EXHIBIT 10.28
September 22, 2017
Via Email to lallen@providence-energy.com
Providence Energy Partners III, LP
Attn: Luke Allen, VP of Business Development
16400 North Dallas Parkway, Suite 400
Dallas, TX 75248
Re: Consent to Incur Additional Indebtedness
Dear Luke:
Reference is made to that certain Revolving Line of Credit Facility
Agreement dated October 13, 2016 ("Supplemental Line of Credit Agreement"), as
same may be amended from time to time, by and between PetroShare Corp.
("Company") and Providence Energy Partners III, LP ("PEP III"), the Promissory
Note between Company and PEP III of even date and related thereto, as same may
be amended from time to time (the "PEP III Note"); and any Deed of Trust,
Mortgage, Assignment of Production, Security Agreement and Financing Statement
from Company to PEP III of even date related thereto, as same may be amended
from time to time ("Mortgage"; and, collectively with the Supplemental Line of
Credit Agreement and the PEP III Note, the "PEP III Credit Documents").
The Company has prepared a confidential offering memorandum ("COM") for an
offering (the "Offering") of up to $7.5 million (including an over-allotment) of
unsecured convertible promissory notes (the "Series B Notes"). The Series B will
Notes bear interest at 15% per year, require that interest be paid quarterly
beginning December 31, 2017, and that all accrued interest and principal be paid
on or before December 31, 2018. The principal amount of the Series B Notes is
convertible into common stock of the Company at $1.50 per share. The forms of
the COM and Series B Notes (collectively, the "New Credit Documents") are
attached hereto as Exhibits A and B, respectively. If this consent agreement is
executed, it is agreed that the Company shall execute and enter into the
Documents with no changes from the forms attached hereto.
The Company shall only use the funds raised by and from the Offering to pay
accrued drilling costs for wells that underlie and securitize, and that are
otherwise subject to and secured by, the PEP III Credit Documents and to pay
capital and operating expenses for the improvement and maintenance of the wells
and oil and gas leases that underlie and securitize, and that are otherwise
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subject to and secured by, the PEP III Credit Documents (the "Purposes"). The
Company shall not provide any security in connection with the Offering or the
Series B Notes. For the sake of clarity, no Offering proceeds shall be used to
repay or prepay any Company debt obligations; provided that Company shall be
able to use such proceeds to repay or prepay amounts owed under the PEP III
Credit Documents. Notwithstanding any other provision in this consent, except as
expressly set forth herein under items (i) and (ii) above, PEP III does not by
executing this consent agreement agree or consent to, or provide any waiver with
respect to, the Credit Documents or any provisions contained therein, and in no
event does PEP III hereby provide any opinion as to whether the Credit Documents
or the Offering contemplated thereby comply with applicable laws.
In order to allow the Company to pursue the Offering and issue the Series B
Notes as contemplated in the COM, please confirm by execution of this letter
that (i) PEP III consents to the Company conducting the Offering and issuing the
Series B Notes, including the incurrence of debt relating thereto (the "Series B
Debt"), provided that any such additional debt shall not have any priority
position over or equal to any debt subject to the PEP III Credit Documents,
whether currently outstanding or later incurred (the "PEP III Debt") and
provided further for the avoidance of doubt, the Series B Debt shall in all
instances be secondary to, paid later than, and have lesser priority than, the
PEP III Debt; and provided further that the foregoing shall not preclude the
payments of interest on a quarterly basis to holders of the Series B Notes so
long as the Series B Debt is outstanding and, (ii) solely with respect to the
Company conducting the Offering and issuing the Series B Notes in accordance
with this consent agreement, but not as to any other matter, and subject to the
Company only using the Offering for the Purposes and the debt priority set forth
in item (i) above, PEP III waives such actions as an event of default under the
PEP III Credit Documents. No waiver by PEP III under this consent agreement
shall operate as a waiver of any prior, other or subsequent default, whether of
a like or a different character, under any of the PEP III Credit Documents.
Notwithstanding any other in this consent, and except as expressly set forth
herein under items (i) and (ii) in the paragraph above, PEP III does not by
executing this consent agreement agree or consent to, provide any waiver with
respect to, the Credit Documents or any provisions contained therein, and in no
event does PEP III hereby provide any opinion as to whether the Credit Documents
or the Offering contemplated thereby comply with applicable laws.
In the event that the Company uses the Offering, and/or the funds that are
raised in connection therewith, for any use or purpose other than the Purposes,
it shall be a material breach of and an event of default under the each of the
PEP III Credit Documents. Further, except as set forth herein, if the Company
attempts to or does in any way cause or allow the new debt to have a priority
position or preference over or ahead or equal to that of any of the PEP III
Credit Documents, it shall be deemed to be a material breach of and event of
default under each of the PEP III Credit Documents.
The Company hereby represents and warrants that it is not currently in
default under any of the PEP III Credit Documents and that the transactions
contemplated by the Offering and the Series B Notes, and the Company's execution
of and performance under the Documents will not put Company into default or
otherwise conflict with any of the PEP III Credit Documents, subject to the
limited waiver set forth herein.
The Company hereby agrees to all of provisions contained in this consent
agreement. The undersigned hereby confirms that he is duly authorized by Company
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to provide this consent agreement and understands that PEP III is relying on the
Company's representations and covenants in this consent agreement when providing
the consent requested herein.
We appreciate your attention to this matter and the support that PEP III
has provided the Company. Please feel free to contact me if you have any
questions.
Sincerely,
PETROSHARE CORP.
By: /s/ Stephen J. Foley
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Stephen J. Foley, Chief Executive Officer
Agreed and accepted this 23rd day of September 2017.
PROVIDENCE ENERGY PARTNERS III, LP
By: Providence Energy Partners GP, LLC
Its: General Partner
By: /s/ Mark L. Nastri
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Mark L. Nastri, Exec. VP and General Counsel