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EXHIBIT 10.2
INDEMNITY AGREEMENT
This Indemnity Agreement (this "Agreement") is entered into as
of December
22, 2004, by and between PROSPECT ENERGY CORPORATION, a Maryland
corporation
(the "Indemnitor"), and FIRST AMERICAN BANK, SSB, a state
savings bank, as
Administrative Agent (in such capacity, the "Administrative
Agent") for the
Lenders.
W I T N E S S E T H:
WHEREAS, Gas Solutions II Ltd., a Texas limited partnership
and
successor-by-conversion to MNW Partners, LLC, a Texas limited
liability company
(the "Borrower"), is engaged in the business of processing
natural gas and
activities related or ancillary thereto and has purchased two
natural gas
processing plants and related interests pursuant to the Gas
Solutions
Acquisition Agreement as defined in the Credit Agreement
referenced below;
WHEREAS, concurrently herewith, the Borrower is entering into
that certain
Credit Agreement, dated as of even date herewith (the "Credit
Agreement"), with
First American Bank, SSB, as administrative agent, and the
lenders from time to
time parties thereto (the "Lenders"), pursuant to which the
Lenders will make a
term loan to the Borrower in an aggregate principal amount not
to exceed
$12,500,000 (the "Loan");
WHEREAS, the Borrower is an indirect wholly-owned Subsidiary of
the
Indemnitor;
WHEREAS, as a condition precedent to the making of the Loan and
to the
effectiveness of the Credit Agreement, the Administrative Agent
has requested,
and the Indemnitor has agreed, to execute and deliver this
Agreement;
WHEREAS, the Indemnitor has duly authorized the execution,
delivery and
performance of this Agreement; and
WHEREAS, it is in the best interests of the Indemnitor to
execute this
Agreement inasmuch as the Indemnitor will derive substantial
direct and indirect
benefits from the Loan made to the Borrower by the Lenders
pursuant to the
Credit Agreement.
NOW THEREFORE, in order to induce the Lenders to enter into the
Credit
Agreement, the parties hereto, in consideration of the mutual
agreements herein
set forth and for other good and valuable consideration, the
receipt of which is
hereby acknowledged, agree as follows:
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ARTICLE 1
DEFINITIONS
Section 1.1 Certain Terms. The following terms (whether or not
underscored)
when used in this Agreement, including its preamble, recitals,
exhibits and
schedules shall have the following meanings (such definitions to
be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Agreement" is defined in the preamble.
"Applicable Law" means any applicable code, statute, law, common
law, rule,
regulation, order, ordinance, judgment, decree, order, consent
order, stipulated
agreement, writ or injunction of any Governmental Entity.
"Bankruptcy Event of Default" means an event of default of the
type
described in clause (d) of the definition of "Event of Default"
in the Security
Agreement.
"Borrower" is defined in the first recital.
"Control Agreement" means that certain Deposit Account Control
Agreement
dated as of even date herewith, by and among the Indemnitor, the
Administrative
Agent and U.S. Bank National Association, as account agent.
"Credit Agreement" is defined in the second recital.
"Governmental Entity" means any domestic or foreign court or
tribunal in
any domestic or foreign jurisdiction or any federal, state,
municipal or local
government or other governmental body, agency, authority,
district, department,
commission, board, bureau, or other instrumentality, arbitrator
or arbitral body
(domestic or foreign), including any joint action agency, public
power
authority, public utility district, or other similar political
subdivision.
"Indemnifiable Claim" means any Loss suffered or incurred by an
Indemnitee
that meets both of the following conditions:
(a) the Borrower and/or an Indemnitee has been joined as a
defendant in the
Prospect Lawsuit; and
(b) as a result of the entering of a judgment, or of a
temporary
restraining order, injunction or other court order with respect
to, or the
settlement of, or otherwise as a result of the Prospect Lawsuit,
(1) the
Borrower fails to pay in full the Obligations; and (2) the
Lender Parties are
unable to collect or receive
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or retain, following their good faith efforts to exercise their
rights and
remedies as secured creditors under the Loan Documents, payment
in full of the
Obligations;
provided, however, that, for purposes of clause (b), it will be
presumed that,
if (i) the Borrower makes a payment in satisfaction of a
judgment in, or
settlement of, the Prospect Lawsuit and (ii) the Borrower
thereafter fails to
pay in full the Obligations, then an amount equal to the lesser
of (y) such
payment and (z) the shortfall in Borrower's payment of the
Obligations is deemed
to be "as a result" of the Prospect Lawsuit.
"Indemnitee" is defined in Section 2.1.
"Indemnitor" is defined in the preamble.
"Lenders" is defined in the second recital.
"Lender Party" means, as the context may require, the
Administrative Agent
or any Lender, and each of its successors, transferees and
assigns.
"Loan" is defined in the second recital.
"Loan Documents" shall have the meaning given to such term in
the Credit
Agreement.
"Loss" is defined in Section 2.1.
"Obligations" shall have the meaning given to such term in the
Credit
Agreement, and means the amounts owed and owing by the Borrower
to the Lender
Parties under the Credit Agreement and other Loan Documents. For
sake of
clarity, the term "Obligations" shall include the costs and
expenses (including
reasonable attorneys' fees) incurred by an Indemnitee as a
result of such
Indemnitee being joined in the Prospect Lawsuit.
"Prospect Lawsuit" means that certain action styled Dallas Gas
Partners, LP
v. Prospect Energy Corporation, Case No. G-04-669, filed on
November 30, 2004,
and now pending in the United States District Court for the
Southern District of
Texas, Galveston Division, and any other lawsuit asserting
claims that are
raised or could be raised in such action.
"Security Agreement" means that certain Deposit Account Security
Agreement
dated as of even date herewith, made by the Indemnitor in favor
of the
Administrative Agent and the Lender Parties.
Section 1.2 Terminology. Unless the context of this Agreement
clearly
requires otherwise, (a) pronouns, wherever used herein, and of
whatever gender,
shall include natural persons and corporations and associations
of every kind
and character, (b) the singular shall include the plural and the
plural shall
include the singular wherever and as often as may be
appropriate, (c) the word
"include"
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or "includes" or "including" shall mean "including without
limitation", and (d)
the words "hereof", "herein", "hereunder", and similar terms in
this Agreement
shall refer to this Agreement as a whole and not any particular
section or
article in which such words appear. The section, article and
other headings in
this Agreement are for reference purposes and shall not control
or affect the
construction of this Agreement or the interpretation hereof in
any respect.
Article, section, subsection, schedule and exhibit references
are to this
Agreement unless otherwise specified. All accounting terms not
specifically
defined herein shall be construed in accordance with GAAP.
ARTICLE 2
INDEMNIFICATION
Section 2.1 Indemnification by Indemnitor. Subject to the other
terms and
limitations of this Agreement, the Indemnitor hereby agrees to
indemnify and
hold each Lender Party and their respective directors, officers
and employees
(individually, an "Indemnitee" and collectively, the
"Indemnitees") harmless
from and against any and all claims, liabilities, losses,
damages, costs or
expenses, including reasonable attorneys' fees (individually, a
"Loss" and
collectively, the "Losses") that are suffered or incurred by any
of them as a
result of an Indemnifiable Claim. THE INDEMNITIES BY THE
INDEMNITOR IN FAVOR OF
THE INDEMNITEES IN THIS SECTION 2.1 SHALL BE APPLICABLE
NOTWITHSTANDING THAT AN
INDEMNIFIABLE CLAIM OTHERWISE COVERED BY THIS SECTION 2.1 IS
ATTRIBUTABLE TO THE
NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE) OF AN INDEMNITEE
(WHETHER SUCH
NEGLIGENCE IS SOLE, JOINT, CONCURRENT, ACTIVE OR PASSIVE), ANY
PRE-EXISTING
CONDITION OR DEFECT OR ANY FORM OF STRICT LIABILITY. If and to
the extent that
the foregoing undertaking may be unenforceable for any reason,
the Indemnitor
hereby agrees to make the maximum contribution to the payment
and satisfaction
of each of the Indemnifiable Claims which is permissible under
Applicable Law.
Section 2.2 Notification to Indemnifiable Claims.
(a) In the event any Indemnitee proposes to assert the right to
be
indemnified pursuant to Section 2.1 above with respect to any
Indemnifiable
Claim, the Administrative Agent will notify the Indemnitor in
writing
thereof, which notification shall include: a certification that
(i) such
claim is or may be an Indemnifiable Claim, (ii) a copy of all
papers served
or demands received from the plaintiff in the Prospect Lawsuit,
and (iii)
the then-estimated amount of the Indemnifiable Claim, together
with a
reasonably detailed explanation and calculation of such
Indemnifiable
Claim, if such amount can then be calculated.
(b) Notwithstanding the foregoing clause (a), in the event that
the
Administrative Agent shall fail to deliver such notice or shall
not deliver
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such notice in a timely manner so as to allow the Indemnitor to
perform its
obligations hereunder, such failure shall not operate to excuse
the
Indemnitor from its obligations under this Agreement but shall
reduce the
amount of the In
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