Exhibit 10.5
 
First Amendment to Secured Promissory Note

This FIRST AMENDMENT TO SECURED PROMISSORY NOTE (this “Amendment”), dated July
21, 2017, to be effective as of July 31, 2017 (the “Amendment Effective Date”),
is by and between Energy 11 Operating Company, LLC, a Delaware limited liability
company (“Borrower”), with a mailing address of 5815 N. Western Avenue, 
Oklahoma City, Oklahoma 73118, and Kaiser-Francis Management Company, L.L.C., as
agent on behalf of all Secured Persons under the Mortgage, with a mailing
address of 6733 South Yale Avenue, Tulsa, OK 74136 (together with its successors
and assigns, collectively, the “Agent”).
Recitals
A. In connection with a transaction among Borrower, Kaiser Acquisition and
Development-Whiting, LLC and various other parties, Borrower executed and
delivered to Agent that certain Secured Promissory Note dated March 31, 2017, in
the original aggregate principal amount of Thirty Three Million and No/100
Dollars ($33,000,000) (as amended, amended and restated, modified or otherwise
supplemented from time to time, collectively, the “Original Note”).
B. Borrower has requested that the Agent and the Secured Persons extend the
Maturity Date of the Original Note from August 1, 2017 to June 29, 2018, and
make certain other modifications to the Original Note; and
C. Agent and the Secured Persons are agreeable to such request, but only upon
the terms and conditions set forth in this Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
Section 1.               Defined Terms.  All capitalized terms used herein and
not otherwise defined herein shall have the meaning defined in the Original
Note.
    Section 2.               Amendments.  In reliance on the representations,
warranties, covenants and agreements contained in this Amendment, and subject to
the satisfaction of the conditions precedent set forth in Section 4 hereof, the
Original Note shall be extended and amended effective as of the Amendment
Effective Date in the manner provided in this Section 2.
2.1 Amended Definitions.
(a)            The definition of “Maturity Date” contained in the opening
paragraph of the Original Note is hereby amended to replace the date provided
therein with June 29, 2018, and all references in the Original Note and each
other Collateral Document to the Maturity Date shall mean and refer to “June 29,
2018”, unless sooner terminated or accelerated pursuant to the Collateral
Documents.
 
(b)            The definition of “Mortgage” contained in the Original Note is
hereby amended and restated as follows and shall hereafter be referred to as:
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“Mortgage, Fixture Filing, Assignment of As-Extracted Collateral, Security
Agreement and Financing Statement dated effective as of April 1, 2017, between
Borrower and Agent and amended by that certain Amendment and Supplement to
Mortgage, Fixture Filing, Assignment of As-Extracted Collateral, Security
Agreement and Financing Statement dated effective as of July 31, 2017, (as the
same may be further amended, modified, supplemented and amended and restated
from time to time), collectively, the “Mortgage”.”
2.2 Deleted Definitions.   The definitions of “Net Equity Proceeds Amount” and
“Net Equity Proceeds” contained in the Original Note are hereby deleted in their
entirety.
2.3 Modifications to Payment Obligations.  The fourth full paragraph of the
Original Note is hereby amended and restated in its entirety to read as follows:
“Borrower shall make payments of interest beginning April 30, 2017, and
continuing on the last day of each calendar month thereafter until the Maturity
Date. In addition to interest payments on the outstanding principal balance of
this Note, Borrower shall make mandatory principal payments to the Agent (for
the benefit of the Secured Persons) in the amount of (A) One Hundred Thousand
Dollars ($100,000.00) on the last Business Day of each of August, September,
October, November and December, 2017 (each such date a “2017 Mandatory Repayment
Date”) and (B) One Million Dollars ($1,000,000.00) on the last Business Day of
each calendar month commencing January  2018, and continuing for February,
March, April and May, 2018 and continuing until the Maturity Date (each such
date a “2018 Mandatory Repayment Date”; and together with each 2017 Mandatory
Repayment Date, collectively, a “Mandatory Repayment Date”).  Concurrently with
the payment of each mandatory principal payment required above, Borrower shall
deliver to Agent a certificate of the chief financial officer or other financial
officer of Borrower in substantially the form of Exhibit A attached hereto
certifying as to whether an Event of Default has occurred and, if an Event of
Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto.”
2.4 Negative Covenant.  Borrower and Agent acknowledge and confirm that the
Negative Covenant Termination has occurred in accordance with the terms of the
Original Note and, accordingly, all references in the Original Note or any other
Collateral Document to the Negative Covenant, and Borrower’s obligation to
comply therewith, shall be null and void and of no further force and effect.
2.5 Compliance Certificate.  The Compliance Certificate attached as Exhibit A to
the Original Note is hereby deleted in its entirety and replaced with Exhibit A
attached to this Amendment.
Section 3.               Confirmation of Outstanding Principal Balance of the
Note.  After giving effect to the principal reduction payment Borrower is
required to pay to Agent pursuant to Section 4.2 below as a condition to the
effectiveness of this Amendment, the outstanding principal balance of the Note
(as amended by this Amendment) will be Six Million Two Hundred Seven  Thousand
Three Hundred Fifty Six and No/100 Dollars ($6,207,356.00).
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Section 4.               Conditions Precedent.  The effectiveness of this
Amendment is subject to the following:
4.1 The Agent shall have received counterparts of this Amendment from the
Borrower.
4.2 The Agent shall have received from the Borrower, via federal wire transfer
to Agent’s account, a payment in good funds equal to Two Million Dollars
($2,000,000.00) in reduction of the outstanding principal balance of the Note
(as amended hereby).
4.3 The Agent shall have received a duly executed Amendment and Supplement to
Mortgage, Fixture Filing, Assignment of As-Extracted Collateral, Security
Agreement and Financing Statement dated as of the Amendment Effective Date
(“Mortgage Amendment”), in form and substance acceptable to Agent.
4.4 No Event of Default shall be in existence as of the Amendment Effective
Date.
Section 5.               Miscellaneous.
5.1 Confirmation and Effect.  The provisions of the Original Note (as amended by
this  Amendment) shall remain in full force and effect in accordance with its
terms following the effectiveness of this Amendment, and this Amendment shall
not constitute a waiver or amendment of any provision of the Original Note or
any other Collateral Document, except as expressly provided for herein. This
Amendment is a renewal, extension and modification of the Original Note, and
this Amendment is delivered by Borrower in reaffirmation, modification,
extension and rearrangement, but not in novation, discharge or extinguishment,
of the Original Note. Each reference in the Original Note to “this Note”,
“hereunder”, “hereof’, “herein”, or words of like import shall mean and be a
reference to the Original Note as amended hereby (and as the same may be further
amended, amended and restated, supplemented or otherwise modified from time to
time), and each reference to the “Note” in any Collateral Document or any other
document, instrument or agreement executed and/or delivered in connection with
the Original Note shall mean and be a reference to the Original Note as amended
hereby (and as the same may be further amended, amended and restated,
supplemented or otherwise modified from time to time). To the extent of any
conflict or inconsistency between the terms and conditions as previously set
forth in the Original Note, and the terms and conditions as set forth in this
Amendment, the terms and conditions as set forth in this Amendment shall govern
and control.
5.2 Ratification and Affirmation of Borrower.  Borrower hereby expressly (i)
ratifies and affirms its obligations under the Original Note (as amended hereby)
and the other Collateral Documents, (ii) agrees that its obligations under the
Original Note (as amended hereby) and the other Collateral Documents remain in
full force and effect with respect to its obligations thereunder, (iii)
represents and warrants to the Agent and each Secured Person that each
representation and warranty of Borrower contained in the Original Note and the
other Collateral Documents is true and correct in all material respects as of
the date hereof and after giving effect to the amendments set forth in Section 2
hereof except (A) to the extent any such representations and warranties are
expressly limited to an earlier date, in which case, on and as of the date
hereof, such representations and warranties shall continue to be true and
correct as of such
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specified earlier date, and (B) to the extent that any such representation and
warranty is expressly qualified by materiality or by reference to material
adverse effect, such representation and warranty (as so qualified) shall
continue to be true and correct in all respects, (iv) represents and warrants to
the Agent and each Secured Person that the execution, delivery and performance
by Borrower of this Amendment and the Mortgage Amendment are within Borrower’s
limited liability company powers, have been duly authorized by all necessary
action and that this Amendment and the Mortgage Amendment constitutes the valid
and binding obligation of Borrower enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy or other
similar insolvency laws affecting creditor’s rights generally, and (v)
represents and warrants to the Agent and each Secured Person that, after giving
effect to this Amendment, (1) no Event of Default exists, and (2) no event has
occurred which constitutes, or which could reasonably be expected to constitute
(whether after delivery of notice, or the passage of time, or both) a material
adverse effect on or affecting Borrower or the Mortgaged Property (as defined in
the Mortgage).
5.3 Counterparts.  This Amendment may be executed by one or more of the parties
hereto in any number of separate counterparts, and all of such counterparts
taken together shall be deemed to constitute one and the same instrument.
Delivery of this Amendment by facsimile or electronic (e.g. pdf) transmission
shall be effective as delivery of a manually executed original counterpart
hereof.
5.4 No Oral Agreement.  This written Amendment and the other Collateral
Documents executed in connection herewith and therewith represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous, or unwritten oral agreements of the parties.  There are no
subsequent oral agreements between the parties that modify the agreements of the
parties in the note and the other Collateral Documents.
5.5 Governing Law.  This Amendment (including, but not limited to, the validity
and enforceability hereof) shall be governed by, and construed in accordance
with, the laws of the state of oklahoma.
5.6 Payment of Expenses.  The Borrower agrees to pay or reimburse the Agent for
all of its reasonable out-of-pocket costs and expenses incurred in connection
with preparing this Amendment, any other documents prepared in connection
herewith and the transactions contemplated hereby, including, without
limitation, the reasonable fees and disbursements of counsel to the Agent and
all mortgage amendment recording and filing fees and expenses.
5.7 Severability.  Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
5.8 Successors and Assigns.  This Amendment shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
[Signature Pages Follow.]
 
 
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The parties hereto have caused this Amendment to be duly executed as of the day
and year first above written.
BORROWER:
ENERGY 11 OPERATING COMPANY, LLC
By:  /s/ Anthony F. Keating, III                     
                                       Name: Anthony F. Keating, III
                                       Title:   Co-Chief Operating Officer

AGENT:
KAISER FRANCIS MANAGEMENT COMPANY, L.L.C.

By:  /s/ Don P. Millican                                    
                                       Name:  Don P. Millican
      Title:    President and Manager

 
 
 
 
SIGNATURE PAGE TO FIRST AMENDMENT TO
SECURED PROMISSORY NOTE

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EXHIBIT A
COMPLIANCE CERTIFICATE
The undersigned certifies that he/she is a financial officer of the Borrower
named below (the Borrower is referred to herein as the “Company”), and DOES
HEREBY FURTHER CERTIFY on behalf of the Company that:
1. He/she has reviewed the terms of that certain Secured Promissory Note dated
as of March 31, 2017, by and between the Company and Kaiser-Francis Management
Company, L.L.C., as agent on behalf of all Secured Persons under the Mortgage
(the “Agent”), as amended by that certain First Amendment to Secured Promissory
Note dated effective as of July 31, 2017 (as further amended, supplemented or
modified from time to time, the “Note”), including but without limitation the
provisions regarding the Company’s obligation to pay to the Agent (for the
benefit of the Secured Persons) mandatory principal payments as and when due,
and has made, or has caused to be made by employees or agents under his/her
supervision, a detailed review of the transactions and conditions of the
Company. Capitalized terms not defined herein are defined in the Note;
2. The examinations described in paragraph 1 did not disclose, and he/she has no
knowledge of, the existence of any condition or event which constitutes an Event
of Default during or at the end of the applicable Mandatory Repayment Date or as
of the date of this Compliance Certificate, except as set forth below.
Described below are the exceptions, if any, to paragraph 2 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Company has taken, is taking, or proposes to
take with respect to each such condition or event:

 
         
 
 

 

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The foregoing certifications are made and delivered this ___ day of __________,
20__.
BORROWER:
ENERGY 11 OPERATING COMPANY, LLC
By: __________________________________
Name: ________________________________
Title:   ________________________________