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HomeMy WebLinkAboutContract 29119 dM. .w CITY SECRETARY E%H1BIT "F" CONTRACT NO. 1 19 ROAD REPAIR AGREEIMENT BETWEEN " _26-U3 AG9 :5�} 1 it THE CITY OF FORT WORTH AND Four Sevens Operating Co., Ltd. This Road Repair Agreement, (Agreement), is made and entered into on this the 22ndday of January , 2003, by and between the City of Fort Worth, Texas ("City"), a home rule municipal corporation of the State of Texas, located within Tarrant and Denton Counties, Texas (Hereinafter referred to as the "City' and Four Sevens Operating Co., Ltd. ("Operator's for the repair of certain streets and/or roadways within the City of Fort Worth, Texas as more fully described herein. WHEREAS, Operator is in the business of drilling gas wells and, in connection therewith, shall be engaged in drilling and production activities on property known generally as Fossil Hill Lease (11 Fossil Hill Well) . which abuts, is adjacent to, and/or is accessed by roadways within the City of Fort Worth; and WHEREAS, use of the roadways by the Operator for the purpose of performing the activities described hereinabove may cause damage to the roadways; and WHEREAS, the City and Operator, for the mutual consideration hereinafter stated,desire to enter into this Agreement for Operator to repair said roadways for the duration of the term of this Agreement in consideration of Operator's use of said roadways for the purpose of the activities described hereinabove; IT IS NOW THEREFORE AGREED THAT: ARTICLE 1. REPAIR OBLIGATION 1. Operator shall repair damages caused by Operator or its contractors, subcontractors, employees, and agents, excluding ordinary wear and tear, if any, to roadways that abut the above- described property being used by Operator for the drilling and production of gas wells pursuant to a Gas Well Permit issued to Operator. The repair obligation shall continue even if the Gas Well Permit is amended to allow for the drilling of additional gas wells. This obligation shall continue during the term of this Agreement, and Operator shall, prior to the termination of this Agreement, as provided herein, repair such damages to such roadways, excluding ordinary wear and tear, if any, to the condition in which such roadways existed prior to the execution of this Agreement. Operator shall make a videotape of such roadways prior to the start of Operator drilling and operation of its gas wells and shall provide a copy of the videotape to the Director of Transportation and Public Works. Operator shall notify the Director of Transportation and Public Works when drilling or fracing operations are complete so that the Director of Transportation and Public Works can determine if repairs are required. 2 In connection with its obligation to repair said roadwa A►esa .. materials of the same or better quality than those utilized to surface and/ r: q Y ����3tiAd�va QTY Ma prior to execution of this Agreement and in accordance with the current standards specifications of the City. Deviation from the materials described herein shall not be permitted without the prior written consent of the Director of Transportation and Public Works_ Repairs shall be completed in accordance with standard engineering practices acceptable to the City. 3. Operator shall repair the damage to the roadways at its sole cost and expense. 4. During the term of this Agreement, Operator shall periodically inspect the roadways during drilling, fracture stimulation or reworking of the gas well to determine whether or not any damage has occurred as a result of Operator's activities. Immediately upon discovering the existence of any such damage to the roadways, Operator shall undertake to repair and/or remedy same. Upon discovery of damage by the Operator, the Operator will have 48 hours to contact the Director of Transportation and Public Works to work out a schedule of repairs. Repairs shall take place within 34 days or immediately if the damage affects the immediate health and safety of individuals_ ARTICLE 2. TERM OF AGREEMENT This Agreement shall commence upon the date indicated above and shall continue in full force and effect until Operator has completed and/or permanently discontinued the activities upon the roadways, as described hereinabove. ARTICLE 3. EJSUR.ANCE AND INDEMNITY The Operator shall provide or cause to be provided the insurance described below for each well unless a Gas Well Permit has been issued wherein such insurance has been provided for the issuance of the Gas Well Permit under the terms and conditions described in the Fort Worth "Gas Drilling and Production" Ordinance and such insurance to continue until the well is abandoned and the site restored. In addition to the bond or letter of credit required pursuant to this Agreement and the Fort Worth "Gas Drilling and Production" ordinance, the Operator shall carry a policy or policies of insurance issued by an insurance company or companies authorized to do business in Texas. In the event such insurance policy or policies are cancelled, the Gas Well Permit shall be suspended on such date of cancellation and the Operator's right to operate under such Gas Well Permit shall immediately cease until the Operator files additional insurance as provided herein. 1. General Requirements applicable to all policies. a. The City, its officials, employees, agents and officers shall be endorsed as an "Additional hisured" to all policies except Employers Liability coverage under the Operator's Workers Compensation policy. b. All policies shall be written on an occurrence basis except for Environmental Pollution Liability (Seepage and Pollution coverage) and Excess or Umbrella Liability, which may be on a claims-made basis. Page 2 C. All policies shall be written by an insurer with an A-: VIII or better rating by the most current version of the A_ M. Best Key Rating Guide or with such other financially sound insurance carriers acceptable to the City. d. Deductibles shall be listed on the Certificate of Insurance and shall be on a "per occurrence" basis unless otherwise stipulated herein_ e. Certificates of Insurance shall be delivered to the City of Fort Worth, Development Department, 1000 Throcicmorton Street, Fort worth, Texas 76102, evidencing all the required coverages, including endorsements, prior to the issuance of a Gas Well Perrnit_ f. All policies shall be endorsed with a waiver of subrogation providing rights of recovery in favor of the City. g. Any failure on part of the City to request required insurance documentation shall not constitute a waiver of the insurance requirement specified herein. h. Each policy shall be endorsed to provide the City a minimum thirty-day notice of cancellation, non-renewal, and/or material change in policy terms or coverage. A ten days notice shall be acceptable in the event of non-payment of premium- i. remiumi. During the term of the Gas Well Permit, the Operator shall report, in a timely manner, to the Gas Inspector any known loss occurrence which could give rise to a liability claim or lawsuit or which could result in a property loss. I- Upon request., certified copies of all insurance policies shall be furnished to the City. 2. Standard Commercial Geueral Liability Policy. This coverage must include premises, operations, blowout or explosion, products, completed operations, sudden and accidental pollution, blanket contractual liability, underground resources damage, broad form property damage, independent contractors protective liability and personal injury. This coverage shall be a minimum Combined Single Limit of$1,000,000 per occurrence for Bodily Injury and Property Damage. 3. Excess or Umbrella Liability $ 5,000,000 Exccss, if the Operator has a stand-alone Environmental Pollution Liability(EPL)policy. $10,000,000 Excess,if the Operator does not have a stand-alone EPL policy. Coverage must include an endorsement for sudden or accidental pollution. If Seepage and Pollution coverage is written on a "claims made" basis, the Operator must maintain continuous coverage and purchase Extended Coverage Period Insurance when necessary. 4. Workers Compensation and Employers Liability Insurance a. Workers Compensation benefits shall be Texas Statutory Limits. b. Employers Liability shall be a minimum of$500,000 per accident. C. Such coverage shall include a waiver of subrogation in favor of the City and provide coverage in accordance with applicable State and Federal laws. 5. Automobile Liability Insurance a. Combined Single Limit of$1,000,000 per occurrence for Bodily Injury and Property Damage. b. Coverage must include all owned, hired and not-owned automobiles. Page 3 6. Certificates of Insurance a. The company must be admitted or approved to do business in the State of Texas, unless the coverage is written by a Surplus Lines insurer. b. The insurance set forth by the insurance company must be underwritten on forms that have been approved by the Texas State Board of Insurance or ISO, or an equivalent policy form acceptable to the City. C. Sets forth all endorsements and insurance coverage according to requirements and instructions contained herein. d. Shall specifically set forth the notice of cancellation, termination, or change in coverage provisions to the City. All policies shall be endorsed to read "THIS POLICY WILL NOT BE CANCELLED OR NON-RENEWED WITHOUT 30 DAYS ADVANCED WRITTEN NOTICE TO THE OWNER AND THE CITY EXCEPT WHEN THIS POLICY IS BEING CANCELLED FOR NONPAYMENT OF PREMIUM, IN WHICH CASE 10 DAYS ADVANCE WRITTEN NOTICE IS REQUIRED". e. Original endorsements affecting coverage required by this section shall be furnished with the certificates of insurance. T The cancellation of any insurance for the sole purpose of the repair of roadways will not release the obligation of the Operator to meet all requirements of insurance and bonding under the Fort Worth"Gas Drilling and Production" Ordinance. 8. Operator shall and hereby does indemnify, defend and save harmless the City, its officers, agents and employees from all suits, actions or claims of any character, name and description brought for or on account of any injuries or damages received as sustained by any person, persons or property on account of the operations of the Operator, his agents, employees, contractors or subcontractors; or on account of any negligent act of fault of the Operator, his agents, employees, contractors or subcontractors in connection with the obligations under this Road Repair Agreement; and shall pay any judgment, with costs, which may be obtained against the City growing out of such injury or damage. ARTICLE 4. PERFORMANCE BONDS 1. Operator shall provide a performance bond, unless a performance bond has been provided for the issuance of a Gas Well Permit under the terms and conditions described in Fort Worth "Gas Drilling and Production" ordinance, in an amount not less than the amount necessary to repair the roadways, as determined by the City Director of Transportation and Public Works. 2. Prior to the beginning any activity pursuant to the issuance of a Gas Well Permit, unless a performance bond has been provided for the issuance of a Gas Well Permit under the terms and conditions described in the Fort Worth "Gas Drilling and Production" Ordinance, Operator shall provide the Gas Inspector with a security instrument in the form of a bond or an irrevocable letter of credit as follows: Page 4 a. Bond. A bond shall be executed by a reliable bonding or insurance institution authorized to do business in Texas, acceptable to the City. The bond shall become effective on or before the date the Gas Well Permit is issued and shall remain in force and effect for at Ieast a period of six (6) months after the expiration of the Gas Well Permit term or until the well is plugged and abandoned, and the site is restored, whichever occurs first. The Operator shall be listed as principal and the instrument shall run to the City, as ebligee, and shall be conditioned that the Operator will comply with the terms and regulations of this Ordinance and the City. The original bond shall be submitted to the Director of Transportation and Public Works with a copy of the same provided to the City Secretary and the Gas Inspector. b. Letter of Credit. A letter of credit shall be issued by a reliable bank authorized to do business in Texas and shah become effective on or before the date the Gas Well Permit is issued. The letter of credit shall remain in force and effect for at least a period of six (6) months after the expiration of the Gas Well Permit term. The City shall be authorized to draw upon such Ietter of credit to recover any fines or penalties assessed under this ordinance. Evidence of the execution of a letter of credit shall be submitted to the Director of Transportation and Public Works submitting an original signed letter of credit from the banking institution, with a copy of the same provided to the City Secretary and the Gas Inspector. If the Letter of Credit is for a tune period less an Ahe Life of the well as required by Ordinance Number 148$0 evens opagreesV eit`]'i'e'r renew the Letter of Credit or replace the Letter of Credit with a bond in the amount required by the City of Fort Worth Ordinance Number 14880, on or before 45 days prior to the expiration date of the Letter of Credit. If Four Sevens fails to deliver to the City of Fort Worth either the renewal Letter of Credit or replacement b-ond in the appropriate amount on or before 45 days prior to the expiration date of the Letter of Credit, the City of Fort Worth may draw the entire face amount of the attached Letter of Credit to be held by the City of Fort Worth as security for Four Sevens Operating Co 's performance of its obligations under Ordinance Number 14880. C. Whenever the Gas Inspector or the Director of Transportation and Public Works Department finds that a default has occurred in the performance of any requirement or condition imposed by this Agreement, a written notice shall be given to Operator. Such notice shall specify the work to be done, the estimated cost and the period of time deemed by the Gas Inspector or the Director of Transportation and Public works Department to be reasonably necessary for the completion of such work. Aber receipt of such notice, the Operator shall, within the time therein specified, either cause or require the work to be performed, or failing to do so, shall pay over to the City one hundred twenty-five percent (125%) of the estimated cost of doing the work as set forth in the notice. d. The City shall be authorized to draw against any irrevocable letter of credit or bond to recover such amount due from Operator. Upon receipt of such monies, the City shall proceed by such mode as deemed convenient to cause the required work to be performed and completed, but no liability shall be incurred other than for the expenditure of said sum in hand.. C. In the went Operator does not cause the work to be performed and fails or refuses to pay over to the City the estimated cost of the work to be done as set forth in the notice, or Page 5 the issuer of the security instrument refuses to honor any draft by the City against the applicable irrevocable letter of credit or bond the City may proceed to obtain complianc,- and abate the default by way of civil action against Operator, or by criminal action against the Operator, or by both such methods. f The cancellation of any bond or letter of credit for the sole purpose of the repair of roadways will not release the obligation of the Operator to meet all requirements of insurance and bonding under the Fort Worth "Gas Drilling and Production" Ordinance. Any bond required by the Fort Worth "Gas Drilling and Production" Ordinance shall stay in full force and effect until the terms and conditions set out in the Ordinance are met. 3. If the cost of the completing the repair is an amount of $15,000 or less, as determined by the Director of Transportation and Public Works, cash in the amount necessary to complete the repairs, as determined by the Director of Transportation and Public Works, may be deposited with a bank or escrow agent pursuant to an escrow agreement acceptable and approved by the City ensuring completion of the repair. ARTICLE 5 MISCELLANEOUS PROVISIONS 1. Operator understands and agrees that Operator, its employees, servants, agents, and representatives shall at no time represent themselves to be employees, servants, agents, and/or representatives of the City. The City shall not have any control over the means or methods by which Operator shall perform its obligations hereunder. Operator shall furnish all equipment and materials necessary to perform hereunder and shall at all times be acting as an independent Operator. 2. By entering into this Agreement, the City does not waive, nor shall it be deemed to waive, any immunity or defense that would otherwise be available to it against claims arising by third parties. 3. This Agreement represents the entire agreement between Operator and City for repair of roadways and supersedes all prior negotiations, representations, and/or agreements, either written or oral. This Agreement may be amended only by written instrument signed by the governing body of the City or those authorized to sign on behalf of the City's governing body. ARTICLE 6. FORCE MAJEURE Events of Force Majeure shall mean any contingency or cause beyond the reasonable control of a party including, without limitation, acts of God or the public enemy, war, riot, civil commotion, insurrection, government or do facto government action (unless caused by acts or omissions of the party), fires, explosions, rain or other weather delays, floods, strikes, slowdowns or work stoppages. ARTICLE 7. ASSIGNABILITY/CONSENT Page 6 Except as otherwise provided herein, or except as may be hereafter determined by the parties, no party to this Agreement may sell, assign, or transfer its interest in this Agreement, or any of its right, duties, or obligations hereunder, without the prior written consent of the other party. Whenever the consent or the approval of a party is required herein, such party shall not unreasonably withhold, delay, or deny such consent or approval. Operator may assign this Agreement to any successor entity to whom the applicable Gas Well Permit has been assigned upon written notice to the City of said assignment. ARTICLE 8. NOTICE Any notice given by one party to the other in connection with this Agreement shall be in writing and shall be by personal delivery; sent by registered mail or certified mail; or by United States Mail, return receipt requested, postage prepaid; to: CITY: Office of the City Manager City of Fort Worth, Texas 1000 Throclmorton Street Fort Worth,Texas 76102 OPERATOR Four Sevens Operating Co., Ltd. 777 Taylor St., Suite 1090 Fort Worth, Texas 76102 Notice shall be deemed to have been received on the date of receipt as shown on the return receipt or other written evidence of receipt. ARTICLE 9. MODIFICATION No waiver or modification of this Agreement or of any covenant, condition, limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith. No evidence of any waiver or modification shall be offered or received in evidence in any proceeding arising between the parties hereto out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed. The parties further agree that the provisions of this Article will not be waived unless as herein set forth. ARTICLE 10. SAVINGS/SEVERABILITY In the event that any one or more of the provisions hereof contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not effect the other provisions, and the Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained in this Agreement. Page 7 ARTICLE 11. GOVERNING LAW AND VENUE This Agreement shall be construed under and governed by, and in accordance with the laws of the State of Texas, and venue for any action arising under the terms and conditions of this Agreement shall lie in the state courts located in Tarrant County,Texas or the United States District Court for the Northern District of Texas, Fort Worth Division. ARTICLE 12. ENTIRE AGREEMENT This Agreement and the exhibits attached thereto, constitute the entire agreement among the parties hereto with respect to the subject matter hereof, and supersede any prior understandings or written or oral agreements between the parties with respect to the subject matter of this Agreement. No amendment, modification, cancellation or alteration of the terms of this Agreement shall be binding on any party hereto unless the same is in writing, dated subsequent to the date hereof, and is duly authorized and executed by the parties hereto. ARTICLE 13. WAIVER OF TERIMS AND CONDITIONS The failure of either party to enforce or insist upon compliance with any of the terms or conditions of this Agreement shall not constitute a general waiver or relinquishment of any such terms or conditions,but the same shall be and remain at all times in full force and effect. ARTICLE 14. CAPTIONS The captions contained in this Agreement are for informational purposes only and shall not in any way affect the substantive terms or conditions of this Agreement. ARTICLE 15. COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and constitute one and the same instrument. IN WITNESS WHEREOF, thearties do hereby affix their signatures and enter into this Agreement as of the Sf day of 6C-kb6A-& ATT T: CITY OF FORT WORTH By. City Sc6rctary J City Manager �10 Contract Authorization Page AOW APPROVED AS TO FORM AND LEGALITY: David Yett, City Attorney erator Larry D. Brogdon STATE OF TEXAS § Foru Sevens Operating Co., Ltd. COUNTY OF TARRANT § Before me, the undersigned notary public, on this day personally appeared Gary Jackson, the City Manager of the City of Fort Worth, Texas, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the instrument for the purposes and consideration therein expressed. Given under my band and seal of office this .?'oda of4201 EM PATSY COX09 TARY PUBLIC Not Pub c ate of TexasExp 12-18-2004 STATE OF TEAS § COUNTYOF TARRANT § Before me, the undersigned authority, a Notary Public in and for the State o be the person LARRY D. BROGDON 1QioWn day personally appeared ed to me that the same was whose name is subscribed to the foregoing ins=n t, an �ku onl d- that he executed the saMC the act of FOUR SEVENS OPERATING CO., LTD.: Co oration) for the purposes and as the act of said FOUR SEVENS OPERATING CO. LTD. ( rp consideration therein expressed and in the capacity therein Swed JANUARY 20 Given under my hand and seal of o e this--22ND dA of �•Q•P� LS SoVT�'•. ���1•;�*pY P(,�;p} :` Notary Public •. O.,F • Q . .0 .f . page 9 w - AW TexasBank® O • BILL ADAMS January 24, 2003 President City of Fort Worth 1000 Throckmorton Street Fort Worth, TX 76102 Dear Sir or Madam: This Letter of Credit represents a replacement of that certain Letter of Credit dated December 16, 2002. Texas Bank ("Bank") hereby establishes an Irrevocable Letter of Credit ("Credit") in favor of the City of Fort Worth ("Beneficiary") for a sum not exceeding the aggregate amount of Fifty Thousand Dollars ($50,000.00). These funds shall be made available by Beneficiary's drafts drawn on Bank at 300 West 7th Street, Fort Worth, TX 76102 (or such other address that Bank may provide Beneficiary with written notice of in the future) and accompanied by the signed written statements or documents indicated below. Drafts and said signed written statements and documents must be presented to Bank during regular business hours, on any Business Day, only in person, by mail, or by express delivery service. "Business Day" means any day on which banks located in Fort Worth, Texas, are not authorized or required to close. 1. Draft Terms and Conditions. Bank shall honor the drafts submitted by Beneficiary under the following terms and conditions: (a) presentation of the original Credit (as modified below) to Bank; (b) a signed statement of Beneficiary(with signature notarized ) stating that Four Sevens Operating Co., LTD ("Four Sevens") has failed to honor their contracural agreement with the City of Fort Worth, Texas with regard to # 1 Fossil Hill Well as required by Ordinance Number 14880 or the City of Fort Worth Road Maintenance Agreement to which Four Sevens is a Party. Since this Credit may be in effect for a period that is less than the period that the #1 Fossil Hill Well may be in existence, for the purpose of subpart (b) of the foregoing terms and conditions, Beneficiary may draw upon the full amount of credit available under this Credit if Four Sevens does not obtain a renewal or extension of this Credit or a replacement to this Credit, in each case in an amount not less that $50,000.00, on or before 45 days prior to Expiration Date of this Credit (as same may be extended from time to time). Provided that Beneficiary strictly complies with all terms and conditions as set forth above and as otherwise prescribed in this Credit, Bank shall not dishonor any drafts submitted by Beneficiary unless (i) the draft is submitted after the Expiration Date or (ii) the full amount of Credit available under this line has been drawn. (Revised 5/28/98) C(DPY 300 West Seventh St. Fort Worth,Texas 76102 (817)850-0054 Fax (817) 850-0059 E-Mail: bill.adams@texasbank.com Upon Bank's honor of such drafts and payment to Beneficiary, Bank, once the full amount of credit available under this Credit has been drawn, shall be fully discharged of its obligations under this Credit and shall not thereafter be obligated to make any further payments under this Credit to Beneficiary or any other person or entity. Beneficiary shall have no recourse against Bank for any amount paid under this Credit after Bank honors any draft or other document which complies strictly with this Credit, and which on its face appears otherwise in order but which is signed, issued, or presented by any party or under the name of any party purporting to act for Beneficiary, purporting to claim through Beneficiary, or posing as Beneficiary. Beneficiary shall return to Bank any funds received by Beneficiary in excess of the Credit's maximum drawing amount. 2. Use Restrictions. All drafts must be marked "DRAWN UNDER IRREVOCABLE LETTER OF CREDIT NO. 588 DATED December 16, 2002." Only Beneficiary may complete a draft and accompanying statements or documents required by this Credit and make a draw under this Credit. Partial draws are permitted under this Credit. If partial draws are permitted under this Credit, a copy of this Credit must accompany each draft with the original Credit accompanying the final draft. Bank's honor of draft shall automatically reduce the amount of credit available under this Credit by the amount of the draft. 3. Expiration Date. This Credit shall expire ("Expiration Date") upon the earlier of 90 days from date for First Production which date will be provided by the natural gas purchaser, and all drafts and accompanying statements or documents must be presented to Bank on or before that date and time; or(b) the day that Bank honors a draw under which the full amount of this Credit is drawn. 4. Assignment or Transfer. This Credit shall be nontransferable, except for: (a) a transfer by direct operation of law to the original Beneficiary's administrator, executor, bankruptcy trustee, receiver, liquidator, successor, or other representatives at law; and (b) the first immediate transfer by such legal representative to a third party after express approval of the applicable governmental body (judicial, administrative, or executive). 5. Timing of Dishonor. To the extent not prohibited by law, Bank shall be entitled to honor or dishonor any draft submitted in connection with this Credit withing five (5) calendar days not counting the day Bank receives the draft. Although Bank shall be entitled to honor a draft subsequent to the Expiration Date, Beneficiary shall not be entitled to submit a draft or provide Bank with any documents in support of a draft after the Expiration Date. If Bank fails to make payment on the appropriate payment date because of an Act of God or other act beyond the control of Bank, the amount of the payment will automatically be increased by a daily amount of interest equal to the per diem rate that is derived from the Prime Rate set forth in The Wall Street Journal from time to time, as applicable, for each day that the payment is delayed and Bank's sole obligation and liability shall be to make the payment due together with the additional interest computed as provided above. 6. Modification. This Credit sets forth in full the terms of Bank's undertaking. A (Revised 5/28/98) ' r Irrevocable Letter of Credit Page 3 modification or waiver of any of Bank's or Beneficiary's obligations or rights under this Credit must be contained in writing signed by Bank. A waiver on one occasion shall not constitute a waiver on any other occasion. 7. Compliance Burden. Under no circumstances shall Bank be held responsible for any impossibility or other difficulty in Beneficiary achieving strict compliance with the requirements of this Credit. Beneficiary understands and acknowledges that (a) unless and until the present wording of this Credit is amended with Bank's prior written consent, the burden of complying strictly with such wording remains solely upon Beneficiary, and (b) Bank is relying upon the lack of such amendment as constituting Beneficiary's initial and continued approval of such wording. 8. Non-Severability. If any aspect of this Credit is ever declared unenforceable for any reason by any court or government body having jurisdiction, Bank's entire engagement under this Credit shall be deemed null and void, and both Bank and Beneficiary shall be restored to the position each would have occupied with all rights available as though this Credit had never occurred. This non-severability provision shall override all other provisions in this Credit, no matter where such provision appears within the Credit's body. 9. Choice of Law/Jurisdiction. This Credit shall be governed by the laws of the State of Texas to the extent not governed by the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and to the extent such laws are not inconsistent with the terms of this Credit. VENUE OF ANY LITIGATION INVOLVING THIS CREDIT MUST BE MAINTAINED IN A COURT OF COMPETENT JURISDICTION LOCATED IN Tarrant COUNTY, TEXAS, WHERE THIS CREDIT IS PERFORMABLE. Sincerely, TS W. H. Adams, President (Revised 5/28/98) i. EXHIBIT "I" t J aw T December 16, 2002 City of Fort Worth 1000 Throckmorton Street Fort Worth, TX 76102 Dear Sir or Madam: Texas Bank ("Bank") hereby establishes an Irrevocable Letter of Credit ("Credit") in favor of the City of Fort Worth (`Beneficiary") for a sum not exceeding the aggregate amount of Fifty Thousand Dollars ($50,000.00). These funds shall be made available by Beneficiary's drafts drawn on Bank at 300 West 7`h Street, Fort Worth, TX 76102 (or such other address that Bank may provide Beneficiary with written notice of in the future) and accompanied by the signed written statements or documents indicated below. Drafts and said signed written statements and documents must be presented to Bank during regular business hours, on any Business Day, only in person, by mail, or by express delivery service. "Business Day"means any day on which banks located in Fort Worth, Texas, are not authorized or required to close. 1. Draft Terms and Conditions. Bank shall honor the drafts submitted by Beneficiary under the following terms and conditions: (a) presentation of the original Credit (as modified below) to Bank; (b) a signed statement of Beneficiary(with signature notarized ) stating that Four Sevens Oil Co., LTD has failed to honor their contracural agreement with the City of Fort Worth, Texas with regard to # 1 Fossil Hill Well. Upon Bank's honor of such drafts and payment to Beneficiary, Bank, once the full amount of credit available under this Credit has been drawn, shall be fully discharged of its obligations under this Credit and shall not thereafter be obligated to make any further payments under this Credit to Beneficiary or any other person or entity. Beneficiary shall have no recourse against Bank for any amount paid under this Credit after Bank honors any draft or other document which complies strictly with this Credit, and which on its face appears otherwise in order but which is signed, issued, or presented by any party or under the name of any party purporting to act for Beneficiary, purporting to claim through Beneficiary, or posing as Beneficiary. Beneficiary shall return to Bank any funds received by Beneficiary in excess of the Credit's maximum drawing amount. 2. Use Restrictions. All drafts must be marked "DRAWN UNDER IRREVOCABLE (Revised 5/28/98) Irrevocable Letter of Credit Page 2 LETTER OF CREDIT NO. 588 DATED December 16, 2002." Only Beneficiary may complete a draft and accompanying statements or documents required by this Credit and make a draw under this Credit. Partial draws are permitted under this Credit. If partial draws are permitted under this Credit, a copy of this Credit must accompany each draft with the original Credit accompanying the final draft. Bank's honor of draft shall automatically reduce the amount of credit available under this Credit by the amount of the draft. 3. Expiration Date. This Credit shall expire ("Expiration Date") upon the earlier of 90 days from date for First Production which date will be provided by the natural gas purchaser, and all drafts and accompanying statements or documents must be presented to Bank on or before that date and time; or (b) the day that Bank honors a draw under which the full amount of this Credit is drawn. 4. Assignment or Transfer. This Credit shall be nontransferable, except for: (a) a transfer by direct operation of law to the original Beneficiary's administrator, executor, bankruptcy trustee, receiver, liquidator, successor, or other representatives at law; and (b) the first immediate transfer by such legal representative to a third party after express approval of the applicable governmental body(judicial, administrative, or executive). 5. Timing of Dishonor. To the extent not prohibited by law, Bank shall be entitled to honor or dishonor any draft submitted in connection with this Credit withing five (5) calendar days not counting the day Bank receives the draft. Although Bank shall be entitled to honor a draft subsequent to the Expiration Date, Beneficiary shall not be entitled to submit a draft or provide Bank with any documents in support of a draft after the Expiration Date. If Bank fails to make payment on the appropriate payment date because of an Act of God or other act beyond the control of Bank, the amount of the payment will automatically be increased by a daily amount of interest equal to the per diem rate that is derived from the Prime Rate set forth in The Wall Street Journal from time to time, as applicable, for each day that the payment is delayed and Bank's sole obligation and liability shall be to make the payment due together with the additional interest computed as provided above. 6. Modification. This Credit sets forth in full the terms of Bank's undertaking. A modification or waiver of any of Bank's or Beneficiary's obligations or rights under this Credit must be contained in writing signed by Bank. A waiver on one occasion shall not constitute a waiver on any other occasion. 7. Compliance Burden. Under no circumstances shall Bank be held responsible for any impossibility or other difficulty in Beneficiary achieving strict compliance with the requirements of this Credit. Beneficiary understands and acknowledges that (a) unless and until the present wording of this Credit is amended with Bank's prior written consent, the burden of complying strictly with such wording remains solely upon Beneficiary, and (b) Bank is relying (Revised 5/28/98) Irrevocable Letter of Credit Page 3 upon the lack of such amendment as constituting Beneficiary's initial and continued approval of such wording. 8. Non-Severability. If any aspect of this Credit is ever declared unenforceable for any reason by any court or government body having jurisdiction, Bank's entire engagement under this Credit shall be deemed null and void, and both Bank and Beneficiary shall be restored to the position each would have occupied with all rights available as though this Credit had never occurred. This non-severability provision shall override all other provisions in this Credit, no matter where such provision appears within the Credit's body. 9. Choice of Law/Jurisdiction. This Credit shall be governed by the laws of the State of Texas to the extent not governed by the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, and to the extent such laws are not inconsistent with the terms of this Credit. VENUE OF ANY LITIGATION INVOLVING THIS CREDIT MUST BE MAINTAINED IN A COURT OF COMPETENT JURISDICTION LOCATED IN Tarrant COUNTY, TEXAS, WHERE THIS CREDIT IS PERFORMABLE. Sincerely, TE S BANK Z7 W. H. Adam/, dam , III President (Revised 5/28/98)