EXHIBIT 10.1
Amegy Bank National Association
1807 Ross Avenue, Suite 400
Dallas, Texas 75201
August 31, 2007
Infinity Energy Resources, Inc.
633 Seventeenth Street, Suite 1800
Denver, Colorado 80202
     Re: Forbearance Agreement
Ladies and Gentlemen:
     This letter (this “Agreement”) sets forth the forbearance agreement among
Infinity Energy Resources, Inc. (“Borrower”), a Delaware corporation; Infinity
Oil and Gas of Texas, Inc., a Delaware corporation, and Infinity Oil & Gas of
Wyoming, Inc., a Wyoming corporation (collectively “Guarantors”); and Amegy Bank
National Association (“Lender”). Capitalized terms below have the meanings
assigned in the Loan Agreement dated January 9, 2007, among Borrower,
Guarantors, and Lender, as amended (the “Loan Agreement”).
     1. Borrowing Base. Effective as of August 10, 2007, Lender has reduced the
Borrowing Base to $10,500,000.00, until reset by Lender in connection with the
next redetermination of the Borrowing Base. Lender reserves the right to make
the next redetermination of the Borrowing Base at any time.
     2. Borrowing Base Deficiency. The new Borrowing Base results in a Borrowing
Base deficiency in the amount of $11,500,000.00 (the “Deficiency”). On or before
the end of the Forbearance Period (as defined below), Borrower and Guarantors
agree to cure the Deficiency by sale of assets as provided below to pay down the
Revolving Loan and cure the Deficiency, refinance of the Revolving Loan, or
raise capital on terms acceptable to Lender to pay down the Revolving Loan and
cure the Deficiency.
     3. Events of Default. Borrower and Guarantors acknowledge that the
following Events of Default have occurred and remain outstanding (the “Existing
Defaults”):
          (a) Borrower and Guarantors breached the Interest Coverage Ratio set
forth in Subsection (a) of Section 8 of the Loan Agreement for the period ended
June 30, 2007;

 

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Infinity Energy Resources, Inc.
August 31, 2007
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          (b) Borrower and Guarantors breached the Funded Debt to EBITDA Ratio
set forth in Subsection (d) of Section 8 of the Loan Agreement for the period
ended June 30, 2007; and
          (c) Borrower and Guarantors failed to deliver all lien releases
required by Subsection (k) of Section 9 of the Loan Agreement.
     4. Forbearance. Lender, Borrower, and Guarantors agree to a forbearance
period commencing as of the date of this Agreement, and continuing through
November 30, 2007, unless terminated earlier by Lender due to a Default, as
defined below (the “Forbearance Period”). During the Forbearance Period, but
subject to a Default, Lender will forebear from exercising any remedies under
the Loan Agreement, the Revolving Note, the Security Documents, the Guaranties,
and the other Loan Documents. Borrower and Guarantors agree that all statutes of
limitation with respect to enforcement of the Revolving Note, the Guaranties,
and the Security Documents will be tolled during the Forbearance Period and for
ninety days thereafter. If a Definitive Sale Agreement (as defined below) has
been executed on or before November 30, 2007, and there is no additional
Default, then Lender will seek credit approval for an extension of the
Forbearance Period through January 31, 2008.
     5. Temporary Waiver. Borrower and Guarantors have requested that Lender
temporarily waive the Existing Defaults. Lender hereby waives the Existing
Defaults through the Forbearance Period only. This is a temporary and limited
waiver, and Lender reserves the right to require strict compliance with all
covenants under the Loan Agreement, including the covenants violated as set
forth above, in the future. This waiver does not modify, supplement, or alter
any of the terms of the Loan Agreement or any other Loan Document. Further, this
waiver shall not be construed as a commitment by Lender to waive any future
violation of the same or any other term or condition of the Loan Agreement or
any of the Loan Documents. Neither the negotiation or execution of this
Agreement will be an election of any right or remedy available to Lender; and,
except as specifically limited or postponed herein, Lender reserves all rights
and remedies.
     6. Interest. Borrower and Lender hereby agree that during the Forbearance
Period and so long thereafter as any Event of Default remains uncured and
outstanding, the entire unpaid principal balance owed on the Revolving Note
shall accrue interest at the default rate of Stated Rate, plus six percent
(6.0%) (the “Default Rate”), as set forth in the Revolving Note; provided,
however, that accrued interest on the entire unpaid principal balance owed on
the Revolving Note shall be payable monthly on each Interest Payment Date (as
defined in the Revolving Note) calculated at the sum of the Stated Rate, plus
the Applicable Margin; and the difference between the Default Rate and the sum
of the Stated Rate, plus the Applicable Margin, shall accrue and

 

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August 31, 2007
Page 3 of 15
shall be payable only upon the earlier of (i) the termination of the Forbearance
Period, or (ii) the cure of the Deficiency. Effective as of the date of this
Agreement, the LIBOR Balance (as defined in the Revolving Note) is hereby
converted to the Stated Rate Balance (as defined in the Revolving Note); and
Borrower shall be obligated to pay Lender for any LIBOR breakage costs required
under the Revolving Note or any Consequential Loss (as defined in the Revolving
Note).
     7. Additional Collateral. Borrower and Guarantors agree to mortgage all oil
and gas properties and leasehold interests (excluding the Nicaragua concessions)
owned by Borrower or Guarantors and not previously mortgaged to Lender as
additional security for the Notes. In this regard, Borrower and Guarantors agree
within five (5) days of Lender’s written request (i) to sign and deliver
mortgages, deeds of trust, or amendments in Proper Form, covering all such oil
and gas properties and leasehold interests owned by Borrower or Guarantors and
not previously mortgaged to Lender; and (ii) to provide copies of recorded
assignments and all title information requested by Lender, relating to
Borrower’s and Guarantors’s oil and gas properties and leasehold interests.
Further, Borrower and Guarantors agree to use their reasonable best efforts to
obtain a waiver of the prohibition against liens from the lessors on the Murray
lease, Erath County, Texas, and thereafter to mortgage this lease.
     8. Lockbox. Borrower and Guarantors agree to the following provisions
regarding production proceeds attributable to their oil and gas properties:
          (a) Borrower and Guarantors will direct all production proceeds
attributable to their oil and gas properties to be paid to a lockbox account to
be set up and maintained with Lender for the purpose of collection of production
proceeds (the “Lockbox Account”). Contemporaneously with the execution of this
Agreement, Guarantors will sign and deliver to Lender letters in lieu of
transfer orders to all purchasers of production directing those parties to pay
all proceeds attributable to Guarantors’ interest in the Properties to the
Lockbox Account and will provide a schedule with the name, address, telephone
number, and contact of the first purchaser of production for all of the oil and
gas properties.
          (b) All production proceeds received in the Lockbox Account by Lender
with respect to production, severance, ad valorem, or other taxes on production
proceeds (excluding income taxes) or that are attributable to another person’s
or entities’ royalty or other interest in the oil and gas properties shall be
released immediately to Borrower upon Borrower’s request and verification of
those amounts. Borrower and Guarantors shall provide evidence of the timely
payment of production, severance, ad valorem, or other taxes on production
proceeds (excluding income taxes) and of the royalty and overriding royalty
owners; provided, however, that no royalties and overriding royalty interests
owned by Borrower, Guarantors, or any affiliates

 

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August 31, 2007
Page 4 of 15
of Borrower or Guarantors within the meaning of Securities and Exchange
Commission Rule 144, shall be paid from the Lockbox Account proceeds.
          (c) Borrower will provide Lender with a proposed budget of recurring
operating expenses, non-recurring operating expenses, general and administrative
expenses, and any capital expenditures for the oil and gas properties expected
to be paid during the Forbearance Period and supporting documentation for those
expenses and expenditures.
          (d) At Borrower’s request, production proceeds in the Lockbox Account
may be used to pay operating expenses, general and administrative expenses
(subject to the limits below), capital expenditures, and transaction costs
related to the sale of the Sale Properties, including broker fees, if any, due
prior to closing, all as approved by Lender (which approval shall not be
unreasonably withheld, delayed, or denied). Borrower and Guarantors shall not
pay in any month operating expenses, general and administrative expenses,
capital expenditures, or transaction costs exceeding the aggregate budgeted
expenses for each such category for that month, unless Lender has approved such
payments. Borrower shall, not later than two business days prior to the date on
which Borrower proposes to pay such operating expenses, general and
administrative expenses, capital expenditures, and transaction costs and as a
condition precedent to requesting such approval, deliver to Lender in usual and
customary form reasonably acceptable to Lender reasonable detail of all expenses
and expenditures proposed to be paid in respect of such month. Any excess
production proceeds in the Lockbox Account may be used only for such other
purposes as approved by Lender, in its discretion.
          (e) All sums remaining in the Lockbox Account after payment of the
taxes and royalties as provided above and the operating expenses and
discretionary amounts as provided above will be applied by Lender on the last
day of each month to the Revolving Note and collection costs as set forth in
Section 3.2 of the Deed of Trust. If the production proceeds received in the
Lockbox during any month are not sufficient to make the scheduled monthly
payment on the Revolving Loan, Borrower will pay Lender the deficiency within
ten (10) days of notice from Lender of such shortfall.
          (f) Notwithstanding the provisions of Subsection (f) of Section 8 of
the Loan Agreement, Borrower and Guarantors shall not permit cash general and
administrative expenses on a consolidated basis to exceed $150,000.00 (excluding
broker fees as approved by Lender, if any, due prior to closing) per month
during term of this Agreement; provided, however, that general and
administrative expenses in excess of this monthly limit may be accrued and paid
only after the Revolving Loan and Hedge Liabilities have been paid in full.

 

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Infinity Energy Resources, Inc.
August 31, 2007
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     9. Sale of Oil and Gas Properties. In order to cure the Deficiency,
Borrower and Guarantors have advised Lender that they intend to sell the assets
of Infinity Oil & Gas of Wyoming, Inc. (“IOGW”), and Borrower and Guarantors
have requested that Lender allow Borrower to accomplish these sales. In this
regard, Borrower and Guarantors agree to take the following actions:
          (a) Borrower and Guarantors shall proceed with the sale and marketing
of all assets of IOGW (the “Sale Properties”); and Borrower and Guarantors shall
accept any commercially reasonable offer to buy the Sale Properties; provided no
oil and gas property or leasehold interest which is mortgaged to Lender shall be
sold except on terms and price acceptable to Lender and with the prior written
approval of Lender.
          (b) Borrower and Guarantors shall deliver on or before August 31, 2007
an updated evaluation of the Sale Properties with target sale prices.
          (c) On or before September 4, 2007, Borrower and Guarantors shall
enter into an agreement with an oil and gas broker or consultant, reasonably
acceptable to Lender, to facilitate the sale and marketing of the Sale
Properties. Thereafter, Borrower and Guarantors shall use their best efforts to
(i) promptly open a data room on the Sale Properties, (ii) to obtain firm
proposals for the sale of the Sale Properties on or before October 31, 2007,
(iii) to execute a definitive agreement or agreements, subject to stockholder
approval if required, for the sale of Sale Properties with proceeds sufficient
to repay the Deficiency (a “Definitive Sale Agreement”) on or before
November 30, 2007, and (iv) seek stockholder approval, if required, and
consummate the sale of the Sale Properties as soon as practicable thereafter,
but in no event later than the end of the Forbearance Period (as it may be
extended). Borrower and Guarantors shall promptly provide Lender with a copy of
the agreement or engagement letter with the oil and gas broker or consultant;
and thereafter Borrower and Guarantors shall provide a monthly report on the
first (1st) day of each month, to be prepared by the oil and gas broker or
consultant engaged by Borrower and Guarantors to facilitate the sale of the oil
and gas properties and leasehold interests, including the Texas Properties (as
defined below), that includes any and all information pertaining to property
bids, the current status of any bids or sale discussions, and all marketing
efforts employed to sell the Sale Properties and the Texas Properties.
Notwithstanding any provision to the contrary, at least two business days prior
to the date on which Borrower proposes to pay such, Borrower shall deliver to
Lender in usual and customary form reasonably acceptable to Lender reasonable
detail of all broker fees and other transaction costs related to the sale of the
Sale Properties proposed to be paid from proceeds in the Lockbox Accounts, and
thereafter Borrower may pay such fees and costs as are approved by Lender (which
approval shall not be unreasonably withheld, delayed, or denied).

 

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August 31, 2007
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          (d) In addition, upon the written directive of Lender, to be exercised
in Lender’s sole discretion, Borrower and Guarantors shall proceed with the sale
and marketing of all Texas assets of Infinity Oil and Gas of Texas, Inc. (the
“Texas Properties”); and if elected by Lender, Borrower and Guarantors shall
thereafter accept any commercially reasonable offer to buy the Texas Properties;
provided no oil and gas property or leasehold interest which is mortgaged to
Lender shall be sold except on terms and price acceptable to Lender and with the
prior written approval of Lender. To facilitate this future sale, Borrower and
Guarantors shall promptly provide the oil and gas broker or consultant retained
with respect to the sale of the Sale Properties with all information needed for
the future sale of the Texas Properties. Upon Lender’s election to proceed with
the sale of the Texas Properties, Borrower and Guarantors shall thereafter use
their best efforts to (i) promptly open a data room on the Texas Properties,
(ii) to promptly obtain firm proposals for the sale of the Texas Properties,
(iii) to execute a definitive agreement or agreements, subject to stockholder
approval if required, for the sale of Texas Properties with proceeds sufficient
to repay the Deficiency, and (iv) seek stockholder approval, if required, and
consummate the sale of the Texas Properties as soon as practicable thereafter,
but in no event later than the end of the Forbearance Period.
          (e) Borrower and Guarantors shall devote their substantial efforts,
time, talents, and expertise to the sale and marketing of the Sale Properties
and, if required by Lender, the Texas Properties, and will take all lawful
actions as will result in the prompt payment of the Deficiency as provided
herein.
          (f) No sale of any of the Sale Properties or the Texas Properties will
be permitted to an affiliate of Borrower or Guarantors, unless Lender consents
in writing.
          (g) Borrower and Guarantors will direct the net sale proceeds from the
sale of any of the Sale Properties and the Texas Properties to be paid to Lender
to be applied to the Revolving Note and collection costs in such order as
determined by Lender and shall take all lawful actions to ensure that the
proceeds of any such sales are contemporaneously with the closing thereof
applied to the Revolving Note and collection costs as herein provided.
     10. Joint Venture of Barnett Shale Acreage. Lender acknowledges and agrees
that Borrower and Guarantors may proceed with the negotiation and documentation
of a joint venture arrangement, on substantially the terms previously disclosed
to Lender or other terms required by Lender to preserve the leasehold interests
and the value of the Texas Properties, with respect to the Barnett Shale
acreage. Borrower and Guarantors will seek formal consent under the Loan
Agreement prior to the execution of a definitive agreement regarding this joint
venture.

 

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August 31, 2007
Page 7 of 15
     11. Nicaragua Concession. So long as the Deficiency remains uncured or
there is any outstanding Event of Default, Borrower and Guarantors agree that:
          (a) They shall not sell, assign, transfer, or otherwise dispose of all
or any interest in the Nicaragua concession, without the prior written consent
of Lender, except for (i) the sale of hydrocarbons in the ordinary course of
business, and (ii) the sale or transfer of equipment or inventory in the
ordinary course of business or that is no longer necessary for the business of
Borrower or that is obsolete or replaced by equipment of at least comparable
value and use; and
          (b) They shall not mortgage, assign, hypothecate, pledge, or encumber,
and not create, incur, or assume any lien or security interest on or in, the
Nicaragua concession (or any interest in the Nicaragua concession), without the
prior written consent of Lender, except Permitted Encumbrances.
     12. Hedge Transactions. Borrower acknowledges that the Existing Defaults
also constitute an “Event of Default” under Section 5(a)(vi) of the ISDA Master
Agreement dated January 9, 2007, between Borrower and Lender (the “ISDA Master
Agreement”). Notwithstanding Section 6(a) of the ISDA Master Agreement, upon any
termination of the Forbearance Period for any reason, Lender may immediately
designate an “Early Termination Date” as defined in the ISDA Master Agreement
for any or all outstanding Hedge Transactions, without the notice required by
the ISDA Master Agreement. Lender has not yet designated any Early Termination
Date, and Lender reserves all rights and remedies in this regard.
     13. Audit and Inspections. (a) Borrower and Guarantors agree that Lender
and its auditors or accountants may, during the term of this Agreement, conduct
an audit at Borrower’s and Guarantors’ offices and examine, audit, and make and
take away copies or reproductions of Borrower’s and Guarantors’ books and
records reasonably required by Lender, relating to (i) the sources and uses of
all funds advanced by Lender under the Revolving Note, and (ii) the sources and
uses of all production proceeds attributable to Borrower’s and Guarantors’ oil
and gas properties. Lender will provide Borrower and Guarantors with one
business day written notice of its intention to commence the audit. Borrower and
Guarantors agree to cooperate with Lender and comply with all reasonable
requests in connection with the audit, and Borrower and Guarantors hereby
consent to the review and use by Lender’s auditors of Borrower’s third-party
audit of the books and records of Borrower, Guarantors, and any other
subsidiaries, including the supporting documentation and work papers of such
independent auditors.

 

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Infinity Energy Resources, Inc.
August 31, 2007
Page 8 of 15
     14. Reporting Requirements. Until the Revolving Note and all other
obligations and liabilities of Borrower under the Revolving Note and the other
loan documents are fully paid and satisfied, Borrower and Guarantors will
furnish to Lender the following in Proper Form:
          (a) On or before August 31, 2007, a 180-day operating/cash flow
forecast for Borrower and Guarantors and a pro-forma working capital balance for
Borrower and Guarantors as of August 22, 2007.
          (b) Within five (5) days of the end of each month, a pro-forma working
capital balance for Borrower and Guarantors as of the end of the prior month.
          (c) On or before August 31, 2007, a written plan to pay-down the pro
forma Accounts Payable balance of $5,767,351.00.
          (d) On or before August 31, 2007, an in-house valuation of Borrower’s
and Guarantors’ entire leasehold/producing assets.
          (e) As received and available, Borrower and Guarantors shall promptly
provide to Lender all information related in any way to their ability to raise
additional capital.
          (f) As received and available, Borrower and Guarantors shall promptly
provide to Lender copies of any agreement or engagement letter with an oil and
gas broker or consultant, all written purchase bids, purchase agreements, and
farm-in proposals related in any way to the prospective sale of any of the Sale
Properties and shall promptly inform Lender of any unwritten offers or bids.
          (g) As received and available, Borrower and Guarantors shall promptly
provide to Lender copies of any term sheets or financing proposals received that
would result in the Deficiency being cured or a refinance of the entire
outstanding amount owed on the Revolving Note and Hedge Liabilities.
          (h) Notwithstanding the provisions of Subsection (h) of Section 9 of
the Loan Agreement, within forty-five (45) days of the end of each month, a
production report, on a lease-by-lease or unit basis, showing the gross proceeds
from the sale of oil, gas, and associated hydrocarbons produced from the
Properties, the quantity of oil, gas, and associated hydrocarbons sold, the
severance, gross production, occupation, or gathering taxes deducted from or
paid out of the proceeds, settlements of any Hedge Transactions, the cash lease
operating expenses, including non-recurring cash operating expenses, intangible
drilling costs, and capital expenditures, general and administrative expenses,
the number of wells operated, drilled, or

 

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Infinity Energy Resources, Inc.
August 31, 2007
Page 9 of 15
abandoned, the name, address, telephone number, and contact of the first
purchaser of production for all of the Properties, and such other information as
Lender may reasonably request;
          (i) On or before August 31, 2007, evidence of the payments and all
lien releases required by Subsection (k) of Section 9 of the Loan Agreement, or
evidence of Borrower’s and Guarantors’ efforts in this regard if unable to
provide any lien releases; and
          (j) such other information respecting the condition and the
operations, financial or otherwise, of Borrower, Guarantors, and the Properties
as Lender may from time to time reasonably request.
     15. Forbearance Fee. In consideration of the forbearance by Lender under
this Agreement and the waiver of the Existing Defaults and for other valuable
consideration, the receipt and sufficiency of which are acknowledged, Borrower
agrees to pay to Lender a forbearance/waiver fee in the amount of $220,000.00,
due on or before the earlier of the following: (i) the end of the Forbearance
Period, (ii) the cure of the Deficiency, or (iii) refinance of the Revolving
Note by another lender; provided, however, that if Borrower and Guarantors are
able to fully resolve the Deficiency by the sale of the Sale Properties closed
and funded on or before November 30, 2007, then the amount of the
forbearance/waiver fee shall be reduced to $110,000.00. All fees are
non-refundable and earned by Lender upon execution of this Agreement.
     16. Conditions Precedent. The obligation of Lender to enter into this
Agreement and to forbear with respect to the Existing Defaults is subject to
Borrower’s satisfaction, in Lender’s sole discretion, of the following
conditions precedent:
          (a) Except for the Existing Defaults, Borrower shall be in material
compliance with the conditions set forth in Subsection (a) of Section 5 of the
Loan Agreement as of the date of this Agreement, and all representations and
warranties set forth in Section 6 of the Loan Agreement must be true as of the
date of this Agreement.
          (b) the negotiation, execution, and delivery of Loan Documents in
Proper Form, including, but not limited to, the following:
     (i) this Agreement; and
     (ii) a Lockbox Account agreement using Lender’s typical form;
     (iii) Letters in Lieu; and
     (iv) a Borrowing Resolution.

 

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Infinity Energy Resources, Inc.
August 31, 2007
Page 10 of 15
          (c) there shall not have occurred a material adverse change in the
business, assets, liabilities (actual and contingent), operations, or financial
condition of Borrower or in the facts and information regarding such entities as
represented to date.
     17. Default and Remedies. (a) As used in this Agreement, “Default” means
(i) any breach by Borrower or Guarantors of their obligations under this
Agreement, (ii) any misrepresentation by Borrower or Guarantors of the
representations or warranties set forth in this Agreement, or (iii) any further
Event of Default under the Loan Agreement, including additional defaults under
the provisions covered by the Existing Defaults.
          (b) Upon a Default, Lender may terminate the Forbearance Period and
exercise any and all rights and remedies available to it, including, without
limitation, those under the Loan Agreement, the Revolving Note, the Security
Documents, the Guaranties, the Loan Documents, this Agreement, and any other
instrument or agreement relating hereto, or any one or more of them. All rights
and remedies of Lender shall be cumulative and concurrent and, after a Default,
may be pursued separately, successively, or together as often as occasion
therefore shall arise, at the sole discretion of the Lender.
     18. Other Representations. Borrower and Guarantors hereby represent to
Lender as follows:
          (a) The execution, delivery, and performance of this Agreement by
Borrower and Guarantors have been duly authorized by Borrower’s and Guarantors’
respective boards of directors and this Agreement constitutes their legal,
valid, and binding obligations, enforceable in accordance with their respective
terms; and
          (b) There are no actions, suits, or proceedings pending or threatened
against or affecting Borrower, Guarantors, or the Properties, before any court
or governmental department, commission, or board, which, if determined
adversely, would have a material adverse effect on any of the Properties or the
operations or financial condition of any of Borrower or Guarantors.
     19. Confirmations. (a) Borrower and Guarantors agree that the following
amounts are due and outstanding with respect to the Revolving Note as of
August 10, 2007:

         
Principal
  $ 22,000,000.00  
Interest
  $ 190,723.39  
Non Use Fee
  $ 950.01  
 
     
Total
  $ 22,191,673.40  

 

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August 31, 2007
Page 11 of 15
Borrower and Guarantors agree that there is no set off or defense to payment of
the Revolving Note or the Hedge Liabilities.
          (b) As security for the Notes, Borrower and Guarantors previously
executed the Security Documents. Borrower and Guarantors ratify and confirm the
Security Documents, acknowledge that they are valid, subsisting, and binding,
and agree that the Security Documents secure payment of the Notes (including the
Revolving Note) and the Loans (including the Revolving Loan).
          (c) In connection with the Revolving Note, Guarantors executed the
Guaranties. Guarantors ratify and confirm the Guaranties, acknowledge that the
Guaranties are valid, subsisting, and binding upon Guarantors, and agree that
the Guaranties guarantee payment of the Revolving Note. Guarantors agree that
there is no defense to payment under the Guaranties.
          (d) Borrower and Guarantors hereby represent to Lender that all
representations and warranties set forth in Section 6 of the Loan Agreement are
true and correct as of the date of execution of this Agreement; and that, except
for the Existing Defaults, Borrower and Guarantors are in compliance as of the
date of execution of this Agreement with all covenants set forth in Section 7 of
the Loan Agreement, all financial covenants set forth in Section 8 of the Loan
Agreement, and all reporting requirements set forth in Section 9 of the Loan
Agreement.
     20. Validity and Defaults. The Loan Agreement remains in full force and
effect. Borrower and Guarantors acknowledge that the Loan Agreement, the
Revolving Note, the Security Documents, the Guaranties, and the other Loan
Documents are valid, subsisting, and binding upon Borrower and Guarantors; no
uncured breaches or defaults exist under the Loan Agreement, except for the
Existing Defaults; and no other event has occurred or circumstance exists which,
with the passing of time or giving of notice, will constitute a default or
breach under the Loan Agreement. Borrower and Guarantors ratify the Loan
Agreement.
     21. Release. For valuable consideration, the receipt and sufficiency of
which are acknowledged, Borrower and Guarantors hereby RELEASE AND FOREVER
DISCHARGE Lender and its officers, directors, employees, agents,
representatives, attorneys, subsidiaries, and affiliates (collectively “Released
Parties”), from any and all claims, counterclaims, demands, damages, debts,
suits, obligations, liabilities, offsets, rights, actions, and causes of action
of any nature whatsoever (collectively “Claims”), caused by, because of, as a
result of, arising from, or related in any way to the Loan Agreement, the
Revolving Note, the Security Documents, the Loan Documents, this Agreement, any
other transaction between Lender and Borrower, or any

 

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Infinity Energy Resources, Inc.
August 31, 2007
Page 12 of 15
act, omission, communication, transaction, occurrence, representation, promise,
breach, fraud, violation of any statute or law, or any other matter whatsoever
or thing done, omitted, or suffered by any of the Released Parties, whether
those Claims are now or hereafter accrued or possessed, whether known or
unknown, direct or indirect, liquidated or unliquidated, absolute or contingent,
foreseen or unforeseen, at law or in equity, and now or hereafter asserted,
including, without limitation, claims for contribution or indemnity, claims of
control, fraud, duress, mistake, tortuous interference, usury, negligence, or
violations of the Texas Consumer Protection and Deceptive Trade Practices Act.
     22. Advice from Counsel. Borrower and Guarantors understand that this
Agreement is legally binding and represent to Lender that each has obtained
independent legal counsel from the attorney of their choice regarding the
meaning and legal significance of this Agreement. The parties agree that no
provision of this Agreement shall be interpreted or construed against a party
because that party prepared the provision, it being agreed that all parties have
participated in the drafting of this Agreement and have had legal counsel of
their choice.
     23. Governing Law and Venue. THIS AGREEMENT, THE LOAN AGREEMENT, THE
REVOLVING NOTE, AND ALL LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND SHALL BE PERFORMED IN DALLAS
COUNTY, TEXAS. BORROWER, GUARANTORS, AND LENDER IRREVOCABLY AGREE THAT VENUE FOR
ANY ACTION OR CLAIM RELATED TO THIS AGREEMENT, THE LOAN AGREEMENT, THE REVOLVING
NOTE, OR ANY LOAN DOCUMENTS SHALL BE IN DALLAS COUNTY, TEXAS.
     24. Savings Clause. Regardless of any provision contained in the Loan
Agreement, the Revolving Note, the Security Documents, the other Loan Documents,
or this Agreement, it is the express intent of the parties that at no time shall
Borrower or Guarantors pay interest in excess of the maximum lawful rate (or any
other interest amount which might in any way be deemed usurious), and Lender
will never be considered to have contracted for or to be entitled to charge,
receive, collect, or apply as interest on the Revolving Note, any amount in
excess of the maximum lawful rate (or any other interest amount which might in
any way be deemed usurious), and, in the event that Lender ever receives,
collects, or applies as interest any such excess, the amount which would be
excessive interest will be applied to the reduction of the principal balance of
the Revolving Note, and, if the principal balance of the Revolving Note is paid
in full, any remaining excess shall forthwith be paid to Borrower. In
determining whether the interest paid or payable exceeds the maximum lawful rate
(or any other interest amount which might in any way be deemed usurious),
Borrower and Lender shall, to the maximum

 

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Infinity Energy Resources, Inc.
August 31, 2007
Page 13 of 15
extent permitted under applicable law, spread the total amount of interest
throughout the entire contemplated term of the Revolving Note so that the
interest rate is uniform throughout the term.
     25. Fax Provision. This Agreement and the related Loan Documents may be
executed in counterparts, and Lender is authorized to attach the signature pages
from the counterparts to copies for Lender and Borrower. At Lender’s option,
this Agreement and the related Loan Documents may also be executed by Borrower
and Guarantors in remote locations with signature pages faxed to Lender.
Borrower and Guarantors agree that the faxed signatures are binding upon
Borrower and Guarantors, and Borrower and Guarantors further agree to promptly
deliver the original signatures for this Agreement and the related Loan
Documents by overnight mail or expedited delivery. It will be an Event of
Default if Borrower or Guarantors fail to promptly deliver all required original
signatures.
     26. Captions. Captions are for convenience only and should not be used in
interpreting this Agreement.
     27. Final Agreement. (a) In connection with the Loans, Borrower,
Guarantors, and Lender have executed and delivered this Agreement, the Loan
Agreement, and the Loan Documents (collectively the “Written Loan Agreement”).
          (b) It is the intention of Borrower, Guarantors, and Lender that this
paragraph be incorporated by reference into each of the Loan Documents.
Borrower, Guarantors, and Lender each warrant and represent that their entire
agreement with respect to the Loans is contained within the Written Loan
Agreement, and that no agreements or promises have been made by, or exist by or
among, Borrower, Guarantors, and Lender that are not reflected in the Written
Loan Agreement.

 

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Infinity Energy Resources, Inc.
August 31, 2007
Page 14 of 15
          (c) THE LOAN AGREEMENT 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 AGREEMENTS
BETWEEN THE PARTIES.
     If the foregoing correctly sets forth your understanding of our agreement,
please sign and return one copy of this letter. Notwithstanding any provision to
the contrary, this Agreement shall only be effective if Borrower and Guarantors
sign and return to Lender by 3 p.m., Texas time, on Friday, August 31, 2007.

            Yours very truly,

Amegy Bank National Association
      By:   /s/ Tim E. Merrell        Tim E. Merrell,       Senior Vice
President     

 

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Infinity Energy Resources, Inc.
August 31, 2007
Page 15 of 15
Accepted and agreed to
this 31st day of August, 2007:
BORROWER:

          Infinity Energy Resources, Inc.
      By:  
/s/ Stanton E. Ross, Chairman 
      Stanton E. Ross, Chairman
and Chief Executive Officer       

GUARANTORS:

          Infinity Oil and Gas of Texas, Inc.
      By:  
/s/ James A. Tuell 
      James A. Tuell, President       

Infinity Oil & Gas of Wyoming, Inc.

          By:  
/s/ James A. Tuell 
      James A. Tuell, President       

Exhibits:
None