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EXHIBIT 4.3
November 19, 1998
VIA FACSIMILE: 212/262-0596
Joseph M. Rinaldi
Stratum Corp.
1330 Sixth Avenue, 33rd Floor
New York, NY 10019
Re: Stratum Group Energy Partners, L.P. Loan to
Venus Development, Inc.
Settlement of all Obligations
Dear Joe:
Here are the terms of the proposed settlement of all obligations of the Venus
companies and of the former Venus Energy Plc shareholders to the Stratum
companies that arose out of the Term Loan and Security Master Agreement between
Venus Development, Inc., and Stratum Group Energy Partners, L.P. dated October
8, 1996, and the other agreements executed concurrently with that agreement.
In return for a full and final release from those obligations from all of the
Stratum entities and their assigns and for a reassignment to Venus Development,
Inc., or its designee of all real and personal property interests conveyed, or
agreed to be conveyed, to any of the Stratum entities, Venus Exploration, Inc.,
will issue Stratum Corp. or its designee ("Stratum") One Million One Hundred
Thousand (1,100,000) shares of its Common Stock, par value $0.01.
Those securities will be issued without registration under the Securities Act of
1933 and will be restricted securities. As a condition of the settlement offer,
Stratum must agree that:
i) those securities will be acquired for its own account, for
investment purposes only, and without any intent to distribute the
shares; provided, however, that subject to compliance with applicable
securities laws, Stratum may transfer said shares to Stratum's existing
partners as a dividend or other similar distribution to partners;
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Mr. Joseph M. Rinaldi
November 19, 1998
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ii) none of the Venus entities is making any representations or
warranties with regard to the shares or the companies' businesses; and
iii) Stratum is relying solely on the representations and statements
made by Venus Exploration, Inc., in its publicly-filed reports made
under the Securities Exchange Act of 1934.
The effective date of the settlement is November 12, 1998, and in addition to
the return and cancellation of the promissory note, the documents that are
required to complete the settlement transaction include, without limitation, the
following:
a) Reassignment to Venus Development, Inc., of all overriding
royalty interests assigned to Stratum Group Energy Partners,
L.P.;
b) Cancellation of Hydrocarbon Purchase and Sale Option
Agreements
c) Release of Mortgage and Deed of Trust
d) Mutual releases by Stratum and the Venus companies of all
claims, causes of action and other liabilities against the
other under or related to the Term Loan and Security Master
Agreement and any related documents and/or transactions
e) UCC-3's for all states and counties
f) Letters in Lieu of Transfer Orders
g) Release of Assignment of Proceeds
h) Termination of Swap Agreements
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Mr. Joseph M. Rinaldi
November 19, 1998
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i) Assignment of Amended and Restated Equity Conversion Agreement
dated May 21, 1997, between The New Venus Exploration, Inc.,
and Stratum Group, L.P.
j) Assignment of Rights under Escrow Agreement dated May 21,
1997, among Frost National Bank, Stratum Group, L.P., The New
Venus Exploration, Inc., and Venus Oil Company
k) Cancellation of Stock Pledge and Security Agreement
l) Termination of Energy Risk Management Association Master
Energy Price Swap Agreement
m) Various filings and agreements necessary for compliance with
state and federal securities laws and regulations
n) Registration Rights Agreement containing customary terms and
conditions and including the following terms:
(i) Venus Exploration, Inc. will file a registration
statement covering the resale of the shares within 90
days following the consummation of the transaction
contemplated hereby and will use its reasonable best
efforts to cause the SEC to declare such registration
statement effective.
(ii) The Registration Rights Agreement will contain
provisions prohibiting sales of shares during certain
"blackout" periods as required by any underwriter
that Venus Exploration, Inc., may engage with regard
to any debt or equity transaction under
consideration. Those blackout periods will apply to
Stratum only if they also apply and are enforced
against the directors of Venus Exploration, Inc., and
its large shareholders; e.g., Range Resources
Corporation.
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Mr. Joseph M. Rinaldi
November 19, 1998
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(iii) Venus Exploration, Inc., will advise Stratum by
written notice at least two weeks prior to the filing
of any registration statement under the Securities
Act of 1933 that covers its Common Stock and, upon
Stratum's request, will include in any such
registration statement such information as may be
required to permit a public offering of these
settlement shares. If, in the good faith judgment of
the managing underwriter of such public offering, the
inclusion of all of the settlement shares covered by
a request for registration would reduce the number of
shares to be offered by Venus Exploration, Inc., or
would interfere with the successful marketing of the
shares of stock offered by Venus Exploration, Inc.,
the number of settlement shares otherwise to be
included in the underwritten public offering may be
reduced or may be excluded in their entirety if so
required by the underwriter, provided that such
reduction will be not greater than, on a proportional
basis, the reduction experienced by the directors of
Venus Exploration, Inc., and its large shareholders;
e.g., Range Resources Corporation. If only a portion
of the settlement shares is included in the
underwritten public offering, those settlement shares
that are thus excluded from the underwritten public
offering shall be withheld from the market by Stratum
for the period that the managing underwriter
reasonably determines is necessary in order to effect
the underwritten public offering. Stratum will be
required to withhold those shares from the market
only to the extent that the directors of Venus
Exploration, Inc., and its large shareholders; e.g.,
Range Resources Corporation, are equally affected, on
a proportional basis, by such direction to withhold.
Furthermore, if the managing underwriter requires a
shorter withholding period for the directors of Venus
Exploration, Inc., and its large shareholders, that
shorter period will also apply to Stratum.
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Mr. Joseph M. Rinaldi
November 19, 1998
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Venus Exploration, Inc., will bear the entire cost
and expense of any registration of securities
initiated by it under Subsection (n)(iii)
notwithstanding that the settlement shares may be
included in any such registration. Stratum will,
however, bear the fees of its own counsel and any
registration fees, transfer taxes or underwriting
discounts or commissions applicable to the settlement
shares.
(iv) If Stratum and its affiliates beneficially own less
than 5% of the outstanding shares of Common Stock of
Venus Exploration, Inc., the blackout period and
withhold-from-market requirements described in
Subsection (n)(ii) and Subsection (n)(iii) will be
waived by Venus Exploration, Inc.
It is agreed that Stratum and all of its affiliates and assigns will reassign to
Venus Development, Inc., or its designee all rights and property acquired as a
result of the Term Loan and Security Master Agreement, and nothing will be
retained by Stratum, its affiliates or assigns, provided that Stratum will
retain the rights to indemnification to which it is entitled under Section 10.5
of the Term Loan and Security Master Agreement.
If you agree with this settlement offer on the terms included, please
countersign this letter in the space provided below and return a copy to me as
evidence of your acceptance. Upon that acceptance, we will begin drafting the
various releases, assignments and other instruments necessary to document the
agreement. Unless such releases, assignments and other instruments are fully
executed and delivered on or before November 30, 1998, this settlement will be
of no force and effect, and the Venus companies and Stratum will be restored to
their respective positions that they occupied prior to this settlement.
This settlement offer will expire on November 19, 1998, at 5:00 P.M., Central
Standard Time, and may be withdrawn at any time before receipt of your
acceptance as required above.
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Mr. Joseph M. Rinaldi
November 19, 1998
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Very truly yours,
/s/ JOHN Y. AMES
John Y. Ames
President &
Chief Operating Officer
AGREED AND ACCEPTED:
STRATUM GROUP ENERGY PARTNERS, L.P.,
for itself and its affiliates
By: STRATUM CORP., its general partner
By: /s/ JOSEPH M. RINALDI
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Joseph M. Rinaldi, President & CEO