EXHIBIT 10.8
REDEMPTION AGREEMENT
BY AND BETWEEN
ENSOURCE ENERGY PARTNERS, LP
AND
ENSOURCE ENERGY INVESTORS LLC
DATED AS OF FEBRUARY 10, 2006
* * * * * * * * * *

 

--------------------------------------------------------------------------------

 

REDEMPTION AGREEMENT
TABLE OF CONTENTS
Page  
Article 1
Redemption of EEI LP Interest

             
1.1
  Redemption of EEI LP Interest     1  
1.2
  Termination of Interest in the Partnership     1  

Article 2
Liquidation Payment

             
2.1
  Payment on the Effective Date     1  
2.2
  Contingent Payment     2  

Article 3
Representations and Warranties of EEI

             
3.1
  Title to the EEI LP Interest     2  
3.2
  No Outstanding Options     2  
3.3
  Entire Interest     2  
3.4
  Agreement Binding     2  

Article 4
Representations and Warranties of the Partnership

             
4.1
  Authority Relative to Agreement     3  
4.2
  Agreement Binding     3  
4.3
  Effect of Agreement     3  

Article 5
Covenants

             
5.1
  Resignation of Scott A. Bedford; Public Announcement     3  
5.2
  2006 Tax Return     4  
5.3
  Indemnification.     4  

Article 6
Dispute Resolution
Article 7
General Provisions

             
7.1
  Addresses and Notices     4  
7.2
  Titles and Captions     5  
7.3
  Pronouns and Plurals     5  
7.4
  Construction of Term “Includes”     5  
7.5
  Further Action     5  
7.6
  Binding Effect     5  
7.7
  Integration     5  
7.8
  Waiver     5  
7.9
  Applicable Law     5  
7.10
  Attorneys Fees     5  
7.11
  Counterparts     5  

-i-

 

--------------------------------------------------------------------------------

 

REDEMPTION AGREEMENT
     THIS REDEMPTION AGREEMENT is entered into by Ensource Energy Partners, LP,
a Delaware limited partnership (the “Partnership”), and Ensource Energy
Investors LLC, a Delaware limited liability company (“EEI”), effective as of
February 10, 2006 (the “Effective Date”). Reference is made to the Amended and
Restated Agreement of Limited Partnership of Ensource Energy Partners, LP dated
as of November 15, 2005 (the “Partnership Agreement”). Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Partnership Agreement.
PREAMBLE
     WHEREAS, EEI is a Limited Partner in the Partnership holding an LP Interest
(the “EEI LP Interest”) with a Sharing Ratio of 62.05677% (the “EEI Sharing
Ratio”); and
     WHEREAS, EEI desires withdraw from the Partnership as a Limited Partner;
and
     WHEREAS, EEI and the Partnership desire for the Partnership to redeem from
EEI the EEI LP Interest in exchange for a liquidating payment as set forth
herein;
     NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties herein contained, the parties hereto agree as
follows:
ARTICLE 1
REDEMPTION OF EEI LP INTEREST
     1.1 Redemption of EEI LP Interest. Upon the basis of the representations
and warranties set forth herein and subject only to the receipt by EEI of the
Liquidation Payment, as hereinafter defined, the Partnership hereby redeems from
EEI the EEI LP Interest and EEI acknowledges the complete liquidation of the EEI
LP Interest effective for all purposes as of the Effective Date.
     1.2 Termination of Interest in the Partnership. Upon the redemption of the
EEI LP Interest, EEI shall have no further interest in or obligations to the
Partnership except for the matters set forth in this Agreement.
ARTICLE 2
LIQUIDATION PAYMENT
     2.1 Payment on the Effective Date. In consideration for the redemption and
liquidation of the EEI LP Interest, the Partnership shall pay to EEI on the
Effective Date the amount of $12,460,832.38 (the “Liquidation Payment”).

 

--------------------------------------------------------------------------------

 

     2.2 Contingent Payment.
     (a) The parties acknowledge and agree that the Liquidation Payment has been
calculated on the assumption that the aggregate expenses incurred by the
Partnership prior to the Effective Date relating to the Exchange Offer (the
“Exchange Offer Expenses”) equal or exceed $1,350,000, of which the amount
apportioned to EEI after the General partner having agreed to absorb some
portion of the amount that EEI would otherwise be required to pay is $127,177.80
(the “EEI Expenses”). In the event that the total amount paid by the Partnership
with respect to the Exchange Offer Expenses is less than $1,350,000 (such amount
the “Expense Savings”), the Partnership agrees to pay to EEI an amount equal to
the product of (i) the amount of the Expense Savings multiplied by (ii)
65.3831%, but in no event more than $96,149.42.
     (b) In addition to the foregoing,
     (i) in the event that the Partnership, or any other entity affiliated with
the General Partner or any entity affiliated with Marshall Eubank or Scott W.
Smith, consummates the Exchange Offer, or any other transaction pursuant to
which the Partnership or such other entity acquires any of the outstanding NGT
depositary units, the Partnership agrees to pay to EEI an amount equal to the
EEI Expenses; and
     (ii) in the event that the Partnership is reimbursed for any of the
Exchange Offer Expenses or any other expenses, in either case other than by an
existing Partner unless such reimbursement relates to amounts paid as a result
of a Partner making payment on account of an increase to its original limited
partner interest in the Partnership, the Partnership shall use the first
proceeds from such reimbursement to reimburse EEI for its proportionate share of
such expenses borne by EEI (based on the allocation of expenses described in
Section 2.2).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EEI
     EEI represents and warrants to the Partnership, each of which
representations and warranties is hereby deemed material, as follows:
     3.1 Title to the EEI LP Interest. Except as may be provided in the
Partnership Agreement, EEI (i) owns the EEI LP Interest free and clear of any
claims, liens, charges, or encumbrances whatsoever and (ii) has full right,
power, and authority to liquidate the EEI LP Interest as provided herein without
obtaining the consent or approval of any other person or entity.
     3.2 No Outstanding Options. Except as may be provided in the Partnership
Agreement, there are no outstanding options, warrants, or other agreements with,
or right in any person or entity, or otherwise entitling such person or entity
to purchase or otherwise acquire from EEI all or any portion of the EEI LP
Interest.
     3.3 Entire Interest. The EEI LP Interest constitutes the entire interest of
EEI in the Partnership, and EEI does not have or claim any interest, direct or
indirect, in any note, option, right, obligation, or other interest or security
issued by the Partnership. Except for amounts payable under this Agreement, EEI
does not claim any amounts owed to EEI by the Partnership.
     3.4 Agreement Binding. This Agreement, upon due execution by the parties
hereto, will constitute a legal, valid, and binding obligation of EEI
enforceable in accordance with

-2-

--------------------------------------------------------------------------------

 

its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, receivership, moratorium, and similar laws affecting creditors’
rights generally, and the effect of general principles of equity, whether
applied by a court of law or equity.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
     The Partnership represents and warrants to EEI, each of which
representations and warranties is hereby deemed material, as follows:
     4.1 Authority Relative to Agreement. The execution, delivery, and
performance of this Agreement by the Partnership and the consummation by the
Partnership of the transactions contemplated hereby have been duly and
effectively authorized by all necessary partnership or limited liability company
action.
     4.2 Agreement Binding. This Agreement, upon due execution by the parties
hereto, will constitute a legal, valid, and binding obligation of the
Partnership, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, receivership,
moratorium, and similar laws affecting creditors’ rights generally, and the
effect of general principles of equity, whether applied by a court of law or
equity.
     4.3 Effect of Agreement. The execution, delivery, and performance of this
Agreement by the Partnership and the consummation by it of the transactions
contemplated hereby do not require the consent, waiver, approval, license, or
authorization of any person or public authority that has not been obtained; do
not result in a violation in any material respect of any law, rule, or
regulation applicable to the Partnership; and do not conflict with or result in
a breach of the Partnership Agreement or, with or without the giving of notice
and/or the passage of time, any mortgage, deed of trust, license, indenture, or
other agreement or instrument, or any order, judgment, or other restriction of
any kind or character to which the Partnership is a party. The redemption of the
EEI LP Interest is not subject to the right of first offer set forth in
Section 10 of the Partnership Agreement, and the General Partner has received
adequate assurance that the redemption is not prohibited by applicable law and
waives any requirement that EEI provide a legal opinion in connection with the
redemption of the EEI LP Interest.
ARTICLE 5
COVENANTS
     5.1 Resignation of Scott A. Bedford; Public Announcement. The Partnership
acknowledges and accepts the resignation of Scott A Bedford from the Board of
Directors effective as of the Effective Date. Concurrently with the execution
and delivery of this Redemption Agreement, the Partnership will (i) make a
public announcement of such resignation in a press release and a Form 8-K filed
with the Securities and Exchange Commission in substantially the form attached
hereto as Exhibit A and (ii) not more than one business day after such public
announcement, file with the Securities and Exchange Commission a Form 8-K in
substantially the form attached hereto as Exhibit B, and file with the
Securities and Exchange Commission a supplement to its exchange offer addressing
Mr. Bedford’s resignation, the redemption of the EEI LP Interest and the
agreement of EEP’s limited partners to contribute not less than $20.5 million to
the Partnership. The supplement to the exchange offer shall be in substantially
the form attached hereto as Exhibit C. If Ensource fails to issue such press
release, file such Form 8-K or file such supplement to the exchange offer as
provided in the previous sentence, the Partnership shall pay EEI on a daily
basis as partial liquidated damages one percent (1%) of the Liquidation Payment
per day until the press release is issued, the Form 8-K is filed and the
supplement to the exchange offer is filed. If the press release Form 8-K, and
the supplement are not issued or filed as of February 13, 2006, the Partnership
shall cause Ensource to terminate the exchange offer not later than
February 13, 2006 (the “Termination”). If the Termination does not occur timely,
as further partial liquidated damages EEP shall pay EEI an additional three
percent (3%) of the Liquidation Payment for each day that the Termination has
not occurred. The parties agree that the

-3-

--------------------------------------------------------------------------------

 

damages suffered as a result of such failure will be difficult to measure, and
that the amount of the per diem liquidated damages is reasonable under the
circumstances.
     5.2 2006 Tax Return. The parties agree that the income allocable to EEI by
the Partnership for the period from January 1, 2006 through the Effective Date
will be determined using the interim closing of the books method.
5.3 Indemnification.
     (a) Without duplication of any amounts otherwise due to EEI under
Sections 6.7 and 6.8 of the Partnership Agreement, the Partnership hereby agrees
to indemnify, hold harmless and defend EEI and its shareholders, directors,
officers, employees and agents (including without limitation Scott A. Bedford),
such parties being referred to as the “Indemnified Parties,” from and against
any action, cause, claim, damage, debt, demand or liability, including
reasonable costs and attorney’s fees, asserted by any person or entity, arising
out of or relating to: (a) this Redemption Agreement; (b) the Exchange Offer; or
(c) the Partnership Agreement. This indemnity is intended to be broad and
liberally construed. The Partnership further agrees to advance any fees or
expenses incurred or likely to be incurred by any Indemnified Party promptly
upon written request to the Partnership.
     (b) Nothing contained in this Redemption Agreement shall limit the
Partnership’s obligations or EEI and its Affiliates’ rights under Sections 6.7
and 6.8 of the Partnership Agreement.
ARTICLE 6
DISPUTE RESOLUTION
     The parties agree that any dispute with respect to the matters covered by
this Agreement will be resolved using the procedures set forth in Article 17 of
the Partnership Agreement, which shall be deemed incorporated herein with all
the necessary changes.
ARTICLE 7
GENERAL PROVISIONS
     7.1 Addresses and Notices. The address of each party for all purposes shall
be the address set forth for such party on the signature page or such other
address of which the other party has received written notice as provided in this
Section. Subject to the following sentence, any notice, demand, request or
report required or permitted to be given or made to a party under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent to such party at such address by expedited courier service,
registered or certified mail, return receipt requested or by telecopy (with a
supplemental copy mailed on the date of such transmission by telecopier by
prepaid first class mail). Notices shall be deemed received (a) with respect to
notices given by expedited courier service or courier or delivered in person, on
the Business Day indicated on the proof of delivery to the party’s then current
address (or if delivered on other than a Business Day, on the first Business Day
thereafter), (b) with respect to notices given by registered or certified mail,
5 Business days after the date on which such notice was posted with the U.S.
Postal Service to the Partner’s then current address), and (c) with respect to
notices given by telecopy, on the Business Day indicated on any proof of
transmission to such party’s then current telecopier number, or in the event
that such telecopier transmission is received after regular business hours, on
the first Business Day thereafter.

-4-

--------------------------------------------------------------------------------

 

     7.2 Titles and Captions. All Article or Section titles or captions in this
Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof.
     7.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
     7.4 Construction of Term “Includes". The term “includes” and its
derivatives means “includes, but is not limited to,” and corresponding
derivative expressions.
     7.5 Further Action. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purpose of this Agreement; provided,
however, that nothing in this Agreement shall be construed to require any party
to take any action that is in consistent with applicable law.
     7.6 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their heirs, executors, administrators, successors,
legal representatives and permitted assigns.
     7.7 Integration. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
     7.8 Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
     7.9 Applicable Law. Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed under the internal laws, and not
the laws pertaining to conflicts or choice of law, of the State of Delaware.
     7.10 Attorneys Fees. In the event either party to this Redemption Agreement
is in breach of this Redemption Agreement, the non-breaching party shall be
entitled to collect from the breaching party, in addition to its damages at law,
all its expenses (including without limitation reasonable attorneys’ fees and
expenses) incurred in enforcing its rights, whether or not legal action is
commenced.
     7.11 Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all the parties,
notwithstanding that all the parties are not signatories to the original or the
same counterpart. Each party shall become bound by the Agreement immediately
upon affixing its signature hereto, independently of the signature of any other
party.
* * * * *
[Remainder of Page Left Blank]
[Signature Pages of the Partners Attached]

-5-

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the parties named below have caused this Agreement to
be executed by their duly authorized officers or representatives on the date
first above written.

              Ensource Energy Partners, LP
 
       
 
  By:   Ensource Energy Company, LLC
its general partner
 
       
 
  By:   /s/ Scott W. Smith
 
       
 
      Scott W. Smith President
 
            Ensource Energy Investors LLC
 
 
  By:    Peninsula JVL-Capital Advisors, LLC 
 
 
  By:   /s/ Scott A. Bedford
 
       
 
  Name:   Scott A. Bedford
 
  Title:   Manager 

-6-

--------------------------------------------------------------------------------

 

EXHIBIT A
See Attachment
 
Exhibit B
Form 8-K Attached
 
Exhibit C
Form of Supplement Attached

-7-