, TO
THE EXTENT THEY ARE PERMITTED BY LAW OR ARE OTHERWISE EXPRESSLY AUTHORIZED
TO DO SO, ON BEHALF OF ALL OTHER BENZ ENTITIES -- HEREBY RATIFY AND CONFIRM
EACH OF THE LOAN DOCUMENTS (AS MODIFIED AND SUPPLEMENTED HEREBY) IN ALL
RESPECTS, WAIVE ANY DEFENSES, SET-OFFS OR COUNTERCLAIMS WITH RESPECT TO THE
LOAN DOCUMENTS OR ANY OF THE INDEBTEDNESS THEREUNDER, AND RATIFY AND
CONFIRM ALL LIENS AND SECURITY INTERESTS WITH RESPECT TO THE COLLATERAL
HERETOFORE GIVEN BY ANY OF THEM TO OR FOR THE BENEFIT OF ANY INVESTOR
ENTITY. BORROWER AND THE GUARANTORS/SHAREHOLDERS HEREBY AGREE NOT TO
CHALLENGE THE VALIDITY, PRIORITY OR ENFORCE ABILITY OF THE LOAN DOCUMENTS
OR OF ANY LIENS OR SECURITY INTERESTS AT ANY TIME
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 11
GIVEN TO ANY INVESTOR ENTITY WITH RESPECT TO ANY COLLATERAL.
9. BORROWER AND THE GUARANTORS/SHAREHOLDERS -- ON BEHALF OF THEMSELVES AND, TO
THE EXTENT THEY ARE PERMITTED BY LAW OR ARE OTHERWISE EXPRESSLY AUTHORIZED
TO DO SO, ON BEHALF OF ALL OTHER BENZ ENTITIES -- HEREBY GENERALLY RELEASE
AND FOREVER DISCHARGE THE INVESTOR ENTITIES FROM ANY AND ALL RELEASED
CLAIMS. THIS RELEASE IS TO BE CONSTRUED AS THE BROADEST TYPE OF GENERAL
RELEASE AND COVERS AND RELEASES ANY AND ALL RELEASED CLAIMS, WHETHER KNOWN
OR UNKNOWN AND HOWEVER OR WHENEVER ARISING, WHETHER BY CONTRACT OR
AGREEMENT, AT LAW OR UNDER ANY STATUTE (INCLUDING WITHOUT LIMITATION ANY
LAW OR STATUTE PERTAINING TO NEGLIGENCE, GROSS NEGLIGENCE, STRICT
LIABILITY, FRAUD, DECEPTIVE TRADE PRACTICES, NEGLIGENT MISREPRESENTATION,
SECURITIES VIOLATIONS, BREACH OF FIDUCIARY DUTY, BREACH OF CONTRACT, TRADE
REGULATION, REGULATION OF BUSINESS OR COMPETITION, CONSPIRACY OR
RACKETEERING), OR OTHERWISE ARISING, AND EXPRESSLY INCLUDING ANY CLAIMS FOR
PUNITIVE OR EXEMPLARY DAMAGES, ATTORNEYS' FEES, OR PENALTIES. TO THE EXTENT
THAT ANY RELEASED CLAIMS WITH RESPECT TO ANY INVESTOR ENTITY HAVE NOT BEEN
RELEASED BY THIS LETTER AGREEMENT, BORROWER AND THE GUARANTORS/SHAREHOLDERS
HEREBY ASSIGN SUCH RELEASED CLAIMS TO SUCH INVESTOR ENTITY.
10. Borrower, the Guarantors/Shareholders, BOCP and EnCap III LP hereby ratify
and confirm the arbitration provisions of the November Letter Agreement.
Borrower ratifies and confirms its agreement in the November Letter
Agreement to provide to EnCap III LP and to Bank One, within five business
days after the end of every two-week period, schedules showing all of its
accounts payable (in any categories) at the end of such period and all
payments made on its accounts payable during such period, and to provide to
EnCap III LP and to Bank One, within fifteen days after the end of every
calendar month, a schedule showing all of its accounts receivable (in any
categories) at the end of such
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 12
month. Benz agrees to provide BOCP and Bank One with similar schedules, at
the same times, with respect to Benz and its subsidiaries other than
Borrower.
11. Borrower and the Guarantor/Shareholders agree that no payments of any kind
(whether repayments of debt, fees for services, or otherwise) will be made
by Borrower or Benz to any Shareholder/Guarantor other than Benz, provided
that Benz may make salary payments to Xxxxxxx Xxxxxxxxx of up to $16,667
per month (and may accrue additional salary payments of up to $5,450 per
month provided that such accrued salary may not be paid until the earlier
of January 1, 2002 and the termination of the EnCap Credit Agreement.) The
EnCap Credit Agreement is hereby amended by deleting the last two sentences
of Section 7.5 thereof.
12. EACH OF BORROWER, THE GUARANTORS/SHAREHOLDERS, ENCAP III LP, LASCO, ENCAP
LC, AND BOCP HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY
WAIVES AND RELEASES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER ANY "SPECIAL DAMAGES", AS DEFINED BELOW,
FROM ANY OTHER PARTY HERETO IN RESPECT OF ANY LITIGATION (INCLUDING
ARBITRATION PROCEEDINGS) BASED ON, OR DIRECTLY OR INDIRECTLY AT ANY TIME
ARISING OUT OF, UNDER OR IN CONNECTION WITH, ANY ACTIONS, FAILURES TO ACT,
OR EVENTS AT ANY TIME OCCURRING (WHETHER BEFORE, AT OR AFTER THE EFFECTIVE
DATE HEREOF) WHICH IN ANY WAY RELATE TO OR ARE BASED UPON ANY OF THE
FOLLOWING: (1) THE ENCAP CREDIT AGREEMENT OR ANY OTHER LOAN DOCUMENT, (2)
THE MAKING OF ANY LOANS OR ADVANCES THEREUNDER OR THE FAILURE OR REFUSAL TO
MAKE ANY LOANS OR ADVANCES THEREUNDER, (3) ANY ACTUAL, CLAIMED, THREATENED,
OR ALLEGED EXERCISE BY ANY INVESTOR ENTITY OF ANY OF ITS RIGHTS OR REMEDIES
UNDER OR IN CONNECTION WITH THE ENCAP CREDIT AGREEMENT, ANY OF THE OTHER
LOAN DOCUMENTS, OR ANY COLLATERAL, (4) ANY OTHER TRANSACTIONS OF ANY KIND
AMONG ANY OF THE BENZ ENTITIES AND ANY OF THE INVESTOR ENTITIES OR ANY
ACTIONS OR INACTIONS BY ANY INVESTOR ENTITY WITH RESPECT TO ANY BENZ
ENTITY, OR BY ANY BENZ ENTITY WITH RESPECT TO ANY
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 13
INVESTOR ENTITY, OR (5) ANY ACTUAL OR ALLEGED NEGOTIATIONS, DISCUSSIONS,
REPRESENTATIONS, WARRANTIES, PROMISES, OR OTHER UNDERTAKINGS BY ANY PARTY
HERETO IN CONNECTION WITH ANY OF THE FOREGOING. AS USED IN THIS LETTER
"SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR
PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY
PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS IN A DOCUMENT, SECURITY OR
INSTRUMENT EXPRESSLY PROMISED TO PAY OR DELIVER.
13. EACH OF BORROWER, THE GUARANTORS/SHAREHOLDERS, ENCAP III LP, LASCO, ENCAP
LC, AND BOCP HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR DIRECTLY OR
INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH,
BEFORE OR AFTER MATURITY, AND CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE WAIVERS IN THIS PARAGRAPH AND THE
FOREGOING PARAGRAPH, AND ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER
INTO THIS LETTER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY BY,
AMONG OTHER THINGS, THE ARBITRATION PROVISIONS, MUTUAL WAIVERS, AND
CERTIFICATIONS CONTAINED IN THIS PARAGRAPH AND THE TWO PRECEDING
PARAGRAPHS.
14. Borrower and the Guarantors/Shareholders hereby represent and warrant to
BOCP and EnCap III LP that this letter agreement has been duly authorized
in all respects, does not conflict with any obligation or duty owed by any
of them, and is enforceable in accordance with its terms.
15. The rights and duties of the parties to this letter agreement shall never
terminate, except to the extent expressly provided herein. No
Guarantor/Shareholder shall be deemed, under
BOCP Energy Partners, L.P. EnCap
Energy Capital Fund III, L.P.
December 16, 1998
Page 14
any guaranty agreement referred to in paragraph 7 above, to have guarantied
the obligations under this letter agreement of any other party hereto. This
letter agreement shall not be considered a "Loan Document", as defined in
the EnCap Credit Agreement, except for the purposes of Article VIII thereof
(which sets out the "Events of Default" thereunder).
16. This letter agreement shall be governed by and construed under the laws of
the State of Texas and of the United States of America. This letter
agreement may be executed in multiple counterparts and by the different
parties hereto in separate counterparts, all of which shall constitute one
and the same agreement. This letter agreement shall take effect upon its
execution by all parties hereto.
Please execute a counterpart of this letter in the space provided below
to evidence your agreement to the foregoing.
TEXSTAR PETROLEUM, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
--------------------------------
Xxxxxxx X. Xxxxxxxxx, Xx.,
Chief Executive Officer
BENZ ENERGY LTD.
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
--------------------------------
Xxxxxxx X. Xxxxxxxxx, Xx., Chairman
CALIBRE ENERGY, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxxx, Manager
BENZ PROPERTIES LTD.
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
--------------------------------
Xxxxxxx X. Xxxxxxxxx, Xx., President
/s/ XXXXXXX X. XXXXXXXXX, XX.
------------------------------------
XXXXXXX X. XXXXXXXXX, XX.
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 15
TEXSTAR HOLDINGS, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
--------------------------------
Xxxxxxx X. Xxxxxxxxx, Xx., President
/s/ XXXXXXX X. XXXXXXXXX, XX.
------------------------------------
XXXXXXX X. XXXXXXXXX, XX., TRUSTEE
FOR AND ON BEHALF OF THE XXXXXXXX TRUST
/s/ XXXXXXX X. XXXXXXXXX, XX.
------------------------------------
XXXXXXX X. XXXXXXXXX, XX., TRUSTEE
FOR AND ON BEHALF OF THE RUSTON TRUST
/s/ XXXXXXX X. XXXXXXXXX, XX.
------------------------------------
XXXXXXX X. XXXXXXXXX, XX., TRUSTEE
FOR AND ON BEHALF OF THE HOUSTON TRUST
/s/ XXXXXXX X. XXXXXXXXX
------------------------------------
XXXXXXX X. XXXXXXXXX, TRUSTEE
FOR AND ON BEHALF OF THE STARBUCKS TRUST
AGREED TO as of the date first written above:
BOCP ENERGY PARTNERS, L.P.
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.C., Manager of each
By: ---------------------------
Xxxxxx X. Xxxxxx, Managing Director
BOCP Energy Partners, L.P.
EnCap Energy Capital Fund III, L.P.
December 16, 1998
Page 16
ENCAP INVESTMENTS L.C.
By: ---------------------------
Xxxxxx X. Xxxxxx, Managing Director
LASCO ENERGY PARTNERS, L.P.
By: Riverhill Energy Corporation, General Partner
By: /s/ Xxxx X. Xxxxxxx
--------------------------
Xxxx X. Xxxxxxx, President
EXHIBIT A
FIRST AMENDMENT TO PARTICIPATION AGREEMENT
