BANK ONE, TEXAS, N.A.
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
PARTICIPATION AGREEMENT
November 4, 1998
BOCP Energy Partners, L.P.
000 X. Xxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx, Xxxx 00000
Dear Sirs:
Bank One, Texas, N.A. ("Bank One") has entered into that certain
Letter Loan Agreement dated July 17, 1997 (as from time to time amended,
supplemented or restated, including by the herein defined Current Amendment,
the "Loan Agreement") with Texstar Petroleum, Inc., a Texas corporation
("Borrower"), pursuant to which Borrower executed that certain Promissory
Note of even date with the Current Amendment payable to the order of Bank One
in the original principal amount of $10,000,000 (the "Note"). As of the date
hereof, the aggregate unpaid amount of all outstanding principal advances
under the Loan Agreement is $3,201,224.60 (the "Outstanding Advances"). Bank
One has submitted to BOCP Energy Partners, L.P. ("Participant") copies of the
Loan Agreement and the Note (both the original documents and all amendments
and supplements thereto, including that certain Third Amendment to Letter
Loan Agreement of even date herewith, which is herein called the "Current
Amendment"). Reference is made to such instruments for descriptions of the
rights and obligations of Borrower and Bank One thereunder, for definitions
of terms used therein and herein and for all other terms and conditions of
the Loan Agreement and all loans and advances thereunder (collectively, the
"Loan"). The Current Amendment, among other things, creates a Tranche A
("Tranche A") and a Tranche B ("Tranche B") under the Loan Agreement.
References in this Participation Agreement to Participant's "pro rata" share
in the Loan or "pro rata share" of a designated sum or amount shall refer to
that percentage of the Loan or of such sum or amount which is the same as the
percentage determined by dividing (i) the amount of the unpaid principal
balance of Tranche B, at the time in question, by (ii) the entire unpaid
principal balance of the Loan at such time.
This Participation Agreement will evidence and confirm the arrangement
between Bank One and Participant whereby Bank One will allot and sell, and
Participant will take and purchase, a 100% participation in Tranche B under
the Loan Agreement and the related payment rights under the Note. Such
participation (herein called the "Participation") is allotted and sold to,
and is taken and purchased by, Participant for its own account and risk, on
the following terms:
Section 1. ADVANCES. Bank One has heretofore made, or immediately
after execution of this Participation Agreement will make, an advance under
Tranche B to Borrower in the principal
BOCP Energy Partners, L.P.
November 4, 1998
Page 2
amount of $2,000,000, the making of which advance is hereby consented to and
approved by Participant in all respects. In consideration of such advance
under Tranche B, Participant will, on the date hereof, cause immediately
available funds in the amount of such principal amount to be transferred to
an account at Bank One designated by Bank One.
Section 2. "LAST-OUT" PARTICIPATION. Whenever Bank One collects or
receives money on account of the obligations owing under the Note or the Loan
Agreement, whether purportedly with respect to Tranche A, Tranche B or
otherwise, Bank One shall distribute all money so collected or received, and
Bank One and Participant shall apply all such money so distributed, as
follows:
(a) first, for the payment to Bank One for all costs, expenses and
disbursements incurred by Bank One which are owing pursuant to the Loan
Agreement or any other document or instrument executed in connection
therewith or as security therefor;
(b) then for the payment of any interest due and owing under the Note
with respect to Tranche A;
(c) then for the payment or prepayment of principal and any other
interest or other amounts owing under the Note with respect to Tranche A;
and
(d) then for the payment of any interest due and owing under the Note
with respect to Tranche B;
(e) last (upon the payment in full of all principal, interest and
other amounts owing under the Note with respect to Tranche A) for the
payment of principal and any other interest or other amounts owing under
the Note with respect to Tranche B.
To the extent that Bank One has received good funds therefor from Borrower,
Bank One will promptly credit to Participant's account with Bank One, or will
promptly credit to Participant's account with any bank previously designated
by Participant in writing delivered to Bank One, any such interest, principal
or other amounts to which Participant is entitled hereunder.
Section 3. SPECIAL INTEREST PROVISIONS FOR TRANCHE B. Bank One and
Participant acknowledge and agree that (a) interest accrues on the portion of
the principal balance of the Note represented by Tranche B at a rate that is
greater than the rate applicable to Tranche A, and (b) Borrower, with the
consent of Participant, has the option to defer payment of such interest
until the maturity of the Note.
BOCP Energy Partners, L.P.
November 4, 1998
Page 3
Section 4. BANK ONE'S LIMITED RESPONSIBILITY TO PARTICIPANT. Bank
One makes no representation or warranty and shall have no responsibility with
respect to the validity or enforceability of any of the Loan Documents, any
engineering data relating to properties of Borrower or its affiliates, their
financial condition or performance of their obligations under the Loan
Documents, or the collectibility of the Note. In the making and handling of
the Loan and any security therefor Bank One will exercise the same care that
it exercises in the making and handling of loans and security for its own
account, but no further responsibility is assumed by Bank One in connection
therewith.
Section 5. PARTICIPANT'S INDEPENDENT CREDIT DECISIONS. Participant
acknowledges that it has made its own credit decision, examination,
engineering evaluation and review with respect to the Loan, the Loan
Documents and the validity, effectiveness, enforceability, genuineness and
value of the Loan Documents, and that Participant has not relied on Bank One
with respect to any thereof. Participant represents to Bank One that
Participant shall make its own credit decisions, examinations, engineering
evaluations and reviews with respect to all future decisions involving the
Loan and the Loan Documents and agrees that Bank One shall have no
responsibility with respect thereto.
Section 6. REPORTS. Upon request by Participant, Bank One will
send to Participant copies of any reports or information furnished to Bank
One pursuant to the Loan Documents.
Section 7. LIABILITIES AND EXPENSES. Participant shall pay to Bank
One on demand Participant's pro rata share, at the time of incurrence by Bank
One, of all liabilities (other than obligations to make advances and
liabilities under participation agreements) and costs, expenses and
disbursements incurred by Bank One in connection with the Loan or under any
of the Loan Documents or in connection with any action which may be taken by
Bank One to collect the Note or any other sums owing under any of the Loan
Documents, to the extent such liabilities, costs, expenses or disbursements,
or reimbursements therefor, are not paid to Bank One by Borrower or on
Borrower's behalf. If Participant shall make a pro rata payment to Bank One
pursuant to this section for which Bank One is later reimbursed, in whole or
in part, by or on behalf of Borrower, Bank One shall return to Participant
Participant's proportionate share of such reimbursement.
Section 8. ASSIGNMENTS AND SUBPARTICIPATIONS. The Participation
may not be transferred by Participant in whole or in part without the prior
written consent of Bank One, and then only if the transferee accepts the
conditions and assumes the obligations of Participant with respect to the
Participation as contained in this Participation Agreement. Unless the
entirety of the Participation is so transferred with Bank One's prior written
consent, Bank One shall have no obligation or responsibility to any purported
transferee and may treat Participant as the absolute owner of the
Participation for the purpose of receiving payment and for all other purposes
and
BOCP Energy Partners, L.P.
November 4, 1998
Page 4
Bank One shall not be affected by any notice to the contrary. Participant
may sell subparticipations in the Participation, but Bank One shall in all
cases have no obligation or responsibility to any subparticipant and may
treat Participant as the absolute owner of the Participation for the purpose
of receiving payment and for all other purposes and Bank One shall not be
affected by any notice to the contrary. All payments made to Participant
shall be valid and effectual to satisfy and discharge Bank One's liability to
the extent of the sum or sums so paid.
Section 9. RIGHTS OF BANK ONE. Nothing contained in this
Participation Agreement shall prohibit or limit the making of any further
advance by Bank One to or for the benefit of Borrower, whether under Tranche
A or otherwise. It is further understood and agreed that nothing contained
herein shall prohibit or limit the rights of Bank One under the Loan
Agreement and the other Loan Documents to do any or all of the following,
none of which shall require the consent of Participant: (i) declare an event
of default under the Loan Agreement; (ii) accelerate the maturity of the
Note; (iii) take any action with respect to the obligations owed to it under
any guaranty agreement or any other Loan Document, including without
limitation any Loan Document executed as security for the Note or any other
indebtedness evidenced by any Loan Document; (iv) change the date on which
any payment under the Note or any other Loan Document is due; (v) waive any
default under any Loan Document; or (vi) bring suit against or take any other
action Borrower or any guarantor for enforcement of the rights of Bank One
under the Loan Documents ; provided, however, that Bank One will not, without
Participant's prior written consent: (a) release any material amount of
collateral at any time securing the Note, or (b) agree to any reduction in
the amounts payable under the Note, whether for principal or interest or
otherwise.
Section 10. SUBORDINATION. Participant agrees that its rights to
receive payments hereunder are subordinate to the rights of Bank One under
Section 2 above to retain all payments by Borrower of indebtedness owing
under the Loan Documents, as the same may be amended or modified from time to
time, until all such indebtedness (other than Tranche B and interest or other
amounts accruing in respect of Tranche B) has been paid in full. This
subordination applies, among other things, to any distribution of the assets
or readjustment of the indebtedness of Borrower, whether by reason of
liquidation, composition, bankruptcy, arrangement, receivership, assignment
for the benefit of creditors or any action or proceeding involving a
readjustment of any of the indebtedness of Borrower, or the application of
the assets of Borrower to the payment or liquidation thereof.
Section 11. BANK ONE NOT A FIDUCIARY. Nothing contained in this
Participation Agreement shall be deemed to make Bank One a fiduciary of
Participant, a partner or venturer of Participant, or to have any
relationship with Participant other than that of a seller and a purchaser of
a participation in a loan.
BOCP Energy Partners, L.P.
November 4, 1998
Page 5
Section 12. ARBITRATION AND JURY WAIVER.
(a) Bank One and Participant agree that upon the written demand of
either party, whether made before or after the institution of any legal
proceedings, but prior to the rendering of any judgment in that proceeding,
all disputes, claims and controversies between them, whether individual,
joint, or class in nature, arising from this Participation Agreement, any
Loan Document or otherwise, including without limitation contract disputes
and tort claims, shall be resolved by binding arbitration pursuant to the
Commercial Rules of the American Arbitration Association ("AAA"). Any
arbitration proceeding held pursuant to this arbitration provision shall be
conducted in Houston, Texas, or at any other place selected by mutual
agreement of the parties. This arbitration provision shall not limit the
right of either party during any dispute, claim or controversy to seek, use,
and employ ancillary, or preliminary rights and/or remedies, judicial or
otherwise, and any such action shall not be deemed an election of remedies.
Judgment upon any award rendered by any arbitrator may be entered in any
court having jurisdiction. The statute of limitations, estoppel, waiver,
laches and similar doctrines which would otherwise be applicable in an action
brought by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of
any action for these purposes. The Federal Arbitration Act (Title 9 of the
United States Code) shall apply to the construction, interpretation, and
enforcement of this arbitration provision.
(b) PARTICIPANT AND BANK ONE HEREBY VOLUNTARILY, KNOWINGLY
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
BETWEEN OR AMONG PARTICIPANT AND BANK ONE ARISING OUT OF OR IN ANY WAY
RELATED TO THIS PARTICIPATION AGREEMENT, ANY LOAN DOCUMENT, OR ANY
RELATIONSHIP BETWEEN PARTICIPANT AND BANK ONE.
Section 13. DEFAULT BY PARTICIPANT. In the event Participant fails
to timely pay to Bank One any amount required to be made available by
Participant hereunder, or upon the breach by Participant of any of its other
obligations hereunder, Participant shall be liable to Bank One for all such
amounts advanced hereunder by Bank One which Participant does not pay to Bank
One, together with interest thereon at the "Prime Rate" referred to in the
Loan Agreement from the date so advanced by Bank One until repaid, and all
amounts payable with respect to the Note and other Loan Documents (whether
with respect to or allocable to Tranche A, Tranche B or otherwise) shall be
paid to and retained by Bank One until all such obligations of Participant to
Bank One have been satisfied and no default by Participant exists hereunder.
Once all obligations of Participant to Bank One shall have been satisfied, so
that no default by Participant exists hereunder, Participant shall be
entitled to receive all amounts payable hereunder with respect to its
interest described herein, subject to its continued compliance with the terms
hereof.
BOCP Energy Partners, L.P.
November 4, 1998
Page 6
Participant is requested to indicate its acceptance of the
Participation, upon the terms hereinabove set forth, by executing and
returning to Bank One one counterpart of this Participation Agreement.
Yours truly,
BANK ONE, TEXAS, N.A.
By:
--------------------------------------
Name:
Title:
The undersigned Participant hereby accepts, takes and purchases, as of
the date first set out above, the Participation described in the foregoing
Participation Agreement and accepts and agrees to the terms and conditions
contained therein.
BOCP ENERGY PARTNERS, L.P.
By:
--------------------------------------
Name:
Title:
Borrower hereby acknowledges receipt of a copy of the foregoing
Participation Agreement and agrees to the terms thereof.
TEXSTAR PETROLEUM, INC.
By:
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Name:
Title: