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FIRST AMENDMENT TO SECOND
AMENDED AND RESTATED LOAN AGREEMENT
This FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT (the
"First Amendment") dated May 19, 1998 is by and between VENUS EXPLORATION, INC.,
a Delaware corporation, formerly known as XPLOR CORPORATION, a Delaware
corporation (the "Borrower") and XXXXX 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 (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, Borrower and Bank now desire to amend the Loan Agreement as
hereinafter set forth in order to modify certain terms of the Loan Agreement to,
among other things, establish the current Borrowing Base and modify certain
financial covenants.
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) The definition of "Current Ratio" is hereby deleted in its
entirety and the following substituted therefor:
"Current Ratio shall mean the ratio of the sum of all
assets of Borrower that are classified as current assets on
the balance sheet of Borrower in accordance with GAAP, plus an
amount equal to the unused availability under the Borrowing
Base; to all accounts payable and other current liabilities of
Borrower required to be accrued on the balance sheet of
Borrower in accordance with GAAP, excluding current maturities
of the Obligations; provided, however, if any portion of the
Debt due to Stratum under the Stratum Documents should be
classified as a current liability, such amount shall be
excluded from the calculation of this ratio."
(b) The definition of "Prime Rate" is hereby deleted in its
entirety and the following substituted therefor:
"Prime Rate shall be the rate most recently announced
by Bank at its principal office as its "Prime Rate". Prime
Rate is one of Bank's base rates and serves as the basis upon
which effective rates of interest are calculated for those
loans making reference thereto, and is evidenced by the
recording thereof after its announcement in such internal
publication or publications as Bank may designate. Any change
in the interest rate resulting from a change in such Prime
Rate shall become effective as of 12:01 a.m. of the Business
Day on which each change in Prime Rate is announced by Bank."
2. Borrowing Base. Section 2.2(b) of the Loan Agreement is hereby
deleted in its entirety and replaced with the following:
"(b) After receipt of all of the information required
by Section 2.2(a), Bank may redetermine the amount of the
Borrowing Base in accordance with the customary practices of
Bank for oil and gas loans to be effective as of April 1 and
October 1 of such year. In connection with the initial
Redetermination of the Borrowing Base as set forth herein,
Borrower agrees to pay to Bank an Engineering Fee in the
amount of $2,500. Thereafter, upon each subsequent delivery to
Bank of the information required by 2.2(a), Borrower shall pay
to Bank an Engineering Fee in the amount of $2,500.
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Until the next determination of the amount of the Borrowing
Base by Bank on or about June 1, 1998, the amount of the
Borrowing Base as of the Closing Date shall be deemed to be
$5,250,000. Until each new determination of Borrowing Base is
made by Bank, the amount of the Borrowing Base shall be deemed
to be the Borrowing Base last deemed or calculated, as the
case may be. In addition to the foregoing, Bank or Borrower
may initiate a redetermination of the Borrowing Base at any
other time as it so elects, provided, however, that Borrower
may initiate only two (2) such unscheduled redeterminations
during any consecutive twelve (12) month period by specifying
in writing to Bank the date on which Borrower will furnish the
information required by Section 2.2(a) and the date on which
it desires such redetermination to occur. Bank shall have at
least forty-five (45) days after the delivery of the
information required by Section 2.2(a) to make any unscheduled
redetermination of the Borrowing Base requested by Borrower.
Bank may, at any time and at its expense, initiate an
unscheduled redetermination of the Borrowing Base by
specifying in writing to Borrower the date by which Borrower
is to furnish the information required by Section 2.2(a)
(excluding the information required by Section 2.2(a)(i)) and
the projected date on which such redetermination is to occur.
Failure of Borrower to timely furnish such information
required by Section 2.2(a) shall not preclude Bank's right to
redetermine the Borrowing Base based on information previously
furnished to Bank. Bank shall promptly notify in writing
Borrower of the new Borrowing Base. Any redetermination of the
Borrowing Base shall not be effective until written notice is
sent to Borrower."
3. Tangible Net Worth. Section 6.17 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"6.17 Tangible Net Worth. Borrower shall not permit
its Tangible Net Worth to ever be less than $5,250,000."
4. Year 2000 Compliance. A new Section 6.33 shall be added to the
Loan Agreement as follows:
"6.33 Year 2000 Compliance. Borrower shall perform
all acts reasonably necessary to ensure that (i) Borrower and
any business in which Borrower holds a substantial interest,
and (ii) all customers, suppliers and vendors that are
material to Borrower's business, become Year 2000 Compliant in
a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all of
Borrower's systems and adopting a detailed plan, with itemized
budget, for the remediation, monitoring and testing of such
systems. As used in this paragraph, "Year 2000 Compliant"
shall mean, in regard to any entity, that all software,
hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of
such entity, will properly perform date sensitive functions
before, during and after the year 2000. Borrower shall,
immediately upon request, provide to Bank such certifications
or other evidence of Borrower's compliance with the terms of
this paragraph as Bank may from time to time require."
5. Arbitration Program. Exhibit 8.4(b) of the Loan Agreement
shall be deleted in its entirety and replaced with Exhibit 8.4(b) attached
hereto.
6. Ratifications. The terms and provisions as set forth in this
First 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 First 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.
7. Representations and Warranties. Borrower hereby represents and
warrants to Bank that (i) the execution, delivery and performance of this First
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 First 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 First Amendment, no Event of
Default or Potential Default has occurred and is continuing.
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8. Covenant Deviation and Waiver. As of December 31, 1997,
Borrower failed to observe or maintain compliance with the Tangible Net Worth
requirement 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 such time period. 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.
9. 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, employees
and representatives, arising out of or with respect to any and all transactions
relating to the Loan Agreement, this First 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.
10. Conditions Precedent to Effectiveness of First Amendment. This
First Amendment shall become effective and be deemed effective upon receipt by
Bank of the following:
(i) counterparts of this First Amendment duly executed by
Borrower and Bank;
(ii) a copy of resolutions approving this First 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 First 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) payment by Borrower of an Engineering Fee in the amount
of $2,500 as required by Section 2.2(b);
(iv) there shall not have been, in the sole judgment of Bank,
any material adverse change in the financial condition, business or
operations of Borrower;
(v) payment by Borrower of the fees and expenses of counsel to
Bank in connection with the preparation and negotiation of this First
Amendment and all documents and instruments contemplated hereby; and
(vi) the execution and delivery by Borrower of such additional
documents and instruments that Bank and its counsel may deem necessary
to effectuate this First Amendment or any document executed and
delivered to Bank in connection herewith or therewith.
11. Execution Counterparts. This First 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 First Amendment shall be governed by and
construed in accordance with the internal Laws of the State of Texas.
13. Successors and Assigns. This First 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.
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14. Headings. The headings, captions and arrangements used in this
First Amendment are for convenience only and shall not effect the interpretation
of this First Amendment.
15. NO ORAL AGREEMENTS. THIS FIRST 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.
16. AGREEMENT FOR BINDING ARBITRATION. THE PARTIES AGREE TO BE
BOUND BY THE TERMS AND PROVISIONS OF THE CURRENT ARBITRATION PROGRAM OF XXXXX
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:
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Name:
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Title:
---------------------------------
"BANK"
XXXXX FARGO BANK (TEXAS) N.A.
By:
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Xxxxxxxx X. Xxxxx
Vice President
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EXHIBIT 8.4(b)
XXXXX FARGO BANK (TEXAS), N.A. ARBITRATION PROGRAM
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who fails
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and expenses incurred by such other party in compelling
arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in Texas selected by
the AAA or other administrator. If there is any inconsistency between the terms
hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All discovery activities shall be expressly limited to
matters directly relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. Section 91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the Texas State Bar with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of Texas, (ii) may grant any
remedy or relief that a court of the state of Texas could order or grant within
the scope hereof and such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
Texas Rules of Civil Procedure or other applicable law. Any Dispute in which the
amount in controversy is $5,000,000 or less shall be decided by a single
arbitrator who shall not render an award of greater than $5,000,000 (including
damages, costs, fees and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more than $5,000,000. Any
Dispute in which the amount in controversy exceeds $5,000,000 shall be decided
by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
Texas, and (iii) the parties shall have in addition to the grounds referred to
in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators
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are supported by substantial evidence, and (B) whether the conclusions of law
are erroneous under the substantive law of the state of Texas. Judgment
confirming an award in such a proceeding may be entered only if a court
determines the award is supported by substantial evidence and not based on legal
error under the substantive law of the state of Texas.
(f) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
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