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FORBEARANCE AGREEMENT AND
SECOND AMENDMENT TO
LOAN AGREEMENT DATED MAY 5, 2000
BY AND AMONG
VENUS EXPLORATION, INC.
AND BANK ONE, TEXAS, N.A.
This Forbearance Agreement and Second Amendment to Loan Agreement dated
May 5, 2000 (this "Second Amendment") by and between VENUS EXPLORATION, INC.
(the "Borrower") and BANK ONE, NA, a national banking association formerly known
as Bank One, Texas, N.A. (the "Bank") is entered into effective on the 8th day
of May 2001.
WITNESSETH:
A. Borrower and Bank entered into a Loan Agreement dated May 5, 2000,
which was amended by First Amendment thereto dated August 25, 2000 (collectively
the "Loan Agreement").
B. The Revolving Loan Termination Date established in the Loan
Agreement was May 8, 2001, and notwithstanding the terms of the Revolving Note
and of the other Loan Documents that require the entire, unpaid balance of the
Revolving Loan and accrued, unpaid interest thereon to be repaid in full on or
before the Revolving Loan Termination Date, such repayment in full has not
occurred, and accordingly, as of the date of this Second Amendment, there exists
an Event of Default, as defined in Section 7.01(a) of the Loan Agreement. In
addition, Events of Default also exist as of the date of this Second Amendment
due to Borrower's failure to have been in compliance with the following Sections
of the Loan Agreement as of the fiscal quarter ended March 31, 2001: Section
6.15 (General and Administrative expenses), Section 6.16 (Minimum Tangible Net
Worth), Section 6.17 (Current Ratio) and Section 6.18 (Debt Service Coverage
Ratio).
C. As the result of the occurrence and continuation of such Events of
Default under the Loan Agreement, Bank has the right to exercise any and all
remedies that it may have under the Loan Documents, and at law or in equity
(collectively the "Remedies"), but Borrower has requested that Bank forbear from
exercising any such Remedies, and Bank is willing to do so subject to and
strictly in accordance with the terms set forth in this Second Amendment.
NOW, THEREFORE, in consideration of the promises herein
contained, the mutual benefits to be derived herefrom and other good and
valuable consideration received by each party, and each intending to be legally
bound hereby, the parties agree as follows:
I. Amendments to Loan Agreement.
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Article I, Definitions is hereby amended by replacing the
definition of "Floating Rate" in its entirety with the following
definition:
"Floating Rate" means a per annum interest rate equal to the
Base Rate in effect from time to time plus: (a) in the absence
of any Event of Default (i) three percent (3%) during the
period from and including May 9, 2001, to and including June
8, 2001, and (ii) four percent (4%) during the period from and
including June 9, 2001 through and including July 9, 2001; and
(b) following and during the continuation of any Event of
Default and/or after July 9, 2001, six percent (6%).
Section 2.06, Mandatory Prepayment of the Note, is amended to
delete the reference therein to "thirty (30) days" and substitute in
its place reference to "three (3) days".
Section 5.26, Change of Purchaser's of Production, is amended
by adding the following text at the end of that section:
In addition, on or before May 25, 2001, Borrower shall notify
Bank in writing of the identity and address of each
then-current purchaser of production from the Borrowing Base
Oil and Gas Properties.
Section 5.32, Production Report, is amended by adding the
following text at the end of such section:
The production report required to be submitted on or before
May 30, 2001, shall provide the information required by this
Section not only with respect to the calendar month of April
2001, but also on a cumulative basis for the calendar months
January through April 2001.
Article V, Affirmative Covenants, is amended by adding the
following new section thereto:
5.38 Monthly Cash Statement. On or before May 18, 2001, and on
or before the fifteenth (15th) day of each subsequent calendar
month thereafter, Borrower shall prepare and submit to Bank a
cash report that details Borrower's cash flow during the
rolling 3-calendar month period ending with the last calendar
month immediately preceding the date of such report,
including, but not limited to, the sources of Borrower's cash
receipts during such period, the specific uses of Borrower's
cash payments during such period, and the balance as of the
last day of such period of all sums held in legal suspense and
any other production revenues held by Borrower that are
payable to third parties.
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Section 6.12, Hedge Agreements, is hereby amended in its
entirety to read as follows:
6.12 Hedge Agreements. Except for Permitted Hedge Agreements
that are in effect on the date of the Second Amendment, enter
into or become obligated under any contract for sale for
future delivery of hydrocarbons, forward contract, Hedging
Agreement, futures contract or any other similar agreement
(other than normal production contracts entered into in
Borrower's normal course of business) without the prior
written consent of Bank, which consent may be granted or
withheld in Bank's sole discretion.
Section 8.03, Notices and Other Communications, is hereby
amended by revising Bank's address in its entirely to read as follows:
BANK ONE, NA
1717 Main Street
TX1-2454 Fourth Floor
Dallas, Texas 75201
Attention: Laurel Varney Mason
II. Forbearance Agreement. Bank has not waived and does not hereby
waive any Events of Default that have occurred and are continuing under the Loan
Agreement and other Loan Documents. Bank, however, does hereby agree to forbear
from exercising its Remedies in response to the Events of Default referred to in
Recitation B, above, until June 15, 2001, provided that if on or before such
date a creditworthy lender issues a written commitment to Borrower to advance to
Bank for the account of Borrower on or before July 9, 2001, a cash sum
sufficient to fully pay and discharge the entire, unpaid balance of the
Revolving Loan and accrued, unpaid interest due thereon as of the date of such
payment, and a true and complete copy of such commitment is delivered to Bank on
or before June 15, 2001, then Bank shall continue to forbear from the exercise
of its Remedies relating to such Events of Default through and including July 9,
2001. Notwithstanding the preceding provisions of this Article II, however,
Bank's agreement to forbear from the exercise of its Remedies may be rescinded
immediately, at the option of Bank, if the Bank learns of the existence or
occurrence and continuation of any Events of Default other than those described
in Recitation B., above, including, but not limited to, Borrower's failure to
pay accrued, unpaid interest on the Revolving Loan on or before the first day of
any calendar month following the date of this Second Amendment.
III. Termination and Release. Upon payment and performance in full of
the Obligations on or before July 9, 2001, Bank agrees, at Borrower's request
and sole cost and expense, to execute and deliver any such lien release
documents and other documentation reasonably requested by Borrower to release or
terminate Bank's liens and security interests under the Loan Agreement and other
Loan Documents.
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IV. Forbearance Fee. Upon the execution and delivery of this Second
Amendment, Borrower shall thereupon become obligated to pay to Bank a fee in the
amount of $11,300.00, as consideration for Bank's entry into this Second
Amendment, payable on or before July 9, 2001; provided that if the entire,
unpaid balance of the Revolving Loan and all accrued, unpaid interest thereon is
repaid to Bank on or before July 9, 2001, Borrower's obligation to pay the
forbearance fee to Bank shall thereupon be terminated and forgiven.
V. Second Amendment Legal Fees. Upon Bank's and Borrower's execution
and delivery of this Second Amendment, Borrower shall pay all legal fees and
expenses incurred to Bank's special counsel, Porter & Hedges, L.L.P., in
connection with the negotiation, documentation, execution and delivery of this
Second Amendment.
VI. Reaffirmation of Representations and Warranties. To induce the Bank
to enter into this Second Amendment, Borrower hereby reaffirms, as of the date
hereof, its representations and warranties contained in Article IV of the Loan
Agreement and in all other documents executed pursuant thereto, and additionally
represents and warrants as follows:
A. The execution and delivery of this Second Amendment and the
performance by the Borrower of its obligations under this Second
Amendment are within Borrower's power, have been duly authorized by all
necessary corporate action, have received all necessary governmental
approval (if any shall be required), and do not and will not contravene
or conflict with any provision of law or of the certificate of
incorporation, the articles of incorporation or bylaws of Borrower or
of any agreement binding upon Borrower.
B. This Second Amendment represents the legal, valid and
binding obligations of Borrower enforceable against Borrower in
accordance with its terms subject as to enforcement only to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally.
C. Since the date of the Loan Agreement, no change, event or
state of affairs has occurred and is continuing which would constitute
an Event of Default or an Unmatured Event of Default, except for the
Events of Default referred to in Recitation B. of this Second
Amendment.
VII. Defined Terms. Terms used herein that are defined in the Loan
Agreement shall have the same meanings herein, unless the context otherwise
requires.
VIII. Reaffirmation of Loan Agreement. This Second Amendment shall be
deemed to be an amendment to the Loan Agreement, and the Loan Agreement, as
amended hereby, is hereby ratified, adopted and confirmed in each and every
respect. All references to the Loan Agreement herein and in any
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other document, instrument, agreement or writing shall hereafter be deemed to
refer to the Loan Agreement as amended hereby.
IX. RELEASE BY BORROWER. AS PARTIAL CONSIDERATION FOR THE BANK'S ENTRY
INTO THIS SECOND AMENDMENT, BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY
RELEASES AND DISCHARGES THE BANK AND ITS SHAREHOLDERS, DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS, AGENTS AND REPRESENTATIVES (THE "BANK PARTIES") FROM ANY
AND ALL CLAIMS, CAUSES OF ACTION, LOSSES, LIABILITIES AND DAMAGES OF WHATSOEVER
TYPE OR NATURE (COLLECTIVELY "DAMAGES AND CLAIMS") WHETHER ASSERTED OR
UNASSERTED, ACCRUED OR UNACCRUED, KNOWN OR UNKNOWN, ARISING DIRECTLY OR
INDIRECTLY OUT OF, OR RELATING DIRECTLY OR INDIRECTLY TO ACTS, OMISSIONS, EVENTS
OR CONDITIONS THAT OCCURRED OR EXISTED AS OF OR PRIOR TO THE EXECUTION OF THIS
SECOND AMENDMENT IN CONNECTION WITH THE LOAN AGREEMENT AND/OR ANY OTHER LOAN
DOCUMENTS, OR THE RELATIONSHIPS OF THE BANK, THE BORROWER, AND ANY THIRD PARTY
IN CONNECTION WITH THE LOAN AGREEMENT AND/OR ANY OTHER LOAN DOCUMENTS, AND
WHETHER OR NOT SUCH DAMAGES AND CLAIMS MIGHT BE ALLEGED TO HAVE ARISEN FROM
BREACHES OF CONTRACTUAL OBLIGATIONS, COMMON LAW OR STATUTORY DUTIES, STRICT
LIABILITY, OR TORT, AND THE BORROWER HEREBY AGREES TO FULLY INDEMNIFY AND HOLD
THE BANK PARTIES HARMLESS FROM AND AGAINST ANY AND ALL SUCH DAMAGES AND CLAIMS,
INCLUDING, BUT NOT LIMITED TO, THOSE ALLEGED TO HAVE ARISEN, IN WHOLE OR IN
PART, FROM THE BANK PARTIES' NEGLIGENCE, INCLUDING GROSS NEGLIGENCE, WHETHER
ACTIVE OR PASSIVE, SOLE, JOINT, OR CONCURRENT.
X. Entire Agreement. The Loan Agreement, as hereby amended, embodies
the entire agreement between Borrower and Bank, and supersedes all prior
proposals, agreements and understandings relating to the subject matter hereof.
Borrower certifies that it is relying on no representation, warranty, covenant
or agreement except for those set forth in the Loan Agreement as hereby amended
and the other documents previously executed or executed of even date herewith.
Notwithstanding any prior course of dealing between Bank and Borrower, or any
allegation that the Bank might have waived, in whole or in part, any of its
rights or Remedies or any of Borrower's Obligations under the Loan Documents,
Borrower hereby conclusively acknowledges and agrees that no such alleged prior
course of dealing or waiver shall be effective hereafter to modify in any
respect the rights and Remedies of the Bank or the Obligations of the Borrower
under the express provisions of the Loan Agreement and other Loan Documents, as
hereby amended.
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XI. Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. This Second Amendment has been entered
into in Harris County, Texas, and it shall be performable for all purposes in
Harris County, Texas. Courts within the State of Texas shall have jurisdiction
over any and all disputes between the Borrower and the Bank, whether in law or
equity, including, but not limited to, any and all disputes arising out of or
relating to this Second Amendment or any other Loan Documents; and venue in any
such dispute whether in federal or state court shall be laid in Harris County,
Texas.
XII. Severability. Whenever possible each provision of this Second
Amendment shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Second Amendment shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Second Amendment.
XIII. Execution in Counterparts. This Second Amendment may be executed
in any number of counterparts and by the different parties on separate
counterparts on different dates, and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same agreement.
XIV. Section Captions. Section captions used in this Second Amendment
are for convenience of reference only, and shall not affect the construction of
this Second Amendment.
XV. Successors and Assigns. This Second Amendment shall be binding upon
the Borrower, the Bank and its respective successors and assigns, and shall
inure to the benefit of the Borrower, the Bank and the respective successors and
assigns of the Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the day and year first above written.
BORROWER:
VENUS EXPLORATION, INC.
By:
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John Y. Ames
President and Chief Operating Officer
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BANK:
BANK ONE, NA
By:
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Laurel Varney Mason
Vice President
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STATE OF TEXAS )
)
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on May ___, 2001 by John Y. Ames,
President of Venus Exploration, Inc., a Delaware corporation, on behalf of said
corporation.
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Notary Public, State of Texas
STATE OF TEXAS )
)
)
COUNTY OF HARRIS )
This instrument was acknowledged before me on May ___, 2001, by Laurel Varney
Mason, Vice President of Bank One, NA, a national banking association, on behalf
of said national banking association.
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Notary Public, State of Texas
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