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EXHIBIT 10.6
FOURTH AMENDMENT TO SECOND
AMENDED AND RESTATED LOAN AGREEMENT
This FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
(the "Fourth Amendment") dated December 3, 1998, is by and between VENUS
EXPLORATION, INC., a Delaware corporation, formerly known as XPLOR CORPORATION,
a Delaware corporation (the "Borrower"), and WELLS FARGO BANK (TEXAS), N.A., a
national banking association (the "Bank").
W I T N E S S E T H:
WHEREAS, Bank and Borrower entered into that certain Second Amended and
Restated Loan Agreement dated December 22, 1997 (as the same has been previously
amended through the date hereof is herein called the "Loan Agreement"), pursuant
to which Borrower obtained a credit facility in the amount of up to the lesser
of the Borrowing Base (as defined in the Loan Agreement) or the Commitment (as
defined in the Loan Agreement); and
WHEREAS, Bank and Borrower now desire to further amend that Loan
Agreement as herein set forth to, among other things, increase the Borrowing
Base from $5,240,000 to $5,540,000, and waive certain financial covenant
defaults.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. Except as otherwise provided, unless the context hereof
indicates otherwise, all capitalized terms used herein shall have the same
meaning as such capitalized terms are defined in the Loan Agreement.
(a) A new definition of "Transaction" is hereby added to the
Loan Agreement as follows:
"Transaction shall mean the closing and funding of either (i)
a merger with another oil and gas company, with Borrower as
the successor thereto, the result of which will be that
Borrower having an increase in net annual cash flow of at
least $3,000,000; or (ii) the sale of certain Oil and Gas
Properties which generates at least $2,400,000 in net
proceeds, all of which shall be applied by Borrower to the
Obligations."
2. Borrowing Base. Section 2.2(b) of the Loan Agreement is hereby
amended by deleting the reference to "$5,240,000" and substituting "$5,540,000"
therefor.
3. Transaction. A new Section 6.34 "Transaction" is hereby added to the
Loan Agreement as follows:
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"6.34 Transaction. On or before January 15, 1999, Borrower
shall have either consummated a Transaction or have entered
into a binding letter of intent, in form and substance
acceptable to Bank, to consummate a Transaction within thirty
(30) days thereafter."
4. Stratum and Stratum Documents. The Loan Agreement is hereby further
amended to delete any and all references to either Stratum and/or the Stratum
Documents.
5. Ratifications. The terms and provisions as set forth in this Fourth
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Loan Agreement, and except as expressly modified and superseded by
this Fourth Amendment, the terms of the Note and any and all other Loan
Documents executed in connection therewith or hereunto are hereby ratified and
confirmed and shall continue in full force and effect. Borrower and Bank agree
that the Loan Agreement, as amended hereby, the Note and the other Loan
Documents shall continue to be the legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms.
6. Representations and Warranties. Borrower hereby represents and
warrants to Bank that (i) the execution, delivery and performance of this Fourth
Amendment, and the other documents to be executed and delivered as required
hereby have been duly authorized by all requisite action on the part of
Borrower; (ii) after giving effect to this Fourth Amendment, the representations
and warranties contained in the Loan Agreement, as amended hereby, and any other
Loan Document executed in connection herewith or therewith are true, correct and
complete on and as of the date hereof as though made on and as of the date
hereof; and (iii) after giving effect to this Fourth Amendment, no Event of
Default or Potential Default has occurred and is continuing.
7. Covenant Deviation and Waiver. As of the date hereof, Borrower
failed to observe or maintain compliance with the Current Ratio covenant set
forth in Section 6.16 of the Loan Agreement and the Tangible Net Worth covenant
set forth in Section 6.17 of the Loan Agreement. Borrower has requested, and
Bank has approved, a deviation from such compliance with respect to the
aforementioned covenants for a period from the date hereof through January 15,
1999, at which time Borrower must be in compliance therewith. It is understood
and agreed that Bank's consent to such deviation shall in no way act as a waiver
of any covenants, restrictions, rights or remedies with respect to the Loan
Agreement, but that such deviation shall apply only to the specific matter and
instance set forth hereinabove.
8. Status of Claims. Borrower hereby represents and warrants to Bank
that no facts, events, status or conditions presently exist which, either now or
with the passage of time or the giving of notice or both, presently constitute
or will constitute a basis for any claim or cause of action against Bank, or any
defense to the payment of any of the Obligations. Borrower hereby releases,
relinquishes and forever discharges Bank, its successors, assigns, agents,
officers, directors, employees and representatives, of and from any and all
claims, demands, actions and causes of action of any and every kind or
character, whether known or unknown, present or future, which Borrower may have
against Bank, its successors, assigns, agents, officers, directors,
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employees and representatives, arising out of or with respect to any and all
transactions relating to the Loan Agreement, this Fourth Amendment, or any Loan
Document, including any loss, cost or damage, of any kind or character, arising
out of or in any way connected with or in any way resulting from the acts,
actions or omissions of Bank, its successors, assigns, agents, officers,
directors, employees or representatives.
9. Letters In Lieu. As a condition to the effectiveness of this Fourth
Amendment, Borrower shall execute and deliver to Bank certain Letters-in-Lieu of
Transfer Orders in form and substance acceptable to Bank instructing the
purchasers of oil and gas production from the Oil and Gas Properties which are
part of the Collateral to remit proceeds payable by such purchaser to Borrower
to an account designated by Bank. Bank may at any time forward such
Letters-in-Lieu of Transfer Orders to the aforementioned purchasers and
thereafter upon an Event of Default, apply up to one hundred percent (100%) of
the balances in such account attributable to the Oil and Gas Properties to
reduce the Obligations of Borrower to Bank. Borrower shall provide Bank with a
true and accurate list including the name and address of all such purchasers and
hereby covenants and agrees to notify Bank at least ten (10) days prior to
changing any such purchasers.
10. Conditions Precedent to Effectiveness of Fourth Amendment. This
Fourth Amendment shall become effective and be deemed effective upon receipt by
Bank of the following:
(i) counterparts of this Fourth Amendment duly executed by
Borrower and Bank;
(ii) a copy of resolutions approving this Fourth Amendment,
and authorizing the transactions contemplated herein or therein duly
adopted by the Executive Committee of the Board of Directors of
Borrower, accompanied by a certificate of the duly authorized Secretary
of Borrower, that such copy is a true and correct copy of resolutions
duly adopted by the Executive Committee of the Board of Directors of
Borrower, and that such resolutions constitute all the resolutions
adopted with respect to such Fourth Amendment and the transactions
contemplated herein, and have not been amended, modified or revoked in
any respect and are in full force and effect as of the date hereof;
(iii) there shall not have been, in the sole judgment of Bank,
any material adverse change in the financial condition, business or
operations of Borrower;
(iv) the execution and delivery by Borrower of one or more new
Mortgage, Deed of Trust, Assignment of Production, Security Agreement
and Financing Statements covering the interests of Borrower in the oil
and gas properties set forth on Exhibit A to this Fourth Amendment;
(v) the Letters-in-Lieu of Transfer Orders required by Section
8 above, relating to the interests of Borrower in the Collateral;
(vi) the Stratum Settlement Documents, including, but not
limited to, the following: Full and Final Mutual Release; Registration
Rights Agreement; Reassignment to Venus Development, Inc. of all
overriding royalty interests assigned to Stratum Group
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Energy Partners, L.P.; cancellation of Natural Gas and Crude Oil
Purchase and Sale Option Agreements; releases of liens created by the
Mortgage(s) and Deed(s) of Trust; UCC-3's for all states and counties;
Letters in Lieu of Transfer Orders; Release of Assignment of Proceeds;
Termination of Energy Risk Management Association Master Energy Price
Swap Agreement and of individual Swap Agreements; Assignment of Amended
and Restated Equity Conversion Agreement dated May 21, 1997, between
The New Venus Exploration, Inc. and Stratum Group, L.P.; 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; and Cancellation of Stock Pledge and Security Agreement;
(vii) payment by Borrower of the fees and expenses of counsel
to Bank in connection with the preparation and negotiation of this
Fourth Amendment and all documents and instruments contemplated hereby;
(viii) the execution and delivery by Borrower of such
additional documents and instruments that Bank and its counsel may deem
necessary to effectuate this Fourth Amendment or any document executed
and delivered to Bank in connection herewith or therewith.
11. Execution Counterparts. This Fourth Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which when taken together shall constitute but one and
the same instrument.
12. Governing Law. This Fourth Amendment shall be governed by and
construed in accordance with the internal Laws of the State of Texas.
13. Successors and Assigns. This Fourth Amendment is binding upon and
shall inure to the benefit of Borrower and Bank and their respective successors
and assigns; provided, however, Borrower may not assign or transfer any of their
rights or obligations hereunder without the prior written consent of Bank.
14. Headings. The headings, captions and arrangements used in this
Fourth Amendment are for convenience only and shall not effect the
interpretation of this Fourth Amendment.
15. NO ORAL AGREEMENTS. THIS FOURTH AMENDMENT, TAKEN TOGETHER WITH THE
OTHER LOAN DOCUMENTS AND ALL SCHEDULES AND EXHIBITS THERETO, REPRESENTS THE
FINAL AGREEMENT OF THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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16. AGREEMENT FOR BINDING ARBITRATION. THE PARTIES AGREE TO BE BOUND BY
THE TERMS AND PROVISIONS OF THE CURRENT ARBITRATION PROGRAM OF WELLS FARGO BANK
(TEXAS), N.A., WHICH IS INCORPORATED BY REFERENCE HEREIN AND IS ACKNOWLEDGED AS
RECEIVED BY THE PARTIES, PURSUANT TO WHICH ANY AND ALL DISPUTES SHALL BE
RESOLVED BY MANDATORY BINDING ARBITRATION UPON THE REQUEST OF EITHER PARTY.
"BORROWER"
VENUS EXPLORATION, INC.
By: /s/ JOHN Y. AMES
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Name: John Y. Ames
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Title: President
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"BANK"
WELLS FARGO BANK (TEXAS) N.A.
By: /s/ ANDREW MOY
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Andrew A. Moy, Vice President
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EXHIBIT A
1. The Leases described in said M.H. Griffith No. 1 and No. 2 Leases, and
the Non-Producing Lease (oil, gas and minerals) dated September 1,
1993, between Mary Hobbs Griffith, et.al., as Lessor, and Venus Oil
Company, as Lessee, all situated in Crane and Upton Counties, Texas
2. The Chambers Lease and Leases described in said Designation of Unit,
all situated in Crockett County, Texas
3. The Archer Trusts No. 1 Lease and Leases described in said Designation
of Unit, all situated in Hansford County, Texas
4. The Swanson No. 1 and No. 3 Lease, the Leases described in said Swanson
Acres Lease, and the Leases in the Kainer Gas Unit, all situated in
Wharton County, Texas
5. The Smith No. 1, et.al. Lease, and the Non-Producing Lease (oil and
gas) dated May 1, 1995, by and between Mary Carol Sheets, as Lessor,
and Patricia O. Stanley, as Lessee, all situated in Atascosa County,
Texas
6. The Reed East Lease, and the Reed "C" Lease (a/k/a Reed Louisiana
Lease), all situated in Seminole County, Oklahoma