**Exhibit 4(b)(5)**

 

SECOND AMENDMENT TO 

FIRST AMENDED AND RESTATED CREDIT AGREEMENT

 

Reference is made to First Amended and Restated Credit Agreement datedas of March 31, 2003, as amended by the First Amendment to First Amended andRestated Credit Agreement dated as of July 31, 2003 (collectively the“Agreement”), between GATEWAY PIPELINE COMPANY, a Texas corporation and GATEWAYPROCESSING COMPANY, a Texas corporation (collectively “Borrowers”), GATEWAYENERGY CORPORATION, a Texas corporation (“Guarantor”) and SOUTHWEST BANK OFTEXAS, N. A., a national banking association (the “Lender”), pursuant to whichthe Borrowers amended and restated, upon the terms and conditions thereinstated, a One Million Five Hundred Thousand Dollar ($1,500,000.00) creditfacility (“Loan”) with a Maturity Date of December 31, 2005, ** **subject to****the conditions and covenantsin the Agreement and Loan Documents.

 

RECITALS:

 

A             The Borrowers: (a)reported that the current ratio of Current Assets to Current Liabilities as ofthe end of the Third Quarter of 2003 was 0.96, instead of 1.0, as requiredpursuant to Section 6.29 of the Credit Agreement and (b) requested theLender to waive compliance with the current ratio covenant for the ThirdQuarter of 2003.

 

B.            The Lender hasapproved Borrowers’ request, subject to the conditions and covenants specifiedin this Second Amendment to First Amended and Restated Credit Agreement (the“Amendment”) and in the Loan Documents to be delivered in connection herewithor pursuant hereto.

 

THEREFORE, theBorrowers and the Lender hereby agree as follows, intending to be legallybound:

 

Section 1.               Definitions.  All capitalized terms shall have the meaningassigned to them in the Agreement, except as added, restated or otherwisedefined herein below:

 

(a)           Agreement.  The definition of Agreement is herebyrestated as follows:

 

“Agreementmeans the First Amended and Restated Credit Agreement, as amended by theAmendments, including the Schedules

 

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and Exhibits thereto,respectively, as the same may be amended or supplemented from time to time.”

 

(b)   Amendment.  The definition of Amendment is herebyrestated as follows:

 

“Amendmentsmean the (i) First Amendment to First Amended and Restated Credit Agreementdelivered as of July 31, 2003 by Borrowers and Guarantor to Lender and (ii) theSecond Amendment to First Amended and Restated Credit Agreement dated as ofNovember 15, 2003 by Borrowers and Guarantor to Lender.”

 

(c)           GuarantorSubordination. The following definition of Guarantor Subordination ishereby added to the Agreement.

 

“Guarantor Subordination means an agreement in form andsubstance acceptable to Lender, and any amendment, extension, modification,renewal or supplement thereof, delivered or to be delivered by Guarantor, asthe subordinated creditor, to the Lender, as the senior creditor, expresslysubordinating all Liens and Rights that the Borrowers or Guarantor may now orhereafter have with respect to certain inter-company debts as referred to therein.”

 

(d)           LoanDocuments.  The definition of LoanDocuments is hereby restated as follows:

 

“LoanDocuments means (a) the Agreement, as amended by the Amendments and anycertificates delivered in connection therewith, respectively, (b) any and allpromissory notes (including, without limitation, the Note issued pursuant tothe First Amendment to First Amended and Restated Credit Agreement delivered asof July 31, 2003), the Security Documents, the Guarantor Subordination and anyand other agreements in favor of Lender now or hereafter delivered pursuant tothe Agreement and (c) all future renewals, extensions, rearrangements orrestatements of, or amendments or supplements to, any of the foregoing.”

 

Each of the foregoing definitions as used in the Loan Documents shallinclude the definition or exhibit as amended or restated hereby.

 

Section 2.   Amendments.  The Agreement is hereby amended and restatedas follows:

 

(a)           Section 6.24of the Agreement is hereby amended and restated as follows:

 

“0.1         Restrictions onDebt.  Borrowers and Guarantor willnot incur, create, assume, or permit to exist any Debt, except:

 

(a)           the Obligations;

 

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(b)           existing Debtdescribed on Schedule 6.24 hereto or inter-company debt asdisclosed in writing by the Borrowers to Lender from time to time;

 

(c)           Debt secured byPermitted Liens; and

 

(d)           Extensions, renewalsand refinancings of Debt described in clauses (b) and (c) above, withoutany increase in the outstanding principal amount thereof, provided that theother terms and conditions of such extension, renewal or refinancing are notmaterially more onerous than the existing terms and conditions of such Debt.

 

**“**TheBorrowers may make payments of principal and interest to the Guarantor withrespect to the inter-company debts from time to time; provided that (a)no Default exists under or with respect to any of the Loan Documents or theobligations prior to the time that any payment is made, (b) the Borrowers haveeither (1) cash liquidity in excess of Three Hundred Seventy Thousand FiveHundred and NO/100ths Dollars ($370, 500.00), or (2) cash payments of monthlyexpense and Debt repayment obligations owing by them of at least Three HundredSeventy Thousand Five Hundred and NO/100ths Dollars ($370, 500.00), providedthat this applies only to items that are due and payable during the specificmonth in question and not to accruals that are payable after the current month,or (3) any combination of the preceding sub-clauses (1) and (2) totaling ThreeHundred Seventy Thousand Five Hundred and NO/100ths Dollars ($370, 500.00), and(c) a Default would not otherwise arise or result from any payment ofinter-company debt by the Borrowers to the Guarantor. “

 

**Section 3. Waiver.Contemporaneously herewith, the Lender has delivered a limited waiver theBorrowers’ compliance with the current ratio covenant set forth in Section6.29 of the Agreement as of the end of the Third Quarter of 2003 resultingfrom the distribution or payment of cash by the Borrowers to the Guarantorduring the Third Quarter of 2003, in consideration of a reduction ofnon-current inter-company payables owed by the Borrowers to the Guarantor. TheBorrowers and Guarantor acknowledge that the delivery of the waiver, thisamendment and the other Loan Documents pursuant thereto or in connectiontherewith will produce a material, direct and substantial benefit to theBorrowers and the Guarantor.**

** **

Section 4. Conditions Precedent.  Borrowers acknowledge that the Lender’s obligations under thisAmendment are conditioned upon Borrowers’ and Guarantor’s compliance with theconditions precedent set forth in Section 4 of the Agreement including,without limitation, delivery of Security Documents, material contracts, liensearches, evidence of title to Collateral and environmental information.

 

Section 5.               Representations.  The Borrowers represent and warrant that allof the representations and warranties contained in the Agreement and allinstruments and documents executed pursuant thereto or contemplated thereby aretrue and correct in all material respects on and as of this date, except (a)such representations that relate solely to an earlier date and that were trueand correct on such earlier date, and (b) the breach or inaccuracy of representationsand warranties about which the Lender has been notified in writing prior to thedate of this Amendment.

 

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Section 6.               ContinuedForce and Effect.  Except asspecifically amended herein, all of the terms and conditions of the Agreementand all documents executed in connection therewith or contemplated thereby areand remain in full force and effect in accordance with their respectiveterms.  All of the terms used hereinhave the same meanings as set out in the Agreement, unless amended hereby orunless the context clearly requires otherwise. References in the Agreement to the “Agreement,” the “Credit Agreement”,“hereof”, “herein” and words of similar import shall be deemed to be referencesto the Agreement as amended hereby.  Anyreference in the Note or any of the Security Documents to the “Agreement” orthe “Credit Agreement” shall be deemed to be references to the Agreement asamended through the date hereof.

 

Section 7.               Severability.  In the event any one or more provisionscontained in the Agreement or this Amendment should be held to be invalid,illegal or unenforceable in any respect, the validity, enforceability andlegality of the remaining provisions contained herein and therein shall not beaffected in any way or impaired thereby and shall be enforceable in accordancewith their respective terms.

 

Section 8.               Expenses.  The Borrowers agree to pay (a) a work fee ofFive Hundred no/100ths Dollars ($500.00) to Lender and (b) all out-of-pocket costsand expenses (including reasonable fees and expenses of legal counsel) of theLender in connection with the preparation and enforcement of this Amendment.

 

Section 9.               Acknowledgment.  The Borrowers ratify and confirm that theAgreement, and the other Loan Documents executed in connection therewith, orpursuant thereto, are and remain in full force and effect in accordance withtheir respective terms and that the Collateral is unimpaired by thisAmendment.  The officers of each of theBorrowers executing this Amendment, or any Loan Documents executed inconnection with or contemplated by this Amendment, represent and warrant thatthey have full power and authority to execute and deliver this Amendment andthe Loan Documents on behalf of each of the Borrowers, that such execution anddelivery has been duly authorized by the Board of Directors of each of theBorrowers pursuant to resolutions previously delivered to the Lender on March31, 2003 and July 31, 2003, in connection with the execution and delivery ofthe Agreement, are and remain in full force and effect and have not beenaltered, amended or repealed in anywise.

 

Section 10.             GoverningLaw.  This Amendment shall begoverned by and construed in accordance with the laws of the State of Texasand, to the extent applicable, by federal law.

 

Section 11.             Affirmationof Security Interest.  The Borrowershereby confirm and agree that (a) any and all Liens granted to or for thebenefit of, or Collateral now or hereafter held by, the Lender as security forpayment and performance of the Note is hereby renewed and carried forth tosecure payment and performance of all of the Obligations; and (b) the SecurityDocuments are and remain legal, valid and binding obligations of the partiesthereto, enforceable in accordance with their respective terms.

 

**Section12.**             ARBITRATION. THE BORROWERS,GUARANTOR AND LENDER AGREE THAT ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEENTHEM, OR ANY OF THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, WHETHER INDIVIDUAL,JOINT OR CLASS IN NATURE, ARISING FROM THIS

 

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**AMENDMENTOR ANY OF THE OTHER LOAN DOCUMENTS (INCLUDING CONTRACT AND TORT DISPUTES) SHALLBE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN ARBITRATION ASSOCIATIONUPON THE REQUEST OF ANY PARTY. NO ACT TO TAKE OR DISPOSE OF ANY COLLATERALSECURING THE OBLIGATIONS SHALL CONSTITUTE A WAIVER OF THIS ARBITRATIONPROVISION OR BE PROHIBITED BY THIS ARBITRATION PROVISION. THE FOREGOINGINCLUDES OBTAINING INJUNCTIVE RELIEF OR A TEMPORARY RESTRAINING ORDER; INVOKINGA POWER OF SALE UNDER ANY OF THE SECURITY DOCUMENTS; OBTAINING A WRIT OFATTACHMENT OR THE IMPOSITION OF A RECEIVER; OR EXERCISING ANY RIGHTS RELATINGTO PERSONAL PROPERTY, INCLUDING TAKING OR DISPOSING OF SUCH PROPERTY WITH OR WITHOUTJUDICIAL PROCESS PURSUANT TO ARTICLE 9 OF THE UCC. ANY DISPUTES, CLAIMS ANDCONTROVERSIES CONCERNING THE LAWFULNESS OR REASONABLENESS OF ANY ACT OREXERCISE OF ANY RIGHTS OR ANY RIGHT RELATING TO THE COLLATERAL SECURING THEOBLIGATIONS (INCLUDING, WITHOUT LIMITATION, ANY CLAIM TO RESCIND, REFORM OROTHERWISE MODIFY ANY AGREEMENT RELATING TO THE COLLATERAL SECURING THEOBLIGATIONS) SHALL ALSO BE ARBITRATED; PROVIDED THAT NO ARBITRATOR SHALL HAVETHE RIGHT OR POWER TOENJOIN OR RESTRAIN ANY ACT OF ANY PARTY.  JUDGMENT UPON ANY AWARD RENDERED BY ANYARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION; PROVIDED THATNOTHING CONTAINED HEREIN SHALL BE DEEMED TO BE A WAIVER BY LENDER OF THEPROTECTIONS AFFORDED TO THE LENDER UNDER 12 USC § 91, TEX. FIN. CODE § 59.007,OR THE LAWS OF ANY OTHER STATE (TO THE EXTENT APPLICABLE TO THE LENDER) OR ANYOTHER PROTECTION PROVIDED TO THE LENDER BY THE LAWS OF THE STATE OF TEXAS ORTHE UNITED STATES. THE STATUTE OF LIMITATIONS, OR ESTOPPEL, LACHES, WAIVER ORSIMILAR DOCTRINES THAT WOULD OTHERWISE BE APPLICABLE IN AN ACTION BROUGHT BY APARTY SHALL BE APPLICABLE IN ANY ARBITRATION PROCEEDING AND THE COMMENCEMENT OFANY ARBITRATION PROCEEDING SHALL BE DEEMED THE COMMENCEMENT OF AN ACTION FORTHESE PURPOSES. THE FEDERAL ARBITRATION ACT SHALL APPLY TO THE CONSTRUCTION,INTERPRETATION AND ENFORCEMENT OF THIS ARBITRATION PROVISION. IF THE FEDERALARBITRATION ACT IS INAPPLICABLE TO ANY SUCH DISPUTE, CLAIM OR CONTROVERSY FORANY REASON, THE ARBITRATION SHALL BE CONDUCTED PURSUANT TO THE TEXAS GENERALARBITRATION ACT, THIS ARBITRATION PROVISION AND THE COMMERCIAL ARBITRATIONRULES OF THE AMERICAN ARBITRATION ASSOCIATION.**

** **

Section 13.             **JURISDICTION AND VENUE.SUBJECT TO THE PROVISIONS OF SECTION 12, ALL ACTIONS OR PROCEEDINGS WITHRESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF RELATEDTO OR FROM THIS AMENDMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE LITIGATED,AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN THE COURTS HAVING SITUSIN HOUSTON, HARRIS COUNTY, TEXAS. IN THAT REGARD, THE BORROWERS AND GUARANTORHEREBY SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATEDIN HOUSTON,**

 

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**HARRIS COUNTY, TEXAS, AND HEREBY WAIVES ANYRIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANYLITIGATION BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCEWITH THIS SECTION.**

 

Section 14.             Noticeand Acknowledgment of No Oral Agreements. To the extent allowed by law, the parties hereto agree to be bound bythe terms of the following notice:

 

**NOTICE:  THIS AGREEMENT AND ALL OTHER DOCUMENTSRELATING TO THIS LOAN CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THEFINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OFPRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.**

 

**THERE ARE NOUNWRITTEN ORAL AGREEMENTS OF THE PARTIES RELATING TO THIS LOAN.**

 

EXECUTEDeffective as of November 15, 2003.

 
| Address:                         | BORROWERS:                     |
|----------------------------------|--------------------------------|
|                             |                           |
| One Allen  Center                | GATEWAY  PIPELINE COMPANY      |
| 500 Dallas  Street, Suite 2615   |                           |
| Houston,  Texas 77002            | By:                            |   |   |
| Phone:  (713) 336-0844      |                           | Michael T. Fadden, President |
| Fax:  (713) 336-0855        |                           |   |
|                             |                           |   |
| Address:                         | GATEWAY  PROCESSING COMPANY    |
|                             |                           |   |
| One Allen  Center                | By:                            |   |   |
| 500 Dallas  Street, Suite 2615   |                           | Michael T. Fadden, President |
| Houston,  Texas 77002            |                           |   |
| Phone:  (713) 336-0844      |                           |   |
| Fax:  (713) 336-0855        |                           |   |
|                             |                           |   |
| Address:                         | SOUTHWEST  BANK OF TEXAS, N.A. |
|                             |                           |
| 5 Post Oak  Park Office Building |                           |   |
| 4400 Post  Oak Parkway           | By:                            |   |   |
| Houston,  Texas 77027            | Name:                          | Ken Batson |
| Mail:                            | Title:                         | Assistant  Vice President - Energy |
| P. O. Box  27459                 | Lending                        |
| Houston,  Texas 77227-7459       |                           |
| Phone:  (713) 232-1247      |                           |
| Fax:  (713) 561-0345        |                           |
|                                  |                                |  |  |  |

 

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