Document:

exv10w4

 

Exhibit 10.4

 

			
	Commonwealth Associates
	 	830 Third Avenue · New York, NY 10022
	Investment & Merchant Banking · Member NASD/SIPC
	 	www.commonwealthassociates.com
	 
	 	Tel: 212-829-5800 · 800-422-1253
	 

July 1, 2007

Mr. Karl F. Arleth

Teton Energy Corporation

410 17th Street, Suite 1850

Denver, CO 80202

	 	 	 	 	 
	 

	 	Re:
	 	Retainer Agreement Between Commonwealth Associates, L.P.
	 

	 	 	 	and Teton Energy Corporation (the “Company”)

Gentlemen:

     Commonwealth Associates, L.P., and any of its subsidiaries or affiliates (“COMW” unless
otherwise indicated), is pleased to submit this letter of engagement (the “Agreement”) setting
forth the terms and conditions whereby COMW will act as financial advisor and will provide general
financial advisory and investment banking services to the Company.

	I.	 	Services To Be Provided

     Subject to the terms of that certain Placement Agent Agreement dated as of May 11, 2007
between the Company and COMW (the “May 11 Agreement”) with respect to transaction advisor services,
COMW will endeavor to provide to the Company general financial advisory and investment banking
services in connection with identifying, assessing, evaluating, and if appropriate, executing
possible acquisition, divestiture, exchange, merger, sale, restructuring, financing, refinancing or
other transactions, involving the Company, its assets, and/or its securities, and one or more
third-parties (the “Advisory Services”).

	II.	 	Terms and Conditions

	 	A.	 	Authority. The Company represents and warrants
that the Company is in all respects qualified and authorized to
accept any financing or merger/acquisition commitments being
arranged by COMW; provided, however, that the Company can
decide not to accept any financing or merger/acquisition
commitments being arranged by COMW, in the Company’s sole
discretion. COMW is not responsible for the qualifications of
the Company, the vesting or quality of title or any other
matters’ affecting the consummation of such transaction.
	 
	 	B.	 	Company Information. The Company represents
and warrants that all information (i) made available to COMW by
the Company or (ii) contained in the relevant financing
documents will be complete and correct in all material respects
and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein

 

 

Teton Energy Corporation

July 1, 2007

Page 2

	 	 	 	not misleading in the light of the
circumstances under which such
statements are made. The Company further represents and
warrants that any projections provided to COMW or contained
in any relevant transaction documents will have been
prepared in good faith and will be based on assumptions
that, in light of the circumstances under which they are
made, are reasonable. The Company acknowledges and agrees
that, in rendering its services hereunder, COMW will be
using and relying on such information (and additional
information available from public or other sources) without
independent verification, that COMW will not assume
responsibility for the accuracy or completeness of such
information (included in the relevant financing documents or
otherwise), and that COMW will not undertake to make an
independent appraisal of any of the assets of the Company or
any of its subsidiaries.

	III.	 	Compensation/Payment For Services

     As compensation for COMW’s services, the Company will pay, or cause to be paid, the following
fees to COMW:

	 	A.	 	Compensation to COMW:

	 	1.	 	A non-refundable
Monthly Fee (the “Monthly Fee”) of $15,000,
payable monthly beginning July 1, 2007
continuing until the expiration of the
Agreement as described in Section IV.A, below.
	 
	 	2.	 	If the Monthly Fee is
not fully paid net 30 days after receipt, the
Company agrees to pay all costs of collection,
including but not limited to attorney’s fees
and interest on the obligation, whether
collected by suit or otherwise. The Monthly
Fee is not negotiable and is not subject to any
reduction, set-off, counterclaim, or refund for
any reason or matter whatsoever.
	 
	 	3.	 	In addition to the
Monthly Fee, 1% of the aggregate sale
price for the monetization of partial or full ownership of selected
oil and gas assets, payable on the closing date of
such sale. The Company and COMW hereby
acknowledge and agree that such 1% fee
constitutes a one time modification to the May 11
Agreement with respect to transaction advisor
compensation payable to COMW, and

 

 

Teton Energy Corporation

July 1, 2007

Page 3

	 	 	 	that except for such modification, the terms of
the May 11 Agreement are hereby reaffirmed.

	 	B.	 	Expenses. In addition to the fees described
above, and whether or not any financing is consummated, the
Company will pay all of COMW’s reasonable out-of-pocket
expenses, including travel for trips approved by the Company,
Federal Express and other mailing charges, long distance
telephone calls, and other incremental costs incurred,
including pre-approved fees and disbursements of counsel (which
approval will not be unreasonably withheld). COMW must seek
pre-approval for any single item costing in excess of $1,000.
Out-of-pocket expenses will be billed, due and payable, monthly
in arrears.

	IV.	 	Miscellaneous

	 	A.	 	Term. This Agreement is effective as of July
1, 2007 (the “Effective Date”) and will continue thereafter for
a period of 24 months. The Company may accelerate payments, in
part or in full, at its option.
	 
	 	B.	 	Confidentiality. Except as contemplated by the
terms hereof or as required by applicable law, COMW shall keep
confidential all material non-public information provided to it
by the Company, and shall not disclose such information to any
third party, other than such of its employees and advisors as
COMW determines to have a need to know and except as otherwise
required by law or legal process. The relevant financing
documents and any other information or data about the Company,
its subsidiaries, or their assets will only be made available
to a potential investor on the execution of a confidentiality
agreement prepared by COMW and acceptable to the Company.
	 
	 	C.	 	Nature of Engagement. Pursuant to the May 11
Agreement, COMW is being retained to serve as the Company’s
exclusive transaction advisor (unless otherwise agreed to in
writing between the parties) solely to the Company, and the
engagement of COMW shall not be deemed to be on behalf of and
is not intended to confer rights or benefits on any shareholder
or creditor of the Company or its subsidiaries or on any other
person. Unless expressly agreed to in writing by COMW, no one
other than the Company is authorized to rely on this engagement
of COMW or any statements, conduct or advice of COMW. No
option or advice of COMW shall be used for any other purpose or
reproduced, disseminated, quoted, or referred to at any time,
in any manner or for any purpose, nor shall any

 

 

Teton Energy Corporation

July 1, 2007

Page 4

	 	 	 	public or other
references to COMW (or to such opinions or advice) be made
without the express prior written consent of COMW, which
consent shall not be unreasonably withheld.
	 
	 	D.	 	No Obligation to Consummate a Transaction.
Nothing herein shall obligate the Company to close on any
financing or other transaction introduced to it by COMW.
	 
	 	E.	 	Parties. This Agreement shall be binding on
the parties and their successors and assigns.
	 
	 	F.	 	Modifications and Amendments. This Agreement
and the May 11 Agreement represent the entire understanding
between the Company and COMW with respect to the Advisory
Services. It is understood that COMW’s obligations under this
Agreement are to use its best efforts throughout the period for
which it acts as the Company’s transaction advisor as described
herein. COMW’s engagement is not intended to provide the
Company or any other person or entity with any assurances that
any transaction will be consummated. It is further understood
that except for the modification of the May 11 Agreement set
forth in Section III.A.3 above, the terms of the May 11
Agreement are hereby reaffirmed.
	 
	 	G.	 	Arbitration. Any dispute related to this
Agreement, any transaction contemplated hereby, or any other
matter contemplated hereby shall be settled by arbitration in
accordance with the rules then in effect of the Financial
Institutions Regulatory Authority (f/k/a NASD). Any award
entered by the arbitrators shall be final, binding, and
nonappealable, and judgment may be entered thereon by any party
in accordance with applicable law in any court of competent
jurisdiction. This arbitration provision shall be specifically
enforceable.
	 
	 	H.	 	Governing Law & Amendments. This Agreement
shall be governed by New York law, without application of
conflict of laws principles, and may not be amended or modified
except pursuant to a writing signed by all parties.

[Remainder of page intentionally left blank.]

 

 

Teton Energy Corporation

July 1, 2007

Page 5

     If the foregoing correctly sets forth the entire understanding and agreement between COMW and
the Company, please so indicate in the space provided for that purpose below and return an executed
copy to us no later than September 4, 2007, whereupon this letter shall constitute a binding
agreement between us as of the date first above written.

	 	 	 	 	 	 	 
	 	 	 	 	COMMONWEALTH ASSOCIATES, L.P.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Robert A. O’Sullivan
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	Robert A. O’Sullivan
	 

	 	 	 	 	 	President & CEO
	 
	 	 	 	 	 	 
	AGREED:	 	 	 	 
	 
	 	 	 	 	 	 
	TETON ENERGY CORPORATION	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Karl F. Arleth	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Karl F. Arleth	 	 	 	 
	 

	 	President & CEOexv10w1

 

Exhibit 10.1

AMENDMENT NO. 3

TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDMENT NO. 3 to the SECOND AMENDED AND RESTATED CREDIT AGREEMENT (the “Amendment”)
is dated September 17, 2007, by and among PETROQUEST ENERGY, L.L.C., a Louisiana limited liability
company (“Borrower”); JPMORGAN CHASE BANK, N.A. (individually as a lender and as agent,
“Agent”); each of the Guarantors set forth on the signature pages hereto and the financial
institutions set forth on the signature pages hereto, (“Lenders”).

R E C I T A L S:

     WHEREAS, Borrower, PetroQuest Energy, Inc., a Delaware corporation (“Parent”), Agent,
Calyon New York Branch, as Syndication Agent; J.P. Morgan Securities, Inc., as Sole Lead Arranger
and Sole Book Runner, and the Lenders have entered into a Second Amended and Restated Credit
Agreement dated November 18, 2005 (as the same may have been and may hereafter be amended from time
to time, the “Credit Agreement”), pursuant to which Borrower amended and restated a
previously existing credit facility dated May 13, 2003; and

     WHEREAS, Borrower, Parent, Agent and the Lenders desire to amend the Credit Agreement as
herein set forth.

     NOW THEREFORE, in consideration of the premises herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

     1. Definitions. Except as otherwise provided below, unless the context hereof
indicates otherwise, all capitalized terms used herein shall have the same meaning as such
capitalized terms are defined in the Credit Agreement.

     2. Amendments to the Credit Agreement. The Credit Agreement is, subject to the
satisfaction of the conditions precedent set forth in Section 3 hereof, hereby amended as follows:

     (a) Section 2.2.1, Borrowing Base, of the Credit Agreement is hereby amended by
deleting the section in its entirety and substituting the following:

     “2.2.1 Until the date as of which the Borrowing Base is next redetermined
pursuant to Section 2.2.2, the Borrowing Base shall be $80,000,000, as reduced by
Section 2.2.5.”

     (b) Section 6.13, Sale of Assets, of the Credit Agreement is hereby amended by
deleting the section in its entirety and substituting the following:

     “6.13. Sale of Assets. The Borrower will not, nor will it permit any
Subsidiary to, lease, sell or otherwise dispose of its Property to any other Person,
except:

 

 

	 	(i)	 	the sales of Hydrocarbons in the ordinary course of business.
	 
	 	(ii)	 	transfers of interests in Oil and Gas
Properties in the ordinary course of the joint development of Oil and
Gas Properties with others, including without limitation transfers to
other parties to joint development agreements, participation
agreements, farmout agreements, farmin agreements, exploration
agreements, operating agreements and unit agreements;
	 
	 	(iii)	 	the sale or transfer of equipment that is
obsolete, worn-out, depleted or no longer necessary for their business
or is replaced by equipment of at least comparable value and use;
	 
	 	(iv)	 	during any consecutive twelve month period,
sales of Oil and Gas Properties in the ordinary course that will not
exceed, in the aggregate, five percent (5%) of the Borrowing Base then
in effect, and that will not materially impair or diminish the value of
the Collateral or the Borrower’s financial condition;
	 
	 	(v)	 	the sale or other disposition of approximately
180 miles of gathering systems with current throughput of approximately
30 million cubic feet per day located in the Woodford Shale trend in
southeast Oklahoma; and
	 
	 	(vi)	 	leases, sales or other dispositions of Oil and
Gas Properties, other than those permitted in subsections (i) through
(v) above, that, during any consecutive twelve-month period, do not
constitute a Substantial Portion of the Oil and Gas Properties of the
Borrower and its Subsidiaries.

Upon the written request of the Borrower setting forth in reasonable detail
the transfer, sale or conveyance of assets in a transaction which may be
permitted above, the Agent will execute and deliver to the Borrower such
documentation as is reasonably necessary in the opinion of the Agent and its
counsel to release the Lender Liens on assets so transferred, sold or
conveyed.”

     3. Limited Waiver. Borrower has requested, and Agent and the Lenders have approved, a
deviation from compliance with the covenant set forth in Section 6.28.2 of the Credit Agreement for
all periods prior to the date hereof through the period ending December 31, 2007. At the
expiration of the previously described time period, Borrower must be in compliance with such
covenant. It is understood and agreed that the consent of Agent and the Lenders to the deviation
set forth above shall in no way act as a waiver of any other covenants, restrictions, rights or
remedies with respect to the Credit Agreement, but that such deviation shall apply only to the
specific matter and instance set forth hereinabove.

 

 

     4. Conditions Precedent to Effectiveness of Amendment. This Amendment shall become
effective when, and only when, each of the conditions below has been complied with to the
satisfaction of the Agent and the Lenders and the documents required below have been delivered to
the Agent and the Lenders:

     (a) Counterparts of this Amendment duly executed by Borrower, Guarantors and Lenders;

     (b) A copy of the resolutions approving this Amendment, and authorizing the
transactions contemplated herein duly adopted by the Managers of Borrower, accompanied by a
certificate of the duly authorized Secretary of Borrower, certifying that such copy is a
true and correct copy of the resolutions duly adopted by the Managers of Borrower, and that
such resolutions constitute all the resolutions adopted with respect to such transactions,
and have not been amended, modified or revoked in any respect and are in full force and
effect as of the date hereof;

     (c) A copy of the resolutions approving this Amendment, and authorizing the
transactions contemplated herein duly adopted by the Board of Directors or Members of each
Guarantor, as the case may be, accompanied by a certificate of the duly authorized Secretary
of such Guarantor, certifying that such copy is a true and correct copy of the resolutions
duly adopted by the Board of Directors or Members of such Guarantor, and that such
resolutions constitute all the resolutions adopted with respect to such transactions, and
have not been amended, modified or revoked in any respect and are in full force and effect
as of the date hereof;

     (d) Payment of all fees (to be determined)required to be paid to the Lenders in
connection with this Amendment;

     (e) Payment by Borrower of the fees and expenses of counsel to Lenders in connection
with the preparation and negotiation of this Amendment and all documents and instruments
contemplated hereby; and

     (f) The execution and delivery of such additional documents and instruments which the
Agent and its counsel may deem necessary to effectuate this Amendment or any document
executed and delivered to Lenders in connection herewith or therewith.

     5. Representations and Warranties of Borrower. Borrower represents and warrants as
follows:

     (a) Borrower and Guarantors are each duly authorized and empowered to execute, deliver
and perform this Amendment and all other instruments referred to or mentioned herein to
which it is a party, and all action on its part requisite for the due execution, delivery
and the performance of this Amendment has been duly and effectively taken. This Amendment,
when executed and delivered, will constitute valid and binding obligations of Borrower and
Guarantors, as the case may be, enforceable against such party in accordance with its terms.
This Amendment does not violate any provisions of the Articles of Organization or limited
liability agreement of Borrower, the Certificate of Incorporation or By-Laws of any
Guarantor, or any contract, agreement,

 

 

law or regulation to which Borrower or Guarantors are subject, and does not require the
consent or approval of any regulatory authority or governmental body of the United States or
any state;

     (b) After giving affect to this Amendment, the representations and warranties contained
in the Credit Agreement, as amended hereby, and any other Loan Document executed in
connection herewith or therewith, are true, correct and complete on and as of the date
hereof as though made on and as of the date hereof; and

     (c) After giving affect to this Amendment, no event has occurred and is continuing
which constitutes a Default or Unmatured Default.

     6. Reference to and Effect on the Loan Documents.

     (a) Upon the satisfaction of the conditions contained in Section 3 hereof each
reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or
words of like import, and each reference in the Loan Documents shall mean and be a reference
to the Credit Agreement as amended hereby.

     (b) Except as specifically amended above, the Credit Agreement, the Notes, and all
other instruments securing or guaranteeing Borrower’s obligations to Lenders, including the
Collateral Documents, as amended (collectively, the “Security Instruments”), shall
remain in full force and effect and are hereby ratified and confirmed. Without limiting the
generality of the foregoing, the Security Instruments and all collateral described therein
do and shall continue to secure the payment of all obligations of Borrower and Guarantors
under the Credit Agreement, as amended hereby, and the Notes, and under the other Security
Instruments.

     (c) Each of the Guarantors hereby expressly (i) acknowledges the terms of this
Amendment; (ii) ratifies and affirms its obligations under its Guaranty Agreement dated
November 18, 2005, in favor of the Agent and the Lenders; (iii) acknowledges, renews and
extends its continued liability under its Guaranty Agreement and agrees that its Guaranty
Agreement remains in full force and effect; and (iv) guarantees to the Agent and the Lenders
to promptly pay when due all amounts owing or to be owing by it under its Guaranty Agreement
pursuant to the terms and conditions thereof.

     (d) The execution, delivery and effectiveness of this Amendment shall not operate as a
waiver of any right, power or remedy of Lender under any of the Security Instruments, nor
constitute a waiver of any provision of any of the Security Instruments.

     7. Waiver. As additional consideration for the execution, delivery and performance of
this Amendment by the parties hereto and to induce Lenders to enter into this Amendment, Borrower
and Guarantors each warrants and represents to Lenders that, to the knowledge of Borrower and
Guarantors, no facts, events, statuses or conditions exist or have existed which, either now or
with the passage of time or giving of notice, or both, constitute or will constitute a basis for
any claim or cause of action against Lenders or any defense to (i) the payment of any obligations
and indebtedness under the Notes and/or the Security Instruments, or (ii) the performance of any of
its obligations with respect to the Notes and/or the Security Instruments,

 

 

and in the event any such facts, events, statuses or conditions exist or have existed,
Borrower and Guarantors each unconditionally and irrevocably waive any and all claims and causes of
action against Lenders and any defenses to its payment and performance obligations in respect to
the Notes and the Security Instruments arising prior to the date of this Amendment.

     8. Costs and Expenses. Borrower agrees to pay on demand all costs and expenses of
Lenders in connection with the preparation, reproduction, execution and delivery of this Amendment
and the other instruments and documents to be delivered hereunder, including the reasonable fees
and out-of-pocket expenses of counsel for Lenders. In addition, Borrower shall pay any and all
fees payable or determined to be payable in connection with the execution and delivery, filing or
recording of this Amendment and the other instruments and documents to be delivered hereunder, and
agrees to save Lenders harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omitting to pay such fees.

     9. Execution in Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken together shall
constitute but one and the same instrument.

     10. Governing Law. This Amendment shall be governed by and construed in accordance
with the laws of the State of Texas.

     11. Final Agreement. THIS WRITTEN AMENDMENT 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]

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed in
multiple counterparts, each of which is an original instrument for all purposes, all as of the day
and year first above written.

	 	 	 	 	 
	 	“Borrower”

PETROQUEST ENERGY, L.L.C.

By: PetroQuest Energy Inc., its sole member

 	 
	 	By:  	/s/ Michael O. Aldridge
 	 
	 	 	Name:  	Michael O. Aldridge 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

 

 

	 	 	 	 	 
	 	“Guarantors”

PETROQUEST ENERGY, INC.

 	 
	 	By:  	/s/ Michael O. Aldridge
 	 
	 	 	Name:  	Michael O. Aldridge 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	PITTRANS, INC.

 	 
	 	By:  	/s/ Michael O. Aldridge
 	 
	 	 	Name:  	Michael O. Aldridge 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	TDC ENERGY, LLC

 	 
	 	By:  	/s/ Michael O. Aldridge
 	 
	 	 	Name:  	Michael O. Aldridge 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

 

 

	 	 	 	 	 
	 	“Lenders”

JPMORGAN CHASE BANK, N.A.,

As the Agent, a Lender and LC Issuer

 	 
	 	By:  	/s/ Jo Linda Papadakis
 	 
	 	 	Name:  	Jo Linda Papadakis 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	CALYON NEW YORK BRANCH,

As a Lender and as Syndication Agent

 	 
	 	By:  	/s/ Bertrand Cord'homme
 	 
	 	 	Name:  	Bertrand Cord'homme 	 
	 	 	Title:  	Director 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                            /s/ Michael Willis
 	 
	 	 	Name:  	Michael Willis 	 
	 	 	Title:  	Vice President 	 
	 

	 	 	 	 	 
	 	MACQUARIE BANK LIMITED,

As a Lender

 	 
	 	By:  	/s/ Andrew Sinclair 	 
	 	 	Name:  	Andrew Sinclair 	 
	 	 	Title:  	Division Director 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	               /s/ Thomas Cullinan
 	 
	 	 	Name:  	Thomas Cullinan 	 
	 	 	Title:  	Attorney

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