December 31, 1998
Texstar Petroleum, Inc.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Ladies and Gentlemen:
This letter loan agreement (this "Agreement") confirms the mutual
agreements between Texstar Petroleum, Inc., a Texas corporation ("Borrower") ,
and the persons listed in the attached Schedule I (such persons being
collectively referred to herein as "Lenders" and individually as a "Lender"), in
connection with a credit facility more fully described herein.
Section 1. CREDIT FACILITY. Subject to the terms of this Agreement,
each Lender agrees to lend and Borrower agrees to borrow certain amounts
pursuant to the following terms and conditions (the "Credit Facility"):
(a) NOTE: Borrower's obligation to repay the Credit Facility shall
be evidenced by its execution of a promissory note of even date herewith,
payable to the order of each Lender (herein called such Lender's "Note"),
substantially in the form attached as Exhibit 1(a) hereto.
(b) CREDIT FACILITY AMOUNT: $2,200,000 (the "Credit Facility
Amount").
(c) LOANS: Subject to the terms and conditions hereof, each Lender
agrees to make a single advance to Borrower (herein called such Lender's
"Loan") upon Borrower's request on or before December 31, 1998, provided
that each Lender's advance shall not exceed the amount reflected on
Schedule I for such Lender and the aggregate principal amount of Loans does
not exceed the Credit Facility Amount. The amount of principal owing on
any Lender's Note at any given time shall be the amount of such Lender's
Note minus all payments of principal theretofore received by such Lender on
such Note. Interest on each Note shall accrue and be due and payable as
provided in this Agreement and in each Note. No portion of any Loan which
has been repaid may be reborrowed. Each Note shall be due and payable as
provided in this Agreement and in each Note and shall be due and payable in
full on the Maturity Date.
(d) MATURITY DATE: April 30, 1999 (the "Maturity Date").
Texstar Petroleum, Inc.
December 31, 1998
Page 2
(e) PURPOSE: To finance the acquisition of (1) the "Assigned
Premises," as such term is defined in the draft furnished to the Lenders
of that certain Recordation Notice and Memorandum of Term Assignment of Oil
and Gas Lease(s), by and between Mobil Producing Texas & New Mexico Inc.
("Mobil") and Borrower (the "Notice and Memorandum") and (2) the "Contract
Rights," as such term is defined in the draft furnished to the Lenders of
that certain Assignment of Contract Rights (as herein called) by and
between Mobil and Borrower, and to pay the arrangement fees described in
Section 1(f) and the legal fees of Xxxxxxxx & Xxxxxx, P.C. and Xxxxxxxxx &
Xxxxxxxxx, L.L.P. referenced in Section 9.
(f) ARRANGEMENT FEE AND OTHER AGREEMENTS:
(1) Borrower shall pay to RP&C International, Inc. ("RP&C") and
to EnCap Investments L.C. ("EnCap") arrangement fees in the amounts
of $125,400 and $6,600, respectively, on the date hereof (and RP&C
will use $120,000 of the amount of the fee so paid to it to make
the Loan by it to Borrower hereunder).
(2) No later than 10 business days after the closing provided in
Section 9, Borrower shall use its reasonable best efforts to cause
Benz Energy Ltd., a corporation existing under the laws of the Yukon
Territory and the sole shareholder of Borrower ("Benz Energy"), to
issue to RP&C and to EnCap warrants to purchase Benz Shares (as
defined below) in an aggregate amount equal to $220,000 divided by the
Market Price (and such warrants shall be apportioned 95% to RP&C and
5% to EnCap, respectively). For purposes hereof:
"Benz Shares" shall mean the common shares of Benz Energy, no
par value, and any securities of Benz Energy for or into which such
common shares are exchanged, reclassified or converted.
"Market Price" shall mean the lesser of (x) the average of the
last reported sales price for the Benz Shares for the 20 consecutive
Trading Days immediately preceding the date hereof or (y) the
average of the last reported sales price for the Benz Shares for the
20 consecutive Trading Days immediately preceding the one year
anniversary of the date hereof. The last reported sales price for
each day shall be the last reported sales price for the Benz Shares on
such date on the exchange on which the Benz Shares are primarily
traded.
"Trading Days" shall mean, with respect to the exchange on which
the Benz Shares are primarily traded, the days on which such
securities exchange is open for business.
Texstar Petroleum, Inc.
December 31, 1998
Page 3
The exercise price of the warrants shall be the Market Price and the
exercise period of the warrants shall be for a three-year period
commencing the date of the Notes. In lieu of issuing warrants as
provided above, Borrower shall have the option of using its reasonable
best efforts to cause Benz Energy to make (or, if requested by RP&C
and EnCap, Borrower shall use its reasonable best efforts to cause
Benz Energy to make) alternative arrangements satisfactory to RP&C and
EnCap to provide them in substance with substantially the same
economic rights or interests they would have otherwise received had
they been issued the warrants as provided above (which alternative
arrangements shall include "phantom warrants"). The form of the
warrants or such alternative arrangements shall be in form and content
reasonably satisfactory to RP&C and to EnCap.
(3) No later than 10 business days after the closing provided in
Section 9, Texstar agrees to use its reasonable best efforts to cause
Benz to amend those certain phantom warrants originally issued to
RP&C on March 25, 1998, in connection with the issuance by Parent of
up to $25,000,000 of convertible debentures on or about that date, to
provide for an exercise price equal to the Market Price. If for bona
fide legal or other regulatory purposes, Benz is precluded from so
amending such warrants (or if requested by RP&C), Texstar shall use
its reasonable best efforts to cause Benz to make arrangements
satisfactory to RP&C to provide RP&C in substance with substantially
the same economic rights or interests it would have otherwise received
had the warrants been amended as provided above (and such alternative
arrangements shall be in form and content reasonably satisfactory to
RP&C).
Section 2. INTEREST RATE AND REPAYMENT TERM.
(a) INTEREST RATE.
(1) Subject to the provisions of paragraphs (2) and (3) of this
Section 2(a), Borrower shall pay interest on the outstanding principal
amount of each Note at the rate of 10% per annum. Accrued and unpaid
interest on each Note shall be calculated on the basis of a 365-day year or
366-day year, as the case may be, and the actual number of days elapsed.
(2) In the event that, and for so long as, any principal or interest
owing under a Note is not paid when due, then and in any such event, all of
the outstanding principal amount of each Note shall bear interest from such
due date at the rate of 16% per annum.
Texstar Petroleum, Inc.
December 31, 1998
Page 4
(3) Notwithstanding anything contained herein or in any Note to the
contrary, in no event shall the interest payable with respect to each Note
exceed the Maximum Interest (as defined in each Note).
(b) REPAYMENT TERMS. Accrued and unpaid interest on the outstanding
principal amount of each Note shall be due and payable on February 1, 1999,
and on the first day of each month thereafter. The balance of unpaid
principal and accrued and unpaid interest on each Note shall be due and
payable on the Maturity Date.
Section 3. OVERRIDING ROYALTY INTEREST AND NET PROFITS INTEREST.
(a) OVERRIDING ROYALTY INTEREST. Subject to the terms and
conditions hereof, Borrower agrees to convey to each Lender such Lender's
Percentage Share (as defined below) of an overriding royalty interest
equal to 50% of the Mobil Interest in and to the OOU Leases and the AMI
Leases. The conveyance of each overriding royalty interest provided in
the immediately preceding sentence shall be substantially in the form of
the Conveyance of Overriding Royalty Interest attached hereto as Exhibit
3(a) in all material respects (the "Override Conveyance"), and the terms
"Mobil Interest," "OOU Leases" and "AMI Leases" shall have the respective
meanings assigned to them in the Override Conveyance. As used herein
with respect to a Lender, the term "Percentage Share" shall mean a
percentage derived by dividing the then outstanding principal amount
of such Lender's Note (or Notes, if such Lender hereafter acquires a
Note or Notes, or a portion thereof, of any other Lenders) by the Credit
Facility Amount.
(b) NET PROFITS INTEREST.
(1) If Borrower pays in full all of the Notes on or before the
expiration of the two-month period commencing the date of the Notes,
Borrower and each Lender agree to promptly execute and deliver that
certain Reconveyance of Overriding Royalty Interest and Conveyance of
Net Profits Interest substantially in the form of the instrument
attached hereto as Exhibit 3(b) in all material respects (the "NPI
Conveyance")(it being agreed, however, that each Lender shall be
entitled to receive such Lender's Percentage Share of 6.40% of the net
profits, if any, realized from the production of oil, gas and other
minerals from the Subject Interests, calculated in the manner provided
in the NPI Conveyance). The term "Subject Interests" shall have the
meaning assigned to it in the NPI Conveyance.
(2) If Borrower pays in full all of the Notes after the
expiration of the two-month period commencing the date of the Notes
but on or before the expiration of the four-month period commencing
the date of the Notes, Borrower and each
Texstar Petroleum, Inc.
December 31, 1998
Page 5
Lender agree to promptly execute and deliver the NPI Conveyance
(it being agreed, however, that each Lender shall be entitled
to receive such Lender's Percentage Share of 7.75% of the net
profits, if any, realized from the production of oil, gas and
other minerals from the Subject Interests, calculated in the
manner provided in the NPI Conveyance).
Section 4. REPRESENTATION AND WARRANTIES. Borrower represents and
warrants to each Lender that, as of the date hereof:
(a) ORGANIZATION. Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Texas
and is qualified to transact business in all other jurisdictions where
such qualification is necessary. Borrower is authorized to execute this
Agreement, each Note, and all the other Loan Documents (hereinafter
defined), and those documents or instruments, when executed and delivered
will be valid and binding obligations of Borrower, enforceable in
accordance with their terms (except as such enforcement may be limited by
bankruptcy, insolvency or similar laws of general application relating to
the enforcement of creditors' rights) and do not violate the provisions of
the Articles of Incorporation or Bylaws of Borrower, or any contract,
agreement, law or regulation to which Borrower is subject.
(b) FINANCIAL STATEMENTS. All financial statements of Borrower
delivered by Borrower to any Lender are complete and correct and have
been prepared in accordance with generally accepted accounting principles,
consistently applied, and no material adverse change in the condition of
Borrower, financial or otherwise, has occurred since the date of the most
recent financial statements of Borrower delivered to Lenders.
(c) INVESTMENTS, LIABILITIES AND LITIGATION. Borrower has not made
any investments, warranties or advances or incurred any liabilities except
(i) for investments in, guarantees of, or advances to other entities in the
ordinary course of business and liabilities incurred in the ordinary course
of business and (ii) as disclosed in the most recent financial statements
of Borrower in Lenders' possession. Except as set forth in Exhibit 4(c),
Borrower has no litigation and there is no legal or administrative
proceeding, investigation or other action pending or, to the best knowledge
of Borrower, threatened against or affecting Borrower which, in any case,
involves the possibility of any judgment or liability not fully covered by
insurance.
(d) TITLE. Borrower has good title to its material assets and
properties (including, without limitation, the Assigned Premises and the
Contract Rights) free and clear of adverse claims, except as disclosed in
the most recent financial statements of Borrower delivered to Lenders.
Texstar Petroleum, Inc.
December 31, 1998
Page 6
(e) TAX RETURNS. Borrower has filed all federal and state tax
returns required to be filed as of the date of this Agreement and has paid
all taxes or assessments related to said returns.
(f) NO DEFAULT. Borrower is not, and after giving effect to the
Loans made to Borrower under the Credit Facility will not be, in default in
any respect under this Agreement, any other Loan Document, or any other
contract, agreement, or instrument to which Borrower is a party or by which
Borrower may be bound (except for defaults under that certain Credit
Agreement dated October 9, 1997, as heretofore amended, among Borrower, as
borrower, Benz Energy and Calibre Energy, L.L.C., as guarantors, and EnCap
Energy Capital Fund III, L.P., as lender, as heretofore disclosed to
EnCap), and Borrower is in compliance in all material respects with all
applicable laws and regulations.
(g) ERISA; MARGIN SECURITIES. No fact exists, including but not
limited to any reportable event or prohibited transaction (as defined in
the Employee Retirement Income Security Act of 1974, as amended "ERISA")
which might constitute grounds for termination of any plan of Borrower or
appointment of a trustee to administer such plan. Borrower does not own
any "margin security" or "margin stock" as defined in Regulations G, U, or
X of the Board of Governors of the Federal Reserve System.
(h) PATENTS, ETC. Borrower has all patents, licenses, trademarks,
franchises and the like necessary to conduct its business and is not aware
of any conflict with the rights of others with respect thereto.
(i) NO UNTRUE STATEMENTS. Neither this Agreement nor any other
information furnished by Borrower to any Lender contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements not misleading.
(j) NUEVO LETTER OF INTENT. Borrower has not received any notice
from Nuevo Energy Company ("Nuevo") terminating that certain letter of
intent dated December 15, 1998, by and between Borrower, Benz Energy and
Nuevo, nor have Nuevo, Borrower or Benz Energy amended or modified the
terms of such letter of intent.
Section 5. REPORTING REQUIREMENTS. Borrower will deliver the following
reports to Lender:
(a) QUARTERLY FINANCIAL STATEMENTS OF BORROWER: Within sixty (60)
days after the last day of each calendar quarter, the balance sheet of
Borrower as of the last day of such quarter and the statements of income,
stockholders, equity and cash flow of Borrower for such quarter, certified
by the chief financial officer of Borrower.
Texstar Petroleum, Inc.
December 31, 1998
Page 7
(b) QUARTERLY REPORTS: Simultaneously with the financial statements
delivered pursuant to Section 5(a) above, a certificate of the chief
financial officer of Borrower stating whether Borrower has kept and
performed all covenants set forth in this Agreement and the other Loan
Documents and, if Borrower has not, specifying the subject covenant and
corrective action, if any, which may be taken by Borrower.
(c) FINANCIAL STATEMENTS OF BENZ ENERGY: Within sixty (60) days
after the last day of each calendar quarter, the balance sheet of Benz
Energy (hereinafter defined) as of the last day of such quarter and the
statements of income, stockholders, equity and cash flow of Benz Energy for
such quarter, certified by the chief financial officer of Benz Energy, and
within one hundred (120) days after the last day of each calendar year, the
balance sheet of Benz Energy as of the last day of such year and the
statements of income, stockholders' equity and cash flow of Benz Energy for
such year, certified without qualification by independent certified public
accountants acceptable to Lenders.
(d) NOTICE OF DEFAULT: Within three (3) days after the occurrence
of a default, or an event which with the giving of notice, the passage of
time, or both, would constitute a default under (1) this Agreement or (2)
any other material agreement to which Borrower or Benz Energy is a party,
notice of such default (or event) together with Borrower's or Benz
Energy's plans to correct such default.
(g) NOTICE OF LIABILITIES: Within five (5) days of notice thereof,
written notice of any liability outside the ordinary course of business
(whether actual or contingent) in which the liability or claimed liability
of Borrower or Benz Energy is greater than $100,000.00.
(h) OTHER INFORMATION: Such other information as any Lender may
reasonably request from time to time.
Section 6. COVENANTS.
(a) COMPLIANCE AND PERFORMANCE. Borrower will comply in all
material respects with all statutes and governmental regulations and will
pay all taxes, assessments, governmental charges, claims for labor and
the like. Borrower will maintain its existence as a Texas corporation and
will remain qualified to do business in all jurisdictions in which it is
required to be qualified and will maintain its properties in good and
workable condition at all times (ordinary wear and tear excepted).
Borrower will perform all obligations under this Agreement, and under
all indentures, agreements, and contracts by which Borrower is bound.
Borrower will maintain with financially sound and reputable insurers
acceptable to Lenders, insurance with respect to its properties and
business against such liabilities, casualties, risks and contingencies
as is customary for its business naming Lenders as loss
Texstar Petroleum, Inc.
December 31, 1998
Page 8
payee with respect to any insurance covering collateral
securing the loans hereunder, and will, upon Lenders' request, provide
satisfactory evidence of such insurance. While any Loan is outstanding and
upon Lenders' request, Borrower will provide Lenders and/or Lenders'
representatives access to Borrower's books, records and properties at such
times during ordinary business hours as Lender may request.
(b) PAYMENT OF EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, Borrower will promptly (and
in any event, within 30 days after any invoice or other statement or
notice) pay: (i) all transfer, stamp, mortgage, documentary or other
similar taxes, assessments or charges levied by any governmental or revenue
authority in respect of this Agreement or any of the other Loan Documents
or any other document referred to herein or therein,(ii) all reasonable
third party costs and expenses incurred by or on behalf of any Lender
(including attorneys' fees, consultants' fees and engineering fees, travel
costs and miscellaneous expenses) in connection with (1) the negotiation,
preparation, execution and delivery of the Loan Documents, and any and all
consents, waivers or other documents or instruments relating thereto,(2)
the filing, recording, refiling and re-recording of any Loan Documents and
any other documents or instruments or further assurances required to be
filed or recorded or refiled or re-recorded by the terms of any Loan
Document,(3) the borrowings hereunder and other action reasonably required
in the course of administration hereof,(4) monitoring or confirming (or
preparation or negotiation of any document related to) Borrower's
compliance with any covenants or conditions contained in this Agreement or
in any Loan Document, and (iii) all reasonable costs and expenses incurred
by or on behalf of any Lender (including attorneys' fees, consultants' fees
and accounting fees) in connection with the defense or enforcement of any
of the Loan Documents (including this section) or the defense of any
Lender's exercise of its rights thereunder. In addition to the foregoing,
until all amounts owed by Borrower under this Agreement have been paid in
full, Borrower will also pay or reimburse each Lender for all reasonable
out-of-pocket costs and expenses of each Lender or its agents or employees
in connection with the continuing administration of the Loans and the
related due diligence of each Lender, including travel and miscellaneous
expenses and fees and expenses of any Lender's outside counsel, reserve
engineers and consultants engaged in connection with the Loan Documents.
(c) SECURITY. The Notes and the other indebtedness hereunder shall
be secured by (1) a first and prior lien on certain oil and gas properties
of Borrower described more particularly in that certain Deed of Trust,
Mortgage, Assignment, Security Agreement, Fixture Filing and Financing
Statement from Borrower , as mortgagor, to Xxxxxx X. Xxxxxx, Trustee, and
Perry Limited, et al, as lenders (which Deed of Trust is to be delivered at
closing as provided in Section 9) and (2) a junior lien on certain oil and
gas properties of Borrower described more particularly in that certain
Junior Deed of Trust, Mortgage, Assignment,
Texstar Petroleum, Inc.
December 31, 1998
Page 9
Security Agreement, Fixture Filing and Financing Statement from Borrower,
as mortgagor, to Xxxxxx X. Xxxxxx, Trustee, and Perry Limited, et al, as
lenders (which Junior Deed of Trust is to be delivered at closing as
provided in Section 9) or any other properties from time to time
specified by a Majority in Interest of the Lenders (collectively, the
"Mortgaged Property").
(d) MOBIL DOCUMENTS. The Notice and Memorandum and the Assignment
of Contract Rights executed and delivered by Borrower will be
substantially in the form of the final draft of such documents furnished
to Lenders and their respective counsel.
(e) LEGAL OPINIONS OF COUNSEL TO BENZ ENERGY. Borrower will use its
reasonable best efforts to cause to be delivered to Lenders within 10
business days after the closing provided in Section 9 a favorable opinion
or opinions of counsel to Benz Energy, which counsel and opinion(s) shall
be reasonably acceptable to RP&C and to EnCap.
(f) SEISMIC AGREEMENT. Unless Borrower has first received the prior
written consent of a Majority in Interest of the Lenders, Borrower will not
(1) agree to any alteration, amendment or modification of that certain
Agreement dated _______, 1997, by and between Amoco Production Company,
Mobil Exploration & Producing U.S. Inc., as agent for Mobil Producing Texas
& New Mexico, Inc., Texaco ______ and Cheyenne Petroleum Company, as
amended (the "3D Agreement"), if such alteration, amendment or
modification adversely affects Borrower or Lenders, or (2) waive any of its
material rights thereunder.
Section 7. INDEMNITY. Borrower agrees to indemnify each Lender, upon
demand, from and against any and all liabilities, obligations, claims,
losses, damages, penalties, fines, actions, judgments, suits, settlements,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
section collectively called "liabilities and costs") which to any extent (in
whole or in part) may be imposed on, incurred by, or asserted against such
Lender growing out of, resulting from or in any other way associated with any
of the Mortgaged Property (as herein defined), the Loan Documents and the
transactions and events (including the enforcement or defense thereof) at any
time associated therewith or contemplated therein (whether arising in
contract or in tort or otherwise and including any violation or noncompliance
with any environmental laws by any Lender or any other person or any
liabilities or duties of any or any Lender or any other person with respect
to hazardous materials found in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY
CLAIM OR
Texstar Petroleum, Inc.
December 31, 1998
Page 10
THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY ANY LENDER,
provided only that no Lender shall be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs which
is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment. If any person (including
Borrower or any of its affiliates) ever alleges such gross negligence or
willful misconduct by any Lender, the indemnification provided for in this
section shall nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct. As used in this section the term "Lender" shall refer
not only to each person designated as such herein but also to each director,
officer, trustee, agent, attorney, employee, representative and affiliate of
such persons.
Section 8. DEFAULT AND REMEDIES. It shall constitute an event of
default hereunder if (a) Borrower fails to make when due any payment on any
Note or on any other indebtedness hereunder, (b) Borrower fails to comply
with any provision of Section 5 or 6 hereof and, except for Section 6(e),
such violation remains uncured for a period of thirty (30) days, (c) Borrower
fails to perform any of its other agreements contained herein and such
violation remains uncured for a period of forty-five (45) days, (d) Borrower
defaults under the terms or provisions of any other Loan Document or any
other agreement, instrument or document executed in connection with or as
security for the Credit Facility, (e) any representation or warranty of
Borrower or Benz Energy proves to have been untrue in any material respect
when made, (f) any petition in bankruptcy is filed by Borrower or Benz
Energy, or any order granting relief under any bankruptcy or receivership law
is filed with respect to Borrower or Benz Energy, (g) Borrower or Benz
Energy permits a final, non-appealable monetary judgment against it in excess
of $100,000 to remain undischarged for a period in excess of thirty (30)
days, (h) Borrower or Benz Energy dissolves, (i) a Material Adverse Change
(as defined below) occurs with respect to either Borrower or Benz Energy, (j)
Benz Energy ceases to own 100% of the issued and outstanding capital stock of
Borrower, (k) Borrower or Benz Energy defaults under the terms of that
certain General Agreement for Acquisition of Geophysical Data (Onshore) dated
October 5, 1998, by and between Western Geophysical and Benz Energy, as
amended, modified or supplemented, or (l) after the expiration of the
four-month period commencing the date of the Notes, an "Event of Default"
occurs (as defined in that certain Credit Agreement dated October 9, 1997, as
from time to time amended, supplemented or restated, among Borrower, as
borrower, Benz and Calibre Energy, L.L.C., as guarantors, and EnCap Energy
Capital Fund III, L.P., as lender). Upon the occurrence of an event of
default specified in clause (f) above, immediately, and upon the occurrence
of any other event of default hereunder at the option of a Majority in
Interest of the Lenders (as defined below), without notice to Borrower or any
other
Texstar Petroleum, Inc.
December 31, 1998
Page 11
person, all indebtedness of Borrower to Lenders shall be immediately due and
payable and Lenders may take any other actions as may be permitted by this
Agreement, any other Loan Document or any other document or instrument
evidencing or securing the Credit Facility. Borrower expressly waives
presentment, demand, protest, notice of protest, or other notice of dishonor
of any kind including, without limitation, notice of intent to accelerate the
maturity of the Notes and other indebtedness hereunder and notice of
acceleration of the maturity of the Notes and other indebtedness hereunder.
As used above, (1) the term "Material Adverse Change" shall mean (i) a
material adverse change in the business, assets, financial condition or
results of operations of Borrower or Benz Energy (as applicable) or (ii) a
material adverse effect on Borrower's or Benz Energy's (as applicable)
ability to perform its obligations under this Agreement or any other Loan
Document, and (2) the term "Majority in Interest of the Lenders" shall mean
those Lenders whose aggregate Percentage Shares equal or exceed 51%.
Section 9. CLOSING. The initial funding of the Credit Facility
shall be subject to the payment upon execution hereof of all legal fees and
expenses incurred by Xxxxxxxx & Xxxxxx, P.C., counsel to EnCap, and Xxxxxxxxx
& Xxxxxxxxx, L.L.P., counsel to RP&C, in connection with the preparation,
negotiation and execution of this Agreement and the other Loan Documents, as
well as the receipt by each Lender of the following documents, instruments
and certificates (collectively, the "Loan Documents"), each of which shall be
satisfactory in form and substance to Lenders and their counsel:
(a) a copy of this Agreement executed by Borrower;
(b) each Note executed by Borrower;
(c) the Mortgages, Collateral Assignments, Security Agreements and
Financing Statements covering the Mortgaged Property;
(d) all financing statements or amendments thereto requested by
Lenders, executed by Borrower;
(e) a copy of the Put/Call Agreement executed by Benz Energy
substantially in the form of the instrument attached hereto as Exhibit 9(e)
in all material respects;
(f) certificate of the Secretary of Borrower, certifying as to the
Articles of Incorporation and Bylaws of Borrower, resolutions of the board
of directors of Borrower, and the signatures of authorized officers of
Borrower;
(g) resolutions of the board of directors of Borrower;
Texstar Petroleum, Inc.
December 31, 1998
Page 12
(h) a Certificate of Existence issued by the Secretary of State of
Texas with respect to Borrower;
(i) Certification of Account Status issued by the Comptroller of
Public Accounts of the State of Texas with respect to Borrower;
(j) a Lien Subordination Agreement and Consent substantially in the
form attached hereto as Exhibit 9(j) in all material respects executed by
the parties thereto;
(k) an opinion of counsel to Borrower reasonably acceptable to
Lenders' counsel;
(l) certificate of the Secretary of Benz Energy, certifying as to the
Articles of Incorporation and Bylaws of Benz Energy, resolutions of the
board of directors of Benz Energy, and the signatures of authorized
officers of Benz Energy;
(m) resolutions of the board of directors of Benz Energy;
(n) such other documents and instruments as may be reasonably
requested by any Lender or its counsel.
Section 10. DISCLOSURE. Any additions or exceptions applicable to
the terms of this Agreement, the covenants, representations and warranties of
Borrower herein or with respect to the acquisition of the Assigned Premises
shall only be those disclosed in writing to Lenders prior to or concurrently
with the execution hereof.
Section 11. MISCELLANEOUS.
(a) NOTICES. All notices or other communications hereunder
(including, without limitation, any notice of default) shall be in writing,
and shall be deemed sufficiently given or furnished if delivered by
personal delivery , by telecopy or telex, by delivery service with proof of
delivery, or by registered or certified mail to the address set forth on
the signature page of this Agreement. Any party hereto may, by proper
written notice hereunder to the other party, change the address to which
notices shall thereafter be sent.
(b) SUCCESSORS AND ASSIGNS. All covenants and agreements herein
contained by or on behalf of Borrower shall bind its successors and assigns
and shall inure to the benefit of Lender and its successors and assigns.
Texstar Petroleum, Inc.
December 31, 1998
Page 13
(c) RENEWALS AND EXTENSIONS. All provisions of this Agreement shall
apply with equal force and effect to each and all renewals and extensions,
in whole or in part, of the Notes or the Credit Facility.
(d) USURY SAVINGS CLAUSE. Nothing contained in this Agreement or in
any of the other Loan Documents shall be construed to obligate Borrower,
under any circumstances whatsoever, to pay interest in excess of the
maximum non-usurious interest rate applicable to Borrower. In the event
that any sums received from Borrower are at any time under applicable law
deemed to be in excess of the maximum non-usurious amount Lender could
collect under applicable usury law, the effective rate of interest on the
loans hereunder shall be reduced to and be the maximum non-usurious
interest rate permitted under applicable law and Borrower and all sureties,
endorsers and guarantors shall accept as their sole remedy under such
circumstances either the return of any sums of interest which may have been
collected and which produced a rate of interest in excess of the applicable
maximum non-usurious interest rate or the application of those sums as a
credit against the unpaid principal amount of the loan, whichever remedy
may be elected by Lender.
(e) HEADINGS. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit,
amplify or modify the terms and provisions hereof.
(f) NO WAIVER; REMEDIES CUMULATIVE. No course of dealing on the part
of any Lender or its members, managers, shareholders, directors, or
employees, or any failure or delay by Lenders with respect to exercising
any right, power or privilege of Lenders under this Agreement or any other
Loan Document shall operate as a waiver thereof. The rights and remedies
of Lenders under this Agreement and the other Loan Documents shall be
cumulative and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
(g) GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL
BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF ENGLAND AND WALES, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
(h) INVALID PROVISIONS. In the event any one or more of the
provisions contained in this Agreement or any of the other Loan Documents
shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or the other Loan Documents.
Furthermore, in lieu of such invalid, illegal or unenforceable provision,
there shall
Texstar Petroleum, Inc.
December 31, 1998
Page 14
automatically be added a provision as similar in terms to such invalid,
illegal or unenforceable provision as may be possible and as may be valid,
legal and enforceable.
(i) LENDER ASSIGNMENTS. Any Lender may at any time at its own
expense sell, assign, transfer, negotiate, grant participations in, or
otherwise dispose of to any person or entity all of its interest, rights
and obligations under this Agreement and the other Loan Documents.
Section 12. ENTIRE AGREEMENT. THIS WRITTEN LOAN AGREEMENT, TOGETHER
WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Texstar Petroleum, Inc.
December 31, 1998
Page 15
If this evidences your understanding of the agreements herein, please
execute in the space provided.
Sincerely,
PERRY LIMITED
By: RP&C INTERNATIONAL LIMITED,
Attorney-in-Fact
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
Address for Notice:
x/x XX&X International Limited
00 Xxxxx Xxxxxx
Xxxxxx X0X 0XX
Xxxxxxx
Attention: Xxxxx X. Xxxxx
Fax No.: 00 000 000 0000
-------------------
SREEDESWAR, INC.
By: RP&C INTERNATIONAL LIMITED,
Attorney-in-Fact
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
Address for Notice:
x/x XX&X International Limited
00 Xxxxx Xxxxxx
Xxxxxx X0X 0XX
Xxxxxxx
Attention: Xxxxx X. Xxxxx
Fax No.: 00 000 000 0000
-------------------
Texstar Petroleum, Inc.
December 31, 1998
Page 16
DALWORTH CAPITAL
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
Address for Notice:
x/x XX&X International Limited
00 Xxxxx Xxxxxx
Xxxxxx X0X 0XX
Xxxxxxx
Attention: Xxxxx X. Xxxxx
Fax No.: 00 000 000 0000
-------------------
Xxxxx Xxxxxx
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
Address for Notice:
x/x XX&X International Limited
00 Xxxxx Xxxxxx
Xxxxxx X0X 0XX
Xxxxxxx
Attention: Xxxxx X. Xxxxx
Fax No.: 00 000 000 0000
-------------------
Texstar Petroleum, Inc.
December 31, 1998
Page 17
RP&C INTERNATIONAL LIMITED
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
Address for Notice:
00 Xxxxx Xxxxxx
Xxxxxx X0X 0XX
Xxxxxxx
Attention: Xxxxx X. Xxxxx
Fax No.: 00 000 000 0000
-------------------
ENERGY CAPITAL INVESTMENT COMPANY
PLC
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Authorized Representative
Address for Notice:
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax No.: 000-000-0000
Texstar Petroleum, Inc.
December 31, 1998
Page 18
ACCEPTED AND AGREED TO:
TEXSTAR PETROLEUM, INC.
By: /s/ Xxxx Xxxxxxx
------------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
Address for Notice:
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Xx.
Fax No.: 000-000-0000
SCHEDULE I
LENDER LOAN AMOUNT
-------------------------------------------------- ---------------
Perry Limited, a Guernsey Corporation $ 1,000,000.00
Sreedeswar, Inc., a Panamanian Corporation $ 880,000.00
Dalworth Capital, a Channel Islands Corporation $ 50,000.00
Xxxxx Xxxxxx $ 50,000.00
RP&C International Limited $ 120,000.00
Energy Capital Investment Company PLC $ 100,000.00
PUT/CALL AGREEMENT
THIS PUT/CALL AGREEMENT (this "AGREEMENT") is made and entered into this
31st day of December, 1998, by and among Benz Energy Ltd., a corporation
existing under the laws of the Yukon Territory ("PARENT"), and the persons
listed on SCHEDULE I attached hereto ("LENDERS").
RECITALS:
A. Parent is the owner of 100% of the issued and outstanding shares of
capital stock in Texstar Petroleum, Inc., a Texas corporation ("SUB").
B. Sub, as borrower, and certain of the Lenders, have entered into that
certain letter loan agreement dated as of even date herewith (the "CREDIT
AGREEMENT), whereby the Lenders have agreed to make loans to Sub in an
aggregate principal amount equal to $2,200,000 on the terms and conditions
set forth therein.
C. In connection with the loans contemplated by, and subject to the
terms and conditions of, the Credit Agreement, Sub will convey and assign to
each Lender a net profits overriding royalty interests in certain properties
of Sub pursuant to a "NPI Conveyance" (as such term is defined in the Credit
Agreement). Each net profits overriding royalty interest so conveyed and
assigned by Sub to a Lender under the Credit Agreement shall be herein called
a "NPI").
D. The parties hereto deem it in their mutual best interests to set
forth the terms and conditions whereby (i) each Lender shall have the right
to "put" a NPI to Parent in exchange for common shares of Parent plus a
warrant to purchase common shares of Parent and (ii) Parent has the right to
"call" the NPIs in exchange for cash (or, if requested by a Lender, common
shares of Parent) plus warrants to purchase common shares of Parent.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
the mutual agreements contained herein, the sufficiency of which is hereby
acknowledged and confirmed, the parties hereto, intending to be legally bound
hereby, agree as follows:
SECTION 1. DEFINED TERMS AND REFERENCES.
(a) The following terms shall have the respective meanings assigned to
them below or in the sections, subsections, subdivisions or other parts of
this Agreement referred to below:
"ADJUSTED PV-10 VALUE" shall mean, with respect to a NPI, the
pre-income tax value of projected net revenues (U.S. Dollars) from the
Subject Properties attributable to such NPI as set forth in the Subject
Reserve Report, based upon the following:
-1-
(i) a discount rate of 10% per annum;
(ii) projected NYMEX two-year forward strip prices for Xxxxx Hub
gas and West Texas intermediate crude oil, respectively, as published in
the WALL STREET JOURNAL, adjusted for historical pricing differentials
between such NYMEX prices and actual realizations;
(iii) projected capital costs with respect to which the NPI is to
be charged;
(iv) projected lease operating expenses and production taxes
derived from or consistent with those actually incurred by Sub; and
(v) utilization of Proved Reserves only.
Upon the expiration of the two-year NYMEX pricing period referenced in
PARAGRAPH (ii) above, both commodity prices and lease operating expenses
and production taxes shall be escalated at 3% per annum.
"AGREEMENT" shall mean this Agreement, as hereafter amended or
modified in accordance with the terms hereof.
"CALL NOTICE" shall have the meaning assigned to it in SECTION 3.
"CREDIT AGREEMENT" shall have the meaning assigned to it in
PARAGRAPH B of the Recitals hereto.
"EXCHANGE PRICE" shall mean the lessor of (i) the average of the
last reported sales price for the Parent Shares for the 20 consecutive
Trading Days immediately preceding the date hereof or (ii) the average
of the last reported sales price for the Parent Shares for the 20
consecutive Trading Days immediately preceding the earlier of (x) the
date the put right or the warrants issued hereunder are exercised or (y)
the one year anniversary of the date hereof. The last reported sales
price for each day shall be the last reported sales price for the Parent
Shares on such date on the exchange on which the Parent Shares are
primarily traded.
"MAJORITY IN INTEREST OF THE LENDERS" shall have the meaning
assigned to it in the Credit Agreement.
"NET PROFITS SHARE" shall mean, when used with respect to a Lender,
such Lender's respective undivided percentage interest assigned to the
Lenders under the Override Conveyance (as defined in the Credit
Agreement).
"NPI" shall have the meaning assigned to it in PARAGRAPH C of the
Recitals hereto.
-2-
"PARENT" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"PARENT SHARES" shall mean the common shares of Parent, no par
value, and any securities of Parent for or into which such common shares
are exchanged, reclassified or converted.
"PERCENTAGE SHARE" shall have the meaning assigned to it in the
Credit Agreement.
"PROVED RESERVES" shall have the meaning assigned to such term in
the Definitions for Oil and Gas Reserves promulgated by the Society of
Petroleum Engineers (or any generally recognized successors) as in
effect from time to time.
"PUT EFFECTIVE DATE" shall mean the first day of the month during
which Parent receives a Put Notice.
"PUT NOTICE" shall have the meaning assigned to it in SECTION 2.
"SUB" shall have the meaning assigned to it in PARAGRAPH A of the
Recitals hereto.
"SUBJECT PROPERTIES" shall mean, with respect to a NPI, the subject
oil, gas and mineral properties which such NPI burdens.
"SUBJECT RESERVE REPORT" shall mean an engineering report prepared
by Xxxxx Xxxxx Company or such other independent petroleum engineer
mutually agreed upon in good faith by Parent and a Majority in Interest
of the Lenders with an effective date as of the Put Effective Date.
"TRADING DAYS" shall mean, with respect to the exchange on which
the Parent Shares are primarily traded, the days on which such
securities exchange is open for business.
"VSE APPROVAL" shall mean the approval of the Vancouver Stock
Exchange to the transactions contemplated under this Agreement.
"WARRANTS" shall mean the warrants issued by Parent under the terms
of either SECTION 2 or SECTION 3.
"WARRANT SHARES" shall mean the Parent Shares issued upon exercise
of the Warrants.
(b) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.
-3-
(c) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such
subdivisions.
(d) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as
a whole and not to any particular subdivision unless expressly so limited.
(e) Words in the singular form shall be construed to include the plural
and VICE VERSA, unless the context otherwise requires.
(f) Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender.
(g) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(h) Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such agreement,
instrument or document, provided that nothing contained in this subsection
shall be construed to authorize such renewal, extension, modification,
amendment or restatement.
(i) The word "or" is not exclusive and the word "includes" and its
derivatives shall mean "includes, but is not limited to" and corresponding
derivative expressions.
(j) No consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement.
(k) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
SECTION 2. PUT RIGHT.
(a) Subject to the terms and provisions hereof, each Lender shall have
the right to convey and assign its NPI to Parent, and Parent shall have the
obligation to purchase such NPI from such Lender, in exchange for Parent
Shares and a warrant to purchase Parent Shares determined as provided in
SUBSECTIONS (b) and (c) below.
(b) The number of Parent Shares to be issued by Parent to a Lender
electing to exercise its rights under this SECTION 2 (in this SUBSECTION, an
"ELECTING LENDER") shall be equal to the greater of A or B, where:
"A" = C divided by D, with "C" equal to the Electing Lender's Net
Profits Share multiplied by $1,100,000, and with "D" equal to the Exchange
Price; and
-4-
"B" = E divided by F, with "E" equal to the Adjusted PV-10 Value of the
Electing Lender's NPI as of the Put Effective Date, and with "F" equal to
the Exchange Price.
(c) Parent shall issue to an Electing Lender a warrant substantially in
the form of EXHIBIT 2(c) hereto in all material respects, subject to the
following;
(i) The number of Parent Shares to be acquired upon the exercise
of the warrant shall equal the number of Parent Shares issued by Parent
to such Electing Lender under SUBSECTION (b) above.
(ii) The exercise price of the warrant shall equal the Exchange
Price.
(iii) The exercise period of the warrant shall be for a three-year
period commencing the date the warrant is issued.
(d) To exercise its put right under this SECTION 2, a Lender must give
notice of its election to Parent (the "PUT NOTICE") on or before the
expiration of the two-year period commencing the date hereof.
(e) In connection with a put under this SECTION 2, Parent agrees that
it will cause a Subject Reserve Report to be prepared or updated as promptly
as possible after receipt by it of a Put Notice, but in no event later than
30 days after receipt by it of a Put Notice. Thereafter, Parent agrees that
it will cause a determination of the Adjusted PV-10 Value as promptly as
possible, but in no event later than 60 days after receipt by it of a Put
Notice.
SECTION 3. PARENT CALL
(a) Subject to the terms and provisions hereof and provided that the
Loans (as defined in the Credit Agreement) have been paid in full, Parent
shall have the right to purchase from each Lender its NPI, and each Lender
shall have the obligation to convey and assign its NPI to Parent, in exchange
for cash and a warrant to purchase Parent Shares determined as provided in
SUBSECTION (b) and (c) below.
(b) The amount of cash to be paid by Parent to a Lender in the event
Parent exercises its call right under this SECTION 3 shall be equal to
$1,100,000 multiplied by such Lender's Net Profits Share.
(c) Parent shall issue to a Lender a warrant substantially in the form
of EXHIBIT 2(c) hereto in all material respects, subject to the following:
(i) The number of Parent Shares to be acquired upon the exercise
of the warrant shall be equal to $1,100,000 divided by the Exchange
Price.
(ii) The exercise price of the warrant shall equal the Exchange
Price.
-5-
(iii) The exercise period of the warrant shall be for a three-year
period commencing the date the warrant is issued.
(d) To exercise its call right under this SECTION 3, Parent must give
notice of its election to Lenders (the "CALL NOTICE") on or before the
expiration of the one-year period commencing the date hereof. Without
limiting the foregoing, it is specifically agreed that Parent must exercise
its call right under this SECTION 3 with respect to all of the NPIs.
(e) Notwithstanding the foregoing or anything else herein to the
contrary, any given Lender may elect (as to itself) to receive Parent Shares
in lieu of the cash consideration provided in SECTION 3(b). The number of
Parent Shares to be issued to a Lender that elects the option provided in the
preceding sentence shall be equal to (i) the cash consideration that such
Lender would otherwise receive under SECTION 3(b) divided by (ii) the
Exchange Price.
SECTION 4. CLOSING OF A PUT/CALL TRANSACTION. If a Lender exercises a
put right under SECTION 2 or Parent exercise its call right under SECTION 3,
the parties involved shall consummate the transaction contemplated by such
put or call (in this SECTION 4, a "SUBJECT TRANSACTION"), as applicable, as
follows:
(a) The closing of a Subject Transaction shall take place at the
offices of Parent, at its address for notices under SECTION 7, at 10:00 a.m.
(local time) on (i) in the instance of a Subject Transaction arising under
SECTION 2, the fifth business day after the date on which the Adjusted PV-10
Value of the NPI(s) to be purchased and sold has been determined, (ii) in the
instance of a Subject Transaction arising under SECTION 3, the tenth business
day after receipt of the Call Notice, or (in either event) at such other time
and place as shall be mutually agreed upon by the parties to the Subject
Transaction.
(b) At the closing of a Subject Transaction, (i) a Lender that is a
party thereto shall execute an assignment of that portion of the NPI to be
transferred and assigned to Parent or a designee of Parent (which assignment
shall be reasonably customary in form and content and reasonably acceptable
to Parent); (ii) Parent shall deliver stock certificate(s) representing the
Parent Shares to be transferred and assigned to such Lender and a warrant as
provided in SECTION 2(c) (in the instance of a Subject Transaction arising
under SECTION 2); (iii) Parent shall wire transfer immediately available
funds to an account or accounts designated by a Lender and shall deliver a
warrant as provided in SECTION 3(c) (in the instance of a Subject Transaction
arising under SECTION 3); and (iv) Parent shall deliver a certificate or
instrument in form and content reasonably satisfactory to a Lender and
executed by Parent to the effect the representations and warranties of Parent
contained in SECTION 5 are true and correct on as of the date of the closing.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby
represents and warrants to the Lenders as follows:
(a) Parent is an entity duly organized or formed and in good standing
under the laws of the jurisdiction of its formation. Parent has all requisite
power and authority to own, lease, and
-6-
operate its properties and to carry on its business as now being conducted.
No actions or proceedings to dissolve or terminate Parent are pending.
(b) Except for VSE Approval, Parent has full power and authority to
execute, deliver, and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance by
Parent of this Agreement, and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of Parent. This Agreement has been duly executed and delivered by Parent
and constitutes, and each other agreement, instrument, or document executed
or to be executed by Parent in connection with the transactions contemplated
hereby has been, or when executed will be, duly executed and delivered by
Parent and constitutes, or when executed and delivered will constitute, a
valid and legally binding obligation of Parent, enforceable against it in
accordance with their respective terms, except that such enforceability may
be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally and (ii)
equitable principles which may limit the availability of certain equitable
remedies (such as specific performance) in certain instances.
(c) The execution, delivery, and performance by Parent of this
Agreement and the consummation by it of the transactions contemplated hereby
do not and will not (i) conflict with or result in a violation of any
provision of the charter or other governing instruments of Parent, (ii)
conflict with or result in a violation of any provision of, or constitute
(with or without the giving of notice or the passage of time or both) a
default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
contract, agreement, or other instrument or obligation to which Parent is a
party or by which Parent or any of its properties may be bound, (iii) result
in the creation or imposition of any lien or other encumbrance upon the
properties of Parent, or (iv) violate any applicable law, rule or regulation
binding upon Parent.
(d) Except for VSE Approval, no consent, approval, order, or
authorization of, or declaration, filing, or registration with, any court or
governmental agency or of any third party is required to be obtained or made
by Parent in connection with the execution, delivery, or performance by
Parent of this Agreement or the consummation by it of the transactions
contemplated hereby.
(e) No suit, action or other proceeding is pending before any court or
governmental agency to which Parent is a party and which might materially
hinder or impede the ability of Parent to perform its obligations hereunder.
(f) The Parent Shares and the Warrants and the Warrant Shares which may
be issued hereunder and thereunder have been duly authorized. Upon issuance
of any Parent Shares hereunder (including the Warrant Shares), such Parent
Shares will be validly issued, fully paid and nonassessable and will be free
and clear of all liens, charges, pledges, encumbrances, equities and claims
whatsoever.
-7-
(g) Parent is current in its obligations to file all periodic reports
and proxy statements with all applicable securities commission required to be
filed under applicable Canadian securities laws, as amended, and applicable
rules and regulations promulgated thereunder. Parent's press releases,
material change reports, financial statements, proxy materials and other
continuous disclosure documents required to be filed under applicable
Canadian securities laws do not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
SECTION 6. NO COMMISSIONS OWED. Parent agrees to indemnify and hold
harmless each Lender (and its affiliates, and its and their respective
officers, directors, employees, attorneys, contractors and agents) from and
against any and all claims, actions, causes of action, liabilities, damages,
losses, costs or expenses (including, without limitation, courts costs and
attorneys' fees) of any kind or character arising out of or resulting from
any agreement, arrangement or understanding alleged to have been made by, or
on behalf of, Parent with any broker or finder in connection with this
Agreement or the transactions contemplated hereby. Each Lender severally (and
not jointly or jointly and severally) agrees to indemnify and hold harmless
Parent (and its officers, directors, employees, attorneys, contractors and
agents) from and against any and all claims, actions, causes of action,
liabilities, damages, losses, costs or expenses (including, without
limitation, court costs and attorneys' fees) of any kind or character arising
out of or resulting from any agreement, arrangement or understanding alleged
to have been made by, or on behalf of, it with any broker or finder in
connection with this Agreement or the transactions contemplated hereby.
SECTION 7. NOTICES. All notices and other communications required
under this Agreement shall (unless otherwise specifically provided herein) be
in writing and be delivered personally, be recognized commercial courier or
delivery service which provides a receipt, by telecopier (with receipt
acknowledged), or by registered or certified mail (postage prepaid), at the
following addresses:
IF TO PARENT:
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Xx.
Telecopier No.: (000)000-0000
IF TO A LENDER:
at the address provided for such Lender in the Credit Agreement
(provided, that any notice to EnCap Energy Capital Fund III, L.P.,
EnCap Energy Acquisition III-B, Inc. and BOCP Energy Partners, Ltd.
shall be sent to the same address as Energy Capital Investment
Company PLC)
-8-
and shall be considered delivered on the date of receipt. Any Lender may
change its address for notice purposes by giving notice to Parent in the
manner provided in this Section, at least ten (10) days prior to the
effective date of such change of address. Parent may change its address for
notice purposes by giving notice to Lenders in the manner provided in this
Section, at least ten (10) days prior to the effective date of such change of
address.
SECTION 8. SURVIVAL OF PROVISIONS. All representations, warranties
and covenants made by each party hereto in this Agreement or any other
document contemplated hereby shall be considered to have been relied upon by
the other parties hereto and shall survive the execution and delivery of this
Agreement or such other document, regardless of any investigation made by or
on behalf of any such party.
SECTION 9. COSTS OF ENFORCEMENT. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees and expenses in
addition to any other relief to which such party may be entitled.
SECTION 10. ENTIRE AGREEMENT. This Agreement and the other documents
contemplated hereunder contain the entire understanding of the parties hereto
with respect to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations, and discussions among the parties
with respect to such subject matter.
SECTION 11. AMENDMENTS. This Agreement may be amended, modified,
supplemented, restated or discharged only by an instrument in writing signed
by Parent and those Lenders whose aggregate Percentage Shares equal or exceed
95%.
SECTION 12. NO WAIVER. The failure of any party hereto to insist upon
strict performance of a covenant hereunder or of any obligation hereunder,
irrespective of the length of time for which such failure continues, shall
not be a waiver of such party's right to demand strict compliance in the
future. No consent or waiver, express or implied, to or of any breach or
default in the performance of any obligation hereunder shall constitute a
consent or waiver to or of any other breach or default in the performance of
the same or any other obligation hereunder.
SECTION 13. CHOICE OF LAW. Without regard to principles of conflicts
of law, this Agreement shall be construed and enforced in accordance with and
governed by the laws of England and Wales.
SECTION 14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on
and inure to the benefit of the parties hereto and their respective
successors and assigns, provided that Parent may not assign its rights and
duties hereunder without the prior written consent of those Lenders whose
aggregate Percentage Shares equal or exceed 95%.
SECTION 15. SPECIFIC PERFORMANCE. The parties hereto recognize that
any breach of the terms of this Agreement may give rise to irreparable harm
for which money damages would not
-9-
be an adequate remedy, and accordingly agree that, in addition to other
remedies, any nonbreaching party shall be entitled to enforce the terms of
this Agreement by a decree of specific performance without the necessity of
proving the inadequacy as a remedy of money damages.
SECTION 16. ARBITRATION. Any dispute arising out of or relating to
this Agreement or incident to the transactions contemplated hereby or the
breach, inaccuracy, termination or validity hereof or otherwise arising out
of or relating to the transactions contemplated hereby, shall be determined
by binding arbitration in accordance with the then current Commercial
Arbitration Rules of the (United States) American Arbitration Association. If
a single neutral arbitrator cannot be agreed upon within 30 calendar days
after a dispute has arisen which is to be decided by arbitration, the
arbitration shall be conducted by a panel of three neutral arbitrators.
Otherwise, the arbitration shall be conducted by a single neutral arbitrator.
The parties shall endeavor to select neutral arbitrators by mutual agreement.
If such agreement cannot be reached within 30 calendar days after a dispute
has arisen which is to be decided by arbitration, each party shall select its
own neutral arbitrator within 15 days of the expiration of such 30-day period
and the two neutral arbitrators so selected shall select a third neutral
arbitrator within 10 days of the expiration of such 15-day period. The 3
persons thus selected shall be the arbitrators for such arbitration. If three
arbitrators are selected, the arbitrators shall elect a chairperson to
preside at all meetings and hearings. If a dispute is to be resolved by a
sole arbitrator in accordance with the terms hereof, or if the dispute is to
be resolved by a panel of three arbitrators as provided hereinabove, then
such sole arbitrator or the chairperson of such panel, as the case may be,
shall be a member of a state bar engaged in the practice of law in the United
States or a retired member of a state or the federal judiciary in the United
States. The award of the arbitrator(s) shall require a majority of the
arbitrators in the case of a panel of arbitrators, shall be in writing and
reasoned, shall be based on the evidence admitted and the substantive law of
England and Wales and shall contain an award for each issue and counterclaim.
The award shall be made within 30 days following the close of the final
hearing and the filing of any post hearing briefs authorized by the
arbitrator(s). The award of the arbitrator(s) shall be final and binding on
the parties hereto and the subject matter. Judgment upon the award rendered
by the arbitrator(s) may be entered by any court having jurisdiction. The
place of arbitration shall be in Houston, Texas. Each party shall be entitled
to inspect and obtain a copy of relevant documents in the possession or
control of the other party and to take depositions of the other parties'
employees, agents, representatives and witnesses (including expert
witnesses). All such discovery shall be in accordance with procedures
approved by the arbitrator(s). Unless otherwise provided in the award, each
party shall bear its own costs of discovery. All discovery shall be
expedited, consistent with the nature and complexity of the claim or dispute
and consistent with fairness and justice. The arbitrator(s) shall have the
power to compel any party to comply with discovery requests of the other
parties and to issue binding orders relating to any discovery dispute which
shall be enforceable in the same manner as awards. The arbitrator(s) also
shall have the power to impose sanctions for abuse or frustration of the
arbitration process, including without limitation, the refusal to comply with
orders of the arbitrator(s) relating to discovery and compliance with
subpoenas. Each of the parties hereto hereby irrevocably submits to the
jurisdiction of the courts of the State of Texas for entry of any arbitration
decision or to obtain any preliminary relief which may be necessary and
hereby consents to the enforcement by such courts of any award rendered in
such arbitration.
-10-
SECTION 17. VSE APPROVAL. Parent agrees to use its best efforts to
obtain VSE Approval as promptly as possible after the execution and delivery
of this Agreement, but in any event within 45 days after the execution and
delivery of this Agreement.
SECTION 18. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, with each such counterpart constituting an original and all of
such counterparts constituting but one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-11-
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date and year first above written.
BENZ ENERGY LTD.
By: /s/ Xxxx Xxxxxxx
-------------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
PERRY LIMITED
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By:
-------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
SREEDESWAR, INC.
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By:
-------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
DALWORTH CAPITAL
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By:
-------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
Xxxxx Xxxxxx
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By:
-------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
-12-
RP&C INTERNATIONAL LIMITED
By:
----------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EnCap Investments L.C., General Partner
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
ENCAP ENERGY ACQUISITION III-B, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.C., Manager
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Authorized Representative
-13-
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date and year first above written.
BENZ ENERGY, LTD.
By:
----------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
PERRY LIMITED
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By: /s/ Xxxxx X. Xxxxx
----------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
SREEDESWAR, INC.
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By: /s/ Xxxxx X. Xxxxx
----------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
DALWORTH CAPITAL
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By: /s/ Xxxxx X. Xxxxx
----------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
Xxxxx Xxxxxx
By: RP&C INTERNATIONAL LIMITED, Attorney-in-Fact
By: /s/ Xxxxx X. Xxxxx
----------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
RP&C INTERNATIONAL LIMITED
By: /s/ Xxxxx X. Xxxxx
----------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
ENCAP ENERGY CAPITAL FUND III, L.P.
By: EuCap Investments L.C., General Partner
By:
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
ENCAP ENERGY ACQUISITION III-B, INC.
By:
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
BOCP ENERGY PARTNERS, L.P.
By: EnCap Investments L.C., Manager
By:
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By:
----------------------------
Name: Xxxxxx X. Xxxxxx
Title: Authorized Representative
SCHEDULE I
LENDER LOAN AMOUNT
----------------------------------------------- --------------
Perry Limited, a Guernsey Corporation $ 1,000,000.00
Sreedeswar, Inc., a Panamanian Corporation $ 880,000.00
Dalworth Capital, a Channel Islands Corporation $ 50,000.00
Xxxxx Xxxxxx $ 50,000.00
RP&C International Limited $ 120,000.00
Energy Capital Investment Company PLC $ 100,000.00
