<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.____)*
COSTILLA ENERGY, INC.
- -------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $0.10 PAR VALUE
- -------------------------------------------------------------------------------
(Title of Class of Securities)
22161G103
- -------------------------------------------------------------------------------
(CUSIP Number)
Julia Murray
General Counsel - Finance
Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, TX 77002
(713) 853-6161
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 3, 1998
- -------------------------------------------------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box: /_/
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
SCHEDULE
13D
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Enron Capital & Trade Resources Corp.
- -----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/
(b) /X/
-
- -----------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
-----------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) /_/
- -----------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
-----------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF 0
SHARES -----------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 4,035,512*
REPORTING -----------------------------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
0
-----------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,035,512*
- -----------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,035,512*
- -----------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
N/A
- -----------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.8%**
- -----------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Represents shares of Common Stock initially issuable upon conversion of 7%
(8% Paid in Kind) Series A Cumulative Convertible Preferred Stock of Costilla
Energy, Inc. described herein.
** Based on information contained in the Form 10-Q of Costilla Energy, Inc. for
the Quarter ended March 31, 1998 as of May 14, 1998.
<PAGE> 3
SCHEDULE
13D
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Enron Corp.
- -----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/
(b) /X/
-
- -----------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- -----------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) /_/
- -----------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Oregon
- -----------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY ----------------------------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 4,035,512*
PERSON ----------------------------------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
0
----------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,035,512*
- ------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,035,512*
- -----------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
N/A
- -----------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.8% **
- -----------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Represents shares of Common Stock initially issuable upon conversion of 7%
(8% Paid in Kind) Series A Cumulative Convertible Preferred Stock of Costilla
Energy, Inc. described herein.
** Based on information contained in the Form 10-Q of Costilla Energy, Inc. for
the Quarter ended March 31, 1998 as of May 14, 1998.
<PAGE> 4
SCHEDULE
13D
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Joint Energy Development Investments II Limited Partnership
- -----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /_/
(b) /X/
-
- -----------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
BK
- -----------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) /_/
- -----------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES 0
BENEFICIALLY ---------------------------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 3,026,634*
PERSON --------------------------------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
0
--------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
3,026,634*
- ----------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,026,634*
- -----------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
N/A
- -----------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.6% **
- -----------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Represents shares of Common Stock issuable upon conversion of 7% (8% Paid in
Kind) Series A Cumulative Convertible Preferred Stock of Costilla Energy, Inc.
described herein.
** Based on information contained in the Form 10-Q of Costilla Energy, Inc. for
the Quarter ended March 31, 1998 as of May 14, 1998.
<PAGE> 5
STATEMENT ON SCHEDULE 13D
Note: All information herein with respect to Costilla Energy, Inc., a Delaware
corporation (the "Issuer"), is to the best knowledge and belief of the
Reporting Entities (as defined herein).
Item 1. Security and Issuer.
This statement relates to the shares of common stock, $0.10 par value
("Common Stock"), of Costilla Energy, Inc. The address of the principal
executive office of the Issuer is 400 West Midland, Suite 1000, Midland, Texas
79701.
Item 2. Identity and Background.
This statement is being filed by (i) Enron Capital & Trade Resources
Corp., a Delaware corporation ("ECT"), whose principal business is the purchase
of natural gas, gas liquids and power through a variety of contractual
arrangements and marketing these energy products to local distribution
companies, electric utilities, cogenerators and both commercial and industrial
end users, as well as the provision of risk management services, (ii) Enron
Corp., an Oregon corporation ("Enron"), which is an integrated natural gas and
electricity company that engages, primarily through subsidiaries, in the
transportation and wholesale marketing of natural gas, the exploration for and
production of natural gas and crude oil, the production, purchase,
transportation and worldwide marketing and trading of natural gas liquids,
crude oil and refined petroleum products, and the purchasing and marketing of
electricity and other energy- related commitments, and (iii) Joint Energy
Development Investments II Limited Partnership, a Delaware limited partnership
("JEDI II"), which is engaged primarily in the business of investing in and
managing certain energy related assets. ECT, Enron and JEDI II are referred
to herein as the "Reporting Entities." ECT is a wholly-owned subsidiary of
Enron. Additional entities that may be deemed to be control persons of JEDI II
are (a) Enron Capital Management II Limited Partnership, a Delaware limited
partnership and the general partner of JEDI II ("ECMLP II"), whose principal
business is to manage oil and gas related investments, (b) Enron Capital II
Corp., a Delaware corporation and the general partner of ECMLP II ("ECC II"),
whose principal business is to manage oil and gas related investments, and ECT.
ECC II is a wholly owned subsidiary of ECT and an indirect, wholly owned
subsidiary of Enron.
The address of the principal business office of ECT, JEDI II, ECMLP II,
ECC II and Enron is 1400 Smith Street, Houston, Texas 77002. Schedule I
attached hereto sets forth certain additional information with respect to each
director and each executive officer of ECT, Enron and ECC II. The filing of
this statement on Schedule 13D shall not be construed as an admission that
Enron, ECMLP II, ECC II or any person listed on Schedule I hereto is, for the
purposes of Section 13(d) or 13(g) of the Act, the beneficial owner of any
securities covered by this statement.
None of the Reporting Entities, nor to their knowledge ECMLP II or ECC II
or any person listed on Schedule I hereto, has been, during the last five years
(a) convicted of any criminal proceeding (excluding traffic violations or
similar misdemeanors) or (b) a party to a civil proceeding
1
<PAGE> 6
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, U.S. federal or state securities laws or finding any violations with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On June 3, 1998, pursuant to a Securities Purchase Agreement among ECT,
JEDI II and the Issuer (the "Securities Purchase Agreement"), ECT purchased from
the Issuer an aggregate of 12,500 shares of the Issuer's 7% (8% Paid in Kind)
Series A Cumulative Convertible Preferred Stock (the "Preferred Stock"), and
JEDI II purchased from the Issuer 37,500 shares of Preferred Stock. The
aggregate purchase price for such securities was $50,000,000 in cash, of which
$37,500,000 was paid by JEDI II and $12,500,000 was paid by ECT. See Item 4 for
a more complete description of the Preferred Stock and the transactions
contemplated by the Securities Purchase Agreement.
The source of the funds used for the purchases of the Preferred Stock by
ECT was working capital on hand. JEDI II utilized funds borrowed pursuant to
JEDI II's existing Revolving Credit Agreement with The Chase Manhattan Bank and
Barclays Bank PLC as agents for certain other banks (the "Credit Agreement")
for purchases of the Preferred Stock. A copy of the Credit Agreement is
attached as an exhibit to this statement on Schedule 13D and is incorporated
herein by reference.
Item 4. Purpose of Transaction.
The purchase of the Preferred Stock was the result of a negotiated
transaction with the Issuer. The Preferred Stock was acquired for investment
purposes. ECT and JEDI II intend to review their investment in the Issuer on a
continuing basis and, depending upon the price of, and other market conditions
relating to, the Common Stock, subsequent developments affecting the Issuer
(including opportunities to provide financing from time to time to the Issuer
for expansion of its business), the Issuer's business and prospects, other
investment and business opportunities available to ECT or JEDI II, general
stock market and economic conditions, tax considerations and other factors
deemed relevant, may decide to increase or decrease the size of their
investment in the Issuer.
The Securities Purchase Agreement, the Registration Rights Agreement (as
defined below) and the Certificate of Designations relating to the Preferred
Stock (the "Certificate of Designation"), are each attached as exhibits to this
statement on Schedule 13D and incorporated herein by reference, and the
following summaries of the terms of such agreements or instruments are
qualified by reference to the actual agreements or instruments.
Securities Purchase Agreement. On June 3, 1998, ECT and JEDI II acquired
the Preferred Stock described in Item 3, pursuant to the Securities Purchase
Agreement. In addition to providing for the transactions described in Item 3,
the Securities Purchase Agreement includes provisions that are intended to
limit ECT's and JEDI II's obligations or liability to the Issuer including
those that
2
<PAGE> 7
provide that, to the fullest extent permitted by law, ECT, JEDI II and their
respective affiliates (including, without limitation any director designated by
ECT and JEDI II for nomination to the board of directors of the Issuer, as
described below) are not restricted from engaging in any business activity,
regardless of whether such activity is in direct or indirect competition with
the Issuer and are not required to offer any business opportunity to the
Issuer.
Registration Rights Agreement. The Issuer, ECT and JEDI II entered into a
Registration Rights Agreement dated as of June 3, 1998 (the "Registration
Rights Agreement"), which requires the Issuer to register for sale under the
Securities Act of 1933, as amended (the "Securities Act") the shares of Common
Stock issuable upon conversion of the Preferred Stock, at the expense of the
Issuer. These rights include "piggy back" rights to include shares of Common
Stock in Securities Act registrations effected by the Issuer, as well as
certain "demand" registration rights. ECT and JEDI II (and certain of their
transferees) can request an aggregate of three demand registrations and can
request to include shares of Common Stock in any Registration Statement (other
than registration statements on Form S-4, S-8 or with respect to transactions
subject to Rule 145 under the Securities Act) covering Common Stock of the
Issuer.
Preferred Stock. The Preferred Stock accrues cumulative quarterly
dividends at a rate of $70.00 per share per annum (except to the extent
dividends are permitted to be paid in Common Stock, as described below, in
which case at a rate of $80.00 per share per annum). Dividends may be paid
either in cash or, during any period in which the Issuer does not have legally
available funds for the payment of dividends in cash or is contractually
precluded by the terms of its outstanding 10 1/4% Senior Notes due 2006 (the
"Notes") from paying dividends in cash on the Preferred Stock, at the election
of the Issuer's board of directors, in additional shares of Common Stock at the
rate set forth above. The Preferred Stock is entitled to a liquidation
preference of $1000.00 per share, plus accrued and unpaid dividends to the date
of final distribution as specified in the Certificate of Designation.
The Certificate of Designation provides that for so long as ECT, JEDI II
or any of their respective affiliates, designees or direct or indirect
transferees of Preferred Stock (the "Eligible Holders") collectively directly
or indirectly beneficially own any shares of Preferred Stock, or Common Stock
issued upon the exercise of Preferred Stock in an amount which constitutes 5%
or more of the then outstanding shares of Common Stock, the Eligible Holders,
acting by the vote of a majority of the Preferred Stock (if any Preferred Stock
is then outstanding), or by a majority of the Common Stock held by Eligible
Holders (if no Preferred Stock is then outstanding) issued upon conversion of
the Preferred Stock, have the right (i) collectively, to nominate one person
for election to the board of directors of the Issuer, or (ii) individually, (A)
to receive prior notice of any proposed action by the Issuer's board of
directors, and to receive reasonable notice of and to have one representative
attend any meeting of the Issuer's board of directors, (B) to receive all
management reports and management accounts relating to the Issuer and (C) to
have access to the books and records of the Issuer. The board of directors of
the Issuer has appointed Timothy J. Detmering as a director of the Issuer as
the initial designee of ECT and JEDI II.
3
<PAGE> 8
In addition to the rights of Eligible Holders set forth in the preceding
paragraph, if (A) dividends payable on the shares of Preferred Stock have not
been declared and paid in an aggregate amount equal to at least four
consecutive quarterly dividends on such shares or dividends on the Preferred
Stock are paid in kind for four quarters in the aggregate, (B) there occurs an
event of default under the Notes or any credit facility which enables the
holders of the Notes or of the indebtedness outstanding under such credit
facility to accelerate any of the indebtedness represented thereby, (C) the
Issuer breaches or otherwise fails to observe or perform any other
representation, warranty, covenant or agreement set forth in the Certificate of
Designation, the Securities Purchase Agreement or the Registration Rights
Agreement, (D) certain bankruptcy or insolvency related events occur, the
holders of Preferred Stock have the right, voting separately as a class, to
elect that number of directors which most closely approximates, as a portion of
the entire board of directors of the Issuer, but which is no greater than, the
ratio that the number of shares of Common Stock issuable upon the conversion of
the Preferred Stock would bear to the total number of shares of Common Stock
then outstanding, but in no event less than two directors of the Issuer
(including any director nominated by the Eligible Holders and elected as
provided in the preceding paragraph). The right of the Preferred Stock to
elect directors continues (x) if the right to elect such directors arose
because of an event described in clause (A) (to the extent such right arose
because of the payment of dividends in kind) or (D), until all of the shares of
the Preferred Stock have been converted, redeemed or otherwise retired, (y) if
the right to elect such directors arose because of an event described in clause
(B) or (C) above, until the event of default, breach or failure has been cured,
or (z) otherwise, until all accumulated dividends on the Preferred Stock have
been paid, or declared and funds set aside for payment in full.
In addition, the affirmative vote or consent of the holders of at least a
majority of the shares of Preferred Stock, voting separately as a separate
class, is necessary to authorize:
(i) any merger, consolidation, sale of substantially all
of the Issuer's assets or similar business combination transaction if,
after and giving effect to such transaction, (A) the holders of the Common
Stock immediately prior to the transaction do not own a majority or more
of the voting power of the common stock or other equity securities having
ordinary voting rights in the election of directors of the entity
resulting from the transaction, or (B) individuals who before such
transaction was first publicly announced constituted the board of
directors of the Issuer cease for any reason to constitute a majority of
the board of directors of the entity resulting from such transaction;
(ii) any change to the Issuer's certificate of
incorporation that would (A) change the aggregate number of authorized
shares of Preferred Stock or of unissued preferred stock of the Issuer,
(B) change the par value of the Preferred Stock, (C) effect an exchange,
reclassification or cancellation of all or part of the shares of the
Preferred Stock, (D) effect an exchange, or create a right of exchange, of
all or any part of the shares of another class into the shares of
Preferred Stock, (E) change the designations, preferences, limitations or
relative rights of the shares the Preferred Stock, (F) change the shares
of the Preferred Stock into the same or a different number of shares of
the same class or series or another class or series, (G)
4
<PAGE> 9
create a new class or series of shares having rights and preferences on a
parity with, prior or superior to the shares of the Preferred Stock, or
increase the rights and preferences of any class or series having rights
and preferences on a parity with, prior or superior to the shares of the
Preferred Stock, or increase the rights and preferences of any class or
series having rights or preferences later or inferior to the shares of the
Preferred Stock in such a manner as to become on a parity with, prior or
superior to the shares of the Preferred Stock, (H) limit or deny the
existing preemptive rights of the shares of the Preferred Stock, or (I)
cancel or otherwise affect dividends on the shares of the Preferred Stock
that had accrued but had not been declared; or
(iii) the issuance of any class or series of capital stock
senior to, or on a parity with, the Preferred Stock.
The Preferred Stock may be redeemed at the option of the Issuer at any
time after June 15, 2001 if the price of the Common Stock reaches certain
levels specified in the Certificate of Designation, initially at a price of
107% of the liquidation value plus accrued and unpaid dividends, which
redemption price declines as specified in the Certificate of Designation.
Other than the transactions described herein, none of the Reporting
Entities, nor to their knowledge ECMLP II or ECC II or any person listed on
Schedule I hereto, has any plan or proposal that would result in any of the
consequences listed in paragraphs (a) - (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) None of the Reporting Entities directly owns any Common Stock.
However, ECT owns shares of Preferred Stock which are presently convertible
into 1,008,878 shares of Common Stock, and JEDI II owns shares of Preferred
Stock which are presently convertible into 3,026,634 shares of Common Stock, in
each case subject to adjustment as set forth in the Certificate of Designation.
If such shares of Preferred Stock were converted into Common Stock, the shares
of Common Stock issuable upon conversion of such Preferred Stock would
represent approximately 7.2% and 21.6%, respectively, of the outstanding Common
Stock (based on the number of shares of Common Stock outstanding as of May 14,
1998 as reported by the Issuer in its Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998). Enron, ECT, ECMLP II and ECC II may be deemed
to beneficially own the shares of Preferred Stock held by JEDI II. Enron may
also be deemed to beneficially own the shares of Preferred Stock held by ECT.
See Item 2. Enron disclaims beneficial ownership of any shares of Preferred
Stock. JEDI II disclaims beneficial ownership of the shares of Preferred Stock
issued to ECT. ECT disclaims beneficial ownership of the shares of Preferred
Stock issued to JEDI II.
(b) ECT and Enron may be deemed to share voting and dispositive power
over the Preferred Stock (and the shares of Common Stock issuable upon
conversion thereof) held directly by ECT. In addition, Enron, ECT, ECMLP II,
ECC II and JEDI II may be deemed to share voting and
5
<PAGE> 10
dispositive power over the Preferred Stock (and the shares of Common Stock
issuable upon conversion thereof) held by JEDI II. See Item 2.
(c) Other than the transactions described herein, none of the Reporting
Entities, nor to their knowledge ECMLP II, ECC II or any of the persons named
in Schedule I hereto, has effected any transactions in the Common Stock during
the preceding sixty days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
See the description of the Securities Purchase Agreement, the Preferred
Stock, the Registration Rights Agreement and the Certificate of Designation in
Item 4 above.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 Securities Purchase Agreement dated as of June 3, 1998 among
the Issuer, ECT and JEDI II.
Exhibit 2 Registration Rights Agreement dated as of June 3, 1998 by and
among the Issuer, ECT and JEDI II.
Exhibit 3 Certificate of Designations for 7% (8% Paid in Kind) Series A
Cumulative Convertible Preferred Stock of Costilla Energy,
Inc.
Exhibit 4 Revolving Credit Agreement dated as of May 26, 1998 among
Joint Energy Development Investments II Limited Partnership,
as Borrower, the Banks named therein, as Banks, The Chase
Manhattan Bank, as Administrative Agent, and Barclays Bank PLC
as Documentation Agent.
Exhibit 5 Joint Filing Agreement.
6
<PAGE> 11
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certify that the information set forth in this
statement is true, complete and correct.
Date: June 12, 1998 ENRON CAPITAL & TRADE
RESOURCES CORP.
By: /s/ PEGGY B. MENCHACA
-----------------------------------
Name: Peggy B. Menchaca
Title: Vice President and Secretary
Date: June 12, 1998 ENRON CORP.
By: /s/ PEGGY B. MENCHACA
-----------------------------------
Name: Peggy B. Menchaca
Title: Vice President and Secretary
Date: June 12, 1998 JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP
By: Enron Capital Management II
Limited Partnership,
its general partner
By: Enron Capital II Corp.,
its general partner
By: /s/ PEGGY B. MENCHACA
-----------------------------------
Name: Peggy B. Menchaca
Title: Vice President and Secretary
7
<PAGE> 12
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CAPITAL & TRADE RESOURCES CORP.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
1400 Smith Street
Houston, TX 77002
Mark A. Frevert U.S.A. Director; President - ECT
Europe and Managing Director
Mark E. Haedicke U.S.A. Director; Managing Director - Legal
Kevin P. Hannon U.S.A. Director; President and Chief
Operating Officer
Kenneth D. Rice U.S.A. Director; Chairman of the Board,
Chief Executive Officer and
Managing Director; Chairman and
Chief Executive Officer - ECT North
America
Gene E. Humphrey U.S.A. Vice Chairman
Lou L. Pai U.S.A. Managing Director
Amanda K. Martin U.S.A. President - Energy and Finance
Services
John B. Echols, Jr. U.S.A. Managing Director and Chief
Accounting Officer
Donald C. Bentley II U.S.A. Senior Vice President
Marty Sunde U.S.A. Senior Vice President
Rebecca C. Carter U.S.A. Vice President and Chief Control
Officer
Robert J. Hermann U.S.A. Vice President and General Tax
Counsel
</TABLE>
I - 1
<PAGE> 13
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CORP.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
Robert A. Belfer U.S.A. Director; Chairman, President and Chief
767 Fifth Avenue, 46th Fl. Executive Officer,
New York, NY 10153 Belco Oil & Gas Corp.
Norman P. Blake, Jr. U.S.A. Director; Chairman, United States
USF&G Corporation Fidelity and Guaranty Company
6225 Smith Ave. LA0300
Baltimore, MD 21209
Ronnie C. Chan U.S.A. Director; Chairman of Hang Lung
Hang Lung Development Development Group
Company Limited
28/F, Standard Chartered
Bank Building
4 Des Vouex Road Central
Hong Kong
John H. Duncan U.S.A. Director; Investments
5851 San Felipe, Suite 850
Houston, TX 77057
Joe H. Foy U.S.A. Director; Retired Senior Partner,
404 Highridge Dr. Bracewell & Patterson, L.L.P.
Kerrville, TX 78028
Wendy L. Gramm U.S.A. Director; Former Chairman, U.S. Commodity
P. O. Box 39134 Futures Trading
Washington, D.C. 20016 Commission
Ken L. Harrison U.S.A. Director; Vice Chairman of Enron Corp.
121 S. W. Salmon Street
Portland, OR 97204
Robert K. Jaedicke U.S.A. Director; Professor (Emeritus), Graduate
Graduate School of Business School of Business Stanford University
Stanford University
Stanford, CA 94305
</TABLE>
I - 2
<PAGE> 14
<TABLE>
<S> <C> <C>
Charles A. LeMaistre U.S.A. Director; President (Emeritus),
13104 Travis View Loop University of Texas M.D. Anderson Cancer
Austin, TX 77030 Center
Jerome J. Meyer U.S.A. Director; Chairman and Chief Executive
26600 S. W. Parkway Officer, Tektronix, Inc.
Building 63; P. O. Box 1000
Wilsonville, OR 97070-1000
John A. Urquhart U.S.A. Director; Vice Chairman of
John A. Urquhart Assoc. Enron Corp.; President, John A. Urquhart
111 Beach Road Associates
Fairfield, CT 06430
John Wakeham U.K. Director; Former U.K. Secretary of State
Pingleston House for Energy and Leader of the Houses of
Old Alresford Commons and Lords
Hampshire S024 9TB
United Kingdom
Charls E. Walker U.S.A. Director; Chairman, Walker & Walker, LLC
Walker & Walker, LLC.
10220 River Road, Ste. 105
Potomac, Maryland 20854
Bruce G. Willison U.S.A. Director; President and Chief Operating
4900 Rivergrade Road Officer, Homes Savings of America
Irwindale, CA 91706
Herbert S. Winokur, Jr. U.S.A. Director; President, Winokur &
Winokur & Associates, Inc. Associates, Inc.
30 East Elm Ct.
Greenwich, CT 06830
1400 Smith Street
Houston, TX 77002
Kenneth L. Lay U.S.A. Director; Chairman and Chief Executive
Officer
</TABLE>
I - 3
<PAGE> 15
<TABLE>
<S> <C> <C>
Jeffrey K. Skilling U.S.A. Director; President and Chief Operating
Officer
J. Clifford Baxter U.S.A. Senior Vice President, Corporate
Development
Richard A. Causey U.S.A. Senior Vice President and Chief
Accounting and Information Officer
James V. Derrick, Jr. U.S.A. Senior Vice President and General Counsel
Andrew S. Fastow U.S.A. Senior Vice President, Finance
Stanley C. Horton U.S.A. Chairman and Chief Executive Officer,
Enron Gas Pipeline Group
Rebecca P. Mark U.S.A. Vice Chairman; Chairman and Chief
Executive Officer, Enron International
Inc.
Thomas E. White U.S.A. Chairman, Chief Executive Officer and
President, Enron Ventures Corp.
</TABLE>
I - 4
<PAGE> 16
DIRECTORS AND EXECUTIVE OFFICERS
ENRON CAPITAL II CORP.
<TABLE>
<CAPTION>
Name and Business Address Citizenship Position and Occupation
- ------------------------- ----------- -----------------------
<S> <C> <C>
1400 Smith Street
Houston, TX 77002
James V. Derrick, Jr. U.S.A. Director
Mark A. Frevert U.S.A. Director
Kenneth D. Rice U.S.A. Director; Chairman, Chief Executive
Officer and Managing Director
Gene E. Humphrey U.S.A. President and Managing Director
Richard B. Buy U.S.A. Managing Director
Andrew S. Fastow U.S.A. Managing Director
Mark E. Haedicke U.S.A. Managing Director and General Counsel
Jeremy M. Blachman U.S.A. Vice President
William W. Brown U.S.A. Vice President
Rebecca C. Carter U.S.A. Vice President
Robert J. Hermann U.S.A. Vice President and General Tax Counsel
Clifford P. Hickey U.S.A. Vice President
Jeffrey McMahon U.S.A. Vice President, Finance and Treasurer
Jordan H. Mintz U.S.A. Vice President, Tax and Tax Counsel
Kristina M. Mordaunt U.S.A. Vice President and Assistant General
Counsel
Julia Heintz Murray U.S.A. Vice President and General Counsel,
Finance
Andrea Vail U.S.A. Vice President
</TABLE>
I - 5
<PAGE> 17
EXHIBIT INDEX
Exhibit 1 Securities Purchase Agreement dated as of June 3, 1998 among
the Issuer, ECT and JEDI II.
Exhibit 2 Registration Rights Agreement dated as of June 3, 1998 by and
among the Issuer, ECT and JEDI II.
Exhibit 3 Certificate of Designations for 7% (8% Paid in Kind) Series A
Cumulative Convertible Preferred Stock of Costilla Energy,
Inc.
Exhibit 4 Revolving Credit Agreement dated as of May 26, 1998 among
Joint Energy Development Investments II Limited Partnership,
as Borrower, the Banks named therein, as Banks, The Chase
Manhattan Bank, as Administrative Agent, and Barclays Bank PLC
as Documentation Agent.
Exhibit 5 Joint Filing Agreement.
<PAGE> 1
EXHIBIT 1
===============================================================================
SECURITIES PURCHASE AGREEMENT
DATED AS OF JUNE 3, 1998
BY AND BETWEEN
COSTILLA ENERGY, INC.
AND
ENRON CAPITAL & TRADE RESOURCES CORP.
AND
JOINT ENERGY DEVELOPMENT INVESTMENTS II LIMITED PARTNERSHIP
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1 DEFINITIONS............................................ - 6 -
"Affiliate"............................................ - 6 -
"Agreement"............................................ - 6 -
"Certificate of Designation"........................... - 6 -
"Closing".............................................. - 6 -
"Closing Date"......................................... - 6 -
"Commission"........................................... - 6 -
"Common Stock"......................................... - 6 -
"Company".............................................. - 6 -
"Contracts"............................................ - 6 -
"Costs"................................................ - 6 -
"Designated Directors"................................. - 6 -
"Dispute".............................................. - 7 -
"Dividend Stock"....................................... - 7 -
"ECT".................................................. - 7 -
"ECTSC"................................................ - 7 -
"Environmental Laws"................................... - 7 -
"ERISA"................................................ - 7 -
"Exchange Act"......................................... - 7 -
"Governmental Authority"............................... - 7 -
"Indemnified Party".................................... - 8 -
"Indemnifying Party"................................... - 8 -
"Interested Stockholder"............................... - 8 -
"Intermediary"......................................... - 8 -
"Loss" and "Losses".................................... - 8 -
"Material Adverse Effect".............................. - 8 -
"NASD"................................................. - 8 -
"NASDAQ National Market System"........................ - 8 -
"1935 Act"............................................. - 8 -
"Notes"................................................ - 8 -
"Own Company Securities"............................... - 8 -
"Permits".............................................. - 8 -
"Positions"............................................ - 9 -
"Preferred Stock"...................................... - 9 -
"Purchase Price"....................................... - 9 -
"Purchaser" and "Purchasers"........................... - 9 -
</TABLE>
- 2 -
<PAGE> 3
<TABLE>
<S> <C>
"Registration Rights Agreement"........................ - 9 -
"Registration Statement"............................... - 9 -
"SEC Reports".......................................... - 9 -
"Securities Act"....................................... - 9 -
"Subsidiary"........................................... - 9 -
"Shares"............................................... - 9 -
"Tax Returns".......................................... - 9 -
"Transactions"......................................... - 9 -
Section 1.2 OTHER DEFINITIONS...................................... - 9 -
Section 1.3 CONSTRUCTION.......................................... - 10 -
ARTICLE II
ISSUANCE AND PURCHASE OF SERIES A PREFERRED STOCK
Section 2.1 ISSUANCE AND PURCHASE OF PREFERRED STOCK.............. - 10 -
Section 2.2 THE CLOSING........................................... - 10 -
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 ABSENCE OF MISSTATEMENTS AND OMISSIONS................ - 10 -
Section 3.2 COMMISSION REPORTS.................................... - 11 -
Section 3.3 CAPITALIZATION........................................ - 11 -
Section 3.4 ORGANIZATION.......................................... - 12 -
Section 3.5 POWER AND AUTHORITY; ENFORCEABILITY................... - 12 -
Section 3.6 CONSENTS AND APPROVALS................................ - 13 -
Section 3.7 NO VIOLATION.......................................... - 13 -
Section 3.8 FINANCIAL STATEMENTS.................................. - 13 -
Section 3.9 PRO FORMA FINANCIAL STATEMENTS........................ - 14 -
Section 3.10 LITIGATION............................................ - 14 -
Section 3.11 INTELLECTUAL PROPERTY................................. - 14 -
Section 3.12 PERMITS............................................... - 14 -
Section 3.13 NO ADVERSE CHANGE; ABSENCE OF LIABILITIES............. - 15 -
Section 3.14 TAX RETURNS........................................... - 15 -
Section 3.15 PROPERTIES AND CONTRACTS.............................. - 15 -
Section 3.16 NO UNDISCLOSED LITIGATION AND CONTRACTS............... - 16 -
Section 3.17 ENVIRONMENTAL MATTERS................................. - 16 -
Section 3.18 LABOR MATTERS......................................... - 16 -
Section 3.19 INSURANCE............................................. - 17 -
Section 3.20 ERISA MATTERS......................................... - 17 -
Section 3.21 BOOKS AND RECORDS..................................... - 17 -
Section 3.22 NO INVESTMENT COMPANY................................. - 17 -
Section 3.23 REGISTRATION RIGHTS................................... - 17 -
Section 3.24 SOLVENCY MATTERS...................................... - 17 -
Section 3.25 NO INTEGRATION........................................ - 18 -
</TABLE>
- 3 -
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 3.26 NO REGISTRATION....................................... - 18 -
Section 3.27 RULE 144A MATTERS..................................... - 18 -
Section 3.28 BROKER'S OR FINDER'S COMMISSIONS...................... - 18 -
Section 3.29 NO RESTRICTIONS ON AFFILIATES......................... - 18 -
Section 3.30 USE OF PROCEEDS; MARGIN REGULATIONS................... - 18 -
Section 3.31 PUBLIC UTILITY HOLDING COMPANY ACT MATTERS............ - 18 -
Section 3.32 NO BURDENSOME RESTRICTIONS............................ - 19 -
Section 3.33 NO ILLEGAL OR IMPROPER TRANSACTIONS................... - 19 -
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Section 4.1 AUTHORITY............................................. - 20 -
Section 4.2 CONSENTS AND APPROVAL; NO VIOLATION................... - 20 -
Section 4.3 SECURITIES LAWS....................................... - 20 -
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 USE OF PROCEEDS....................................... - 21 -
Section 5.2 CORPORATE EXISTENCE................................... - 21 -
Section 5.3 COMPLIANCE WITH LAWS.................................. - 21 -
Section 5.4 MAINTENANCE OF PROPERTIES AND PERMITS................. - 21 -
Section 5.5 ACCOUNTING PRACTICES.................................. - 22 -
Section 5.6 RESTRICTIONS ON AFFILIATES............................ - 22 -
Section 5.7 ACCESS TO INFORMATION................................. - 22 -
Section 5.8 SEC FILINGS........................................... - 22 -
Section 5.9 CERTAIN PUBLIC UTILITY MATTERS........................ - 23 -
Section 5.10 RESERVATION OF COMMON STOCK........................... - 23 -
Section 5.11 QUOTATION ON NASDAQ................................... - 23 -
ARTICLE VI
PURCHASERS' CONDITIONS
Section 6.1 REPRESENTATIONS AND COVENANTS......................... - 23 -
Section 6.2 CERTIFICATE OF DESIGNATION............................ - 24 -
Section 6.3 REGISTRATION RIGHTS AGREEMENT......................... - 24 -
Section 6.4 APPOINTMENT OF DIRECTOR............................... - 24 -
Section 6.5 DUE DILIGENCE......................................... - 24 -
Section 6.6 MATERIAL ADVERSE EFFECT............................... - 24 -
Section 6.7 REQUIRED CONSENTS AND APPROVALS....................... - 24 -
Section 6.8 NASD APPROVAL......................................... - 24 -
Section 6.9 PAYMENTS.............................................. - 24 -
Section 6.10 OPINION OF COUNSEL.................................... - 24 -
Section 6.11 ADDITIONAL DOCUMENTS.................................. - 25 -
</TABLE>
- 4 -
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE VII
COMPANY'S CONDITIONS
Section 7.1 REPRESENTATIONS AND COVENANTS......................... - 25 -
Section 7.2 REQUIRED CONSENTS AND APPROVALS....................... - 25 -
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 TERMINATION........................................... - 25 -
Section 8.2 SURVIVAL; FAILURE TO CLOSE............................ - 25 -
ARTICLE IX
OTHER PROVISIONS
Section 9.1 BROKERAGE FEES AND COMMISSIONS........................ - 26 -
Section 9.2 BUSINESS OPPORTUNITY MATTERS.......................... - 26 -
Section 9.3 NO OBLIGATION......................................... - 28 -
Section 9.4 BEST EFFORTS.......................................... - 28 -
Section 9.5 PUBLIC ANNOUNCEMENTS.................................. - 28 -
ARTICLE X
INDEMNIFICATION
Section 10.1 INDEMNIFICATION BY THE COMPANY........................ - 28 -
Section 10.2 INDEMNIFICATION PROCEDURES............................ - 28 -
Section 10.3 TERMINATION........................................... - 29 -
ARTICLE XI
MISCELLANEOUS
Section 11.1 DISPUTE RESOLUTION.................................... - 29 -
Section 11.2 ENTIRE AGREEMENT...................................... - 33 -
Section 11.3 NOTICES. ............................................ - 33 -
Section 11.4 GOVERNING LAW......................................... - 34 -
Section 11.5 SEVERABILITY.......................................... - 34 -
Section 11.6 EXPENSES.............................................. - 34 -
Section 11.7 DESCRIPTIVE HEADINGS.................................. - 34 -
Section 11.8 COUNTERPARTS.......................................... - 34 -
Section 11.9 ASSIGNMENT............................................ - 34 -
Section 11.10 AMENDMENTS; WAIVERS................................... - 35 -
</TABLE>
EXHIBIT A - REGISTRATION RIGHTS AGREEMENT
EXHIBIT B- CERTIFICATE OF DESIGNATION
- 5 -
<PAGE> 6
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is made and entered
into as of the 3rd of June, 1998, by and among Costilla Energy, Inc., a Delaware
corporation (the "Company"), and Enron Capital & Trade Resources Corp., a
Delaware corporation and Joint Energy Development Investments II Limited
Partnership, a Delaware limited partnership (individually, a "Purchaser" and
collectively, the "Purchasers").
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. As used in this Agreement, the following terms
have the meanings indicated:
"Affiliate" and the terms contained in the definition thereof which are
themselves defined terms shall have the respective meanings given to such terms
in Rule 405 under the Securities Act.
"Agreement" has the meaning ascribed to such term in the first
paragraph hereof.
"Certificate of Designation" has the meaning ascribed to such term in
Section 2.1.
"Closing" has the meaning ascribed to such term in Section 2.2.
"Closing Date" has the meaning ascribed to such term in Section 2.2.
"Commission" has the meaning ascribed to such term in Section 3.2.
"Common Stock" means the common stock, $0.10 par value per share, of
the Company.
"Company" has the meaning ascribed to such term in the first paragraph
hereof.
"Contracts" means any indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit, certificate,
contract or other agreement or instrument to which the Company or any of the
Subsidiaries is a party or to which their respective properties or assets are
subject.
"Costs" has the meaning ascribed to such term in Section 11.6.
"Designated Directors" has the meaning ascribed to such term in Section
9.2.
- 6 -
<PAGE> 7
"Dispute" has the meaning ascribed to such term in Section 11.1.
"Dividend Stock" means dividends paid on the Preferred Stock in
additional fully paid and nonassessable shares of Common Stock as provided in
Section 3(b) of the Certificate of Designation.
"ECT" means Enron Capital & Trade Resources Corp., a Delaware
corporation.
"ECTSC" means ECT Securities Corp., a Delaware corporation and an
Affiliate of Purchasers, or its successor by merger or other reorganization.
"Environmental Laws" means the common law and any and all laws,
statutes, ordinances, rules, regulations, orders, or determinations of any
Governmental Authority pertaining to health or the environment in effect in any
and all jurisdictions in which the Company or its Subsidiaries are conducting or
at any time have conducted business, or where any property of the Company or its
Subsidiaries is located, or where any hazardous substances generated by or
disposed of by the Company or its Subsidiaries are located, including but not
limited to the Oil Pollution Act of 1990, as amended ("OPA"), the Clean Air Act,
as amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA"), the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, and other environmental conservation or protection laws. The term "oil"
has the meaning specified in OPA; the terms "hazardous substance," "release" and
"threatened release" have the meanings specified in CERCLA, and the terms "solid
waste," "disposal" and "disposed" have the meanings specified in RCRA; provided,
however, if either CERCLA, RCRA or OPA is amended so as to broaden the meaning
of any term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment, and provided, further, that, to the extent the
laws of the state in which any property of the Company or its Subsidiaries is
located establish a meaning for "oil," "hazardous substance," "release," "solid
waste" or "disposal" which is broader than that specified in either OPA, CERCLA,
or RCRA, such broader meaning shall apply with respect to such property.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended and supplemented, including any rules
or regulations issued in connection therewith.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means the United States, any foreign country,
state, county, city or other political subdivision, agency or instrumentality
thereof.
"Incorporated Documents" means all exhibits, appendices and annexes
included with or incorporated by reference in any of the SEC Reports.
- 7 -
<PAGE> 8
"Indemnified Party" has the meaning ascribed to such term in Section
10.1.
"Indemnifying Party" has the meaning ascribed to such term in Section
10.2.
"Interested Stockholder" has the meaning ascribed to such term in
Section 203(c)(v) of the Delaware General Corporation Law.
"Intermediary" has the meaning ascribed to such term in Section 9.1.
"Loss" and "Losses" have the meaning ascribed to such terms in Section
10.1.
"Material Adverse Effect" means any event or condition which,
individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the general affairs, management, business, condition
(financial or otherwise), prospects or results of operations of the Company and
the Subsidiaries, taken as a whole.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ National Market System" means the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotation System.
"1935 Act" has the meaning ascribed to such term in Section 3.31.
"Notes" shall mean the Corporation's $180,000,000 aggregate principal
amount of 10 1/4% Senior Notes Due 2006, including the terms of the related
Indenture dated as of October 1, 1996 as amended by the First Supplemental
Indenture dated as of January 16, 1998 between the Company and State Street Bank
and Trust Company, as Trustee.
"Own Company Securities" means the direct or indirect beneficial
ownership of any Shares or Common Stock underlying the Shares or any other
securities of the Company in the following amounts: (i) in the case of Preferred
Stock, any shares of Preferred Stock, (ii) in the case of Common Stock or
securities convertible into or exchangeable for Common Stock (other than the
Preferred Stock), an amount which constitutes or would be convertible into or
exchangeable for 5% or more of the then outstanding shares of Common Stock, or
(ii) in the case of other securities, an amount which has an aggregate principal
amount, stated value, liquidation value or original issuance price, whichever is
higher, of $2 million.
"Permits" means any licenses, permits, certificates, consents, orders,
approvals and other authorizations from, and all declarations and filings with,
all federal, state, local and other Governmental Authorities, all
self-regulatory organizations and all courts and other tribunals presently
required or necessary to own or lease, as the case may be, and to operate the
properties of the Company and the Subsidiaries and to carry on the business of
the Company and the Subsidiaries as now or proposed to be conducted as set forth
in the Prospectus and the SEC Reports.
- 8 -
<PAGE> 9
"Positions" has the meaning ascribed to such term in Section 9.2.
"Preferred Stock" means the Series A Cumulative Convertible Preferred
Stock, $0.10 par value per share, of the Company.
"Prospectus" means the prospectus contained in the Registration
Statement in the form filed with the Commission pursuant to Rule 424 under the
Securities Act.
"Purchase Price" has the meaning ascribed to such term in Section 2.1.
"Purchaser" and "Purchasers" have the meanings ascribed to such terms
in the first paragraph hereof.
"Registration Rights Agreement" means the Registration Rights Agreement
in the form attached hereto as Exhibit A.
"Registration Statement" means the Company's Registration Statement on
Form S-4 (file No. 333-50347), filed by the Company under the Securities Act in
the form declared effective by the Commission on April 29, 1998.
"SEC Reports" means the Registration Statement, the Company's Annual
Report on Form 10-K for the Fiscal Year ended December 31, 1997, the Company's
Quarterly Report on Form 10-Q for the Quarter ended March 31, 1998, the
definitive Proxy Statement for the Annual Meeting of Stockholders held on May
29, 1998 and each other document, report or filing made by the Company and any
of its Subsidiaries since December 31, 1997 to and including the Closing Date
with the Commission, including, in each instance, all Incorporated Documents.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity. Such term shall also refer to any other
partnership, limited partnership, limited liability company, joint venture,
trust, or other business entity in which such entity has a material interest.
"Shares" has the meaning ascribed to such term in Section 2.1.
"Tax Returns" has the meaning ascribed to such term in Section 3.14.
"Transactions" means the issuance and sale of the Shares to the
Purchasers and the other transactions contemplated by this Agreement and the
Registration Rights Agreement.
Section 1.2 OTHER DEFINITIONS. Other terms defined in this Agreement
have the meanings so given them.
- 9 -
<PAGE> 10
Section 1.3 CONSTRUCTION. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine, and neuter.
Except as specified otherwise, all references to Articles and Sections refer to
articles and sections of this Agreement, and all references to exhibits are to
Exhibits attached to this Agreement, each of which is made a part of this
Agreement for all purposes. The word "including" shall mean "including, without
limitation" unless the context otherwise requires.
ARTICLE II
ISSUANCE AND PURCHASE OF SERIES A PREFERRED STOCK
Section 2.1 ISSUANCE AND PURCHASE OF PREFERRED STOCK. Subject to the
terms and conditions of this Agreement, the Company agrees to issue and sell to
the Purchasers (or the Purchasers' designees or Affiliates), in such proportion
as the Purchasers shall designate prior to the Closing Date, and the Purchasers
(or the Purchasers' designees or Affiliates) agree to subscribe for and
purchase from the Company, an aggregate of 50,000 shares (the "Shares") of
Preferred Stock of the Company having the relative rights, preferences,
privileges and limitations set forth on the "Certificate of Designations of 7%
(8% Paid in Kind) Series A Cumulative Convertible Preferred Stock" (the
"Certificate of Designation") attached hereto as Exhibit B and incorporated
herein for all purposes by this reference, for an aggregate purchase price of
$50,000,000 ($1,000.00 per share of Preferred Stock) (the "Purchase Price").
Section 2.2 THE CLOSING. Subject to the terms and conditions of this
Agreement, the issuance and purchase of the Shares shall take place at a closing
(the "Closing") to be held at the offices of Vinson & Elkins L.L.P., 1001 Fannin
Street, 23rd Floor, Houston, Texas, at 10:00 a.m. (Central time) on June 3,
1998, or such later date as may be agreed by the parties. The date on which the
Closing occurs is referred to herein as the "Closing Date." On the Closing Date,
the Company will deliver certificates representing the validly issued, fully
paid and nonassessable Shares registered in the name of the Purchasers and/or
the Purchaser's nominees, designees or Affiliates upon receipt of the Purchase
Price therefor by wire transfer of immediately available funds to an account
designated by the Company, or by such other method as is mutually agreed to by
the Purchasers and the Company. Such certificates shall bear appropriate
restrictive legends deemed necessary by the Company to comply with applicable
securities laws. Effective as of the Closing Date, the Company shall have filed
with the Secretary of State of the State of Delaware the Certificate of
Designation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as of the date hereof
as follows:
Section 3.1 ABSENCE OF MISSTATEMENTS AND OMISSIONS. Neither the
Prospectus as of the date thereof, the SEC Reports, the Incorporated Documents
nor any amendment or supplement thereto as of the date thereof contained or
contains any untrue statement of a material fact or omitted
- 10 -
<PAGE> 11
or omits to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. No
representation or warranty made by the Company contained in this Agreement and
no statement contained in any certificate, list, exhibit or other instrument
specified in this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
Section 3.2 COMMISSION REPORTS. The Company has made all filings
required to be made by it with the Securities and Exchange Commission (the
"Commission") pursuant to Sections 12, 13, 14 and 15 of the Exchange Act. All
of such filings (other than the Prospectus, the SEC Reports and the
Incorporated Documents), and all filings made by the Company with the
Commission pursuant to such sections, rules and regulations although not
required to be made, complied in all material respects, as to both form and
content, with all applicable requirements of the Exchange Act and the rules and
regulations thereunder, and, at the time of filing, did not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The Prospectus, the SEC Reports and
the Incorporated Documents heretofore filed were filed in a timely manner and,
when they were filed (or, if any amendment with respect to any such document
was filed, when such amendment was filed), conformed in all material respects,
as to both form and content, to the requirements of the Securities Act or
Exchange Act, as applicable; and any further SEC Reports and Incorporated
Documents will, when so filed, be filed in a timely manner and conform in all
material respects, as to both form and content, to the requirements of the
Exchange Act.
Section 3.3 CAPITALIZATION. (i) As of the Closing Date, (A) the Company
will have the authorized, issued and outstanding capitalization set forth in the
Prospectus and the SEC Reports (other than the Preferred Stock and any changes
due to the exercise of outstanding stock options), and (B) the Certificate of
Designation will have been filed with the Secretary of State of the State of
Delaware. All of the outstanding shares of capital stock of the Company and each
of the Subsidiaries have been, and as of the Closing Date will be, duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights; except as set forth in
the Prospectus and the SEC Reports and except for liens granted in favor of the
lenders under the Company's credit facility, all of the outstanding shares of
capital stock of the Subsidiaries will be free and clear of all liens,
encumbrances, equities and claims or restrictions on transferability (other than
those imposed by the Securities Act and the securities or "Blue Sky" laws of
certain jurisdictions).
(ii) Upon receipt by the Company of the Purchase Price, the
Shares shall be duly authorized, validly issued, fully paid and non-assessable.
Other than such action as may be requested by the NASD after Closing, the Shares
have been duly authorized for issuance by all requisite corporate and other
action, and the shares of Common Stock issuable upon conversion of the Shares
have been duly authorized for issuance by all requisite corporate and other
action and have been reserved for issuance, and such shares of Common Stock when
issued upon conversion of the Shares,
- 11 -
<PAGE> 12
and any shares of Dividend Stock issued as a dividend on or in respect of the
Shares will be validly issued, fully paid and non-assessable and free of any
legal or contractual preemptive rights.
Section 3.4 ORGANIZATION. Each of the Company and the Subsidiaries is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all requisite corporate or other power and
authority to own its properties and conduct its business as now conducted and
as described in the Prospectus and the SEC Reports; each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing in all
other jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure
to be so qualified would not have a Material Adverse Effect.
Section 3.5 POWER AND AUTHORITY; ENFORCEABILITY. (i) The Company has all
requisite corporate power and authority to execute, deliver and perform each of
its obligations under the Preferred Stock and the Certificate of Designation.
The Shares, when issued, will be in the form contemplated by the Certificate of
Designation. The issuance and sale of the Shares have been duly and validly
authorized by the Company and, when executed and delivered by the Company and
when delivered to and paid for by the Purchasers in accordance with the terms of
this Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company, entitled to the
benefits of the Certificate of Designation, and enforceable against the Company
in accordance with their terms, except that the enforcement thereof may be
subject to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and (ii) general principles of equity and the
discretion of the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
(ii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to engage in and perform the Transactions. This Agreement and the
Transactions have been duly and validly authorized by the Company and, when
executed and delivered in accordance with its terms (assuming the due
authorization, execution and delivery by the Purchasers), this Agreement will
have been duly executed and delivered and will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that the enforcement thereof may be subject to (A)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (B) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought (regardless of whether such enforcement is considered in
a proceeding in equity or at law). Approval of the Agreement and the
Transactions contemplated thereby by the Board of Directors of the Company
constitutes approval by the Board of Directors of the Company of the Purchasers
(or their respective Affiliates or designees) becoming Interested Stockholders
of the Company prior to the time the Purchasers (or their respective Affiliates
or designees) became Interested Stockholders within the meaning of Section 203
of the Delaware General Corporation Law.
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(iii) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under the Registration
Rights Agreement. The Registration Rights Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company
(assuming due authorization, execution and delivery by the Purchasers), will
have been duly executed and delivered and will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that (A) the enforcement thereof may be subject to (1)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (2) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law) and (B) any
rights to indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
Section 3.6 CONSENTS AND APPROVALS. No consent, approval,
authorization or order of any court or governmental agency or body, or third
party is required for the performance of this Agreement by the Company or the
consummation of the Transactions contemplated hereby, except such as have been
obtained or as may be requested by the National Association of Securities
Dealers, Inc. following the Closing Date. Neither the Company nor any of the
Subsidiaries is (i) in violation of its certificate or articles of
incorporation or organization or bylaws or regulations, (ii) in breach or
violation of any statute, judgment, decree, order, rule or regulation
applicable to any of them or any of their respective properties or assets,
except for any such breach or violation which would not have a Material Adverse
Effect, or (iii) in breach of or default under (nor has any event occurred
which, with notice or passage of time or both, would constitute a default
under) or in violation of any of the terms or provisions of any Contracts,
except for any such breach, default, violation or event which would not have a
Material Adverse Effect.
Section 3.7 NO VIOLATION. The execution, delivery and performance by the
Company of this Agreement, the Certificate of Designation, the Preferred Stock
and the Registration Rights Agreement and the consummation of the Transactions
contemplated hereby and thereby, and the fulfillment of the terms hereof and
thereof, will not conflict with or constitute or result in a breach of or a
default under (or an event which with notice or passage of time or both would
constitute a default under) or violation of or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the obligation
to create or impose) a lien on any property or assets of the Company or any
Subsidiary with respect to (i) the terms or provisions of any Contract, except
for any such conflict, breach, violation, default or event which would not have
a Material Adverse Effect, (ii) the certificate of incorporation or bylaws of
the Company or any of the Subsidiaries, or (iii) any Permit or statute,
judgment, decree, order, rule or regulation of any court or governmental agency
or body applicable to the Company, the Subsidiaries or any of their respective
properties or assets, except for any such conflict, breach or violation which
would not have a Material Adverse Effect.
Section 3.8 FINANCIAL STATEMENTS. The consolidated financial
statements of the Company and the related notes thereto included in the
Prospectus and the SEC Reports present fairly in all
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material respects the financial position, results of operations and cash flows
of the Company at the dates and for the periods to which they relate and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis, except as otherwise stated therein, and comply as
to form in all material respects with the applicable accounting requirements of
the Securities Act and the Exchange Act and the rules and regulations
thereunder. The selected financial and statistical data included in the
Prospectus present fairly in all material respects the information shown therein
and have been prepared and compiled on a basis consistent with the audited
financial statements included therein, except as otherwise stated therein, and
comply as to form in all material respects with the applicable accounting
requirements of the Securities Act and the rules and regulations thereunder.
KPMG Peat Marwick LLP is an independent public accounting firm within the
meaning of the Act.
Section 3.9 PRO FORMA FINANCIAL STATEMENTS. (i) The pro forma financial
statements (including the notes thereto) and other pro forma financial
information included in the Prospectus and the SEC Reports (A) comply as to form
in all material respects with the applicable requirements of Regulation S-X
promulgated under the Exchange Act, (B) have been prepared in accordance with
the Commission's rules and guidelines with respect to pro forma financial
statements and (C) have been properly computed on the bases described therein,
and (ii) the assumptions used in the preparation of the pro forma financial
statements and other pro forma financial information included in the Prospectus
and the SEC Reports are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
Section 3.10 LITIGATION. Except as described in the Prospectus and the
SEC Reports, there is not pending or, to the best knowledge of the Company,
threatened any action, suit, proceeding, inquiry or investigation to which the
Company or any of its Subsidiaries is a party, or to which any of their
respective properties or assets are subject, before or brought by any court,
arbitrator or governmental agency or body, which, if determined adversely to
the Company or any such Subsidiary, would have a Material Adverse Effect, or
which seeks to restrain, enjoin, prevent the consummation of or otherwise
challenge the issuance or sale of the Shares to be sold hereunder or the
consummation of the Transactions contemplated hereby.
Section 3.11 INTELLECTUAL PROPERTY. Each of the Company and the
Subsidiaries owns or possesses adequate licenses or other rights to use all
patents, trademarks, service marks, trade names, copyrights and know-how
necessary to conduct the businesses now or proposed to be operated by it as
described in the Prospectus and the SEC Reports, and neither the Company nor any
of the Subsidiaries has received any notice of infringement of or conflict with
(or knows of no such infringement of or conflict with) asserted rights of others
with respect to any patents, trademarks, service marks, trade names, copyrights
or know-how which, if such assertion of infringement or conflict were sustained,
would have a Material Adverse Effect.
Section 3.12 PERMITS. Each of the Company and the Subsidiaries possesses
all Permits, and has made or will have made prior to the Closing Date all
declarations and filings necessary or advisable to obtain any Permits, except
where the failure to obtain such Permits would not have a
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<PAGE> 15
Material Adverse Effect; each of the Company and the Subsidiaries has fulfilled
and performed all of its obligations with respect to such Permits and no event
has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment of
the rights of the holder of any such Permit, except for the lack of performance
under, or the revocation or termination of, any Permit which would not have a
Material Adverse Effect; and neither the Company nor any Subsidiary has received
any notice of any proceeding relating to revocation or modification of any such
Permit, except as described in the Prospectus and the SEC Reports and except
where such revocation or modification would not have a Material Adverse Effect.
Section 3.13 NO ADVERSE CHANGE; ABSENCE OF LIABILITIES. Since the
respective dates as of which information is given in the Prospectus and the SEC
Reports and except as described therein, there has been no material adverse
change, or any fact known to the Company which could reasonably be expected to
result in a material adverse change, in the general affairs, management,
business, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries taken as a whole, whether or not arising from
transactions in the ordinary course of business, or any loss of, or damage to,
properties (whether or not insured) which could reasonably be expected to affect
materially and adversely the general affairs, management, business, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole. Since the date of the latest balance sheet
presented in the SEC Reports, except as expressly disclosed in the Prospectus
and the SEC Reports, neither the Company nor any of its Subsidiaries has (i)
incurred or undertaken any liabilities or obligations, direct or contingent,
that are material to the Company and its Subsidiaries taken as a whole, (ii)
entered into any material transaction not in the ordinary course of business and
consistent with past practice or (iii) declared or paid any dividend or made any
distribution on any shares of its capital stock or redeemed, purchased or
otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares
of its capital stock (other than any dividends or distributions to the Company).
Section 3.14 TAX RETURNS. Each of the Company and Subsidiaries has filed
all returns and reports of or relating to any federal, state, local or foreign
income, franchise, ad valorem, excise, withholding or other taxes ("Tax
Returns") required to be filed on or before the date hereof, except where the
failure to so file such Tax Returns would not have a Material Adverse Effect,
and has paid all taxes shown as due on such Tax Returns. Other than tax
deficiencies which the Company or any of the Subsidiaries is contesting in good
faith and for which the Company or such Subsidiary has provided adequate
reserves, there is no claim against the Company or any of its Subsidiaries for
any taxes (including any penalties and interest), and no assessment, deficiency
or adjustment has been asserted or proposed that would have a Material Adverse
Effect.
Section 3.15 PROPERTIES AND CONTRACTS. Each of the Company and the
Subsidiaries has good and defensible title to all property (including interests
in oil and gas leases) described in the Prospectus and the SEC Reports as being
owned by it free and clear of all liens, charges, encumbrances or restrictions,
except as described in the Prospectus and the SEC Reports or to the extent the
failure to have such title or the existence of such liens, charges, encumbrances
or
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<PAGE> 16
restrictions would not have a Material Adverse Effect. All contracts and
agreements and all leases (other than interests in oil and gas leases), to which
the Company or any Subsidiary is a party or by which the Company or such
Subsidiary is bound are valid, binding and enforceable against the Company or
such Subsidiary and, to the knowledge of the Company, are valid, binding and
enforceable against the other party or parties thereto and are in full force and
effect with only such exceptions as would not have a Material Adverse Effect.
The Company and each of the Subsidiaries, and to their best knowledge, the other
parties thereto, are not in default under any of their respective contracts,
agreements or leases, which default would have a Material Adverse Effect.
Section 3.16 NO UNDISCLOSED LITIGATION AND CONTRACTS. There are no legal
or governmental proceedings involving or affecting the Company, any of the
Subsidiaries or any of their respective properties or assets that would be
required to be described in a prospectus pursuant to the Securities Act that are
not described in the Prospectus and the SEC Reports, nor are there any material
contracts or other documents that would be required to be described in a
prospectus pursuant to the Securities Act that are not described in the
Prospectus and the SEC Reports.
Section 3.17 ENVIRONMENTAL MATTERS. Except as would not have a Material
Adverse Effect, (i) each of the Company and the Subsidiaries is in compliance
with and not subject to liability under applicable Environmental Laws, (ii) each
of the Company and the Subsidiaries has made all filings and provided all
notices required under any applicable Environmental Law, and has in full force
and effect and is in compliance with all Permits required under any applicable
Environmental Laws, (iii) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the knowledge
of the Company, threatened against the Company or any Subsidiary under any
Environmental Law, (iv) no lien, charge, encumbrance or restriction has been
recorded under any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company or any Subsidiary,
(v) neither the Company nor any Subsidiary has received notice that it has been
identified as a potentially responsible party under CERCLA, or any comparable
state law, (vi) no property or facility of the Company or any Subsidiary is (A)
listed or proposed for listing on the National Priorities List under CERCLA or
(B) listed in the Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or on any comparable
list maintained by any state or local governmental authority; and (vii) there
has been no exposure of any person or property to any hazardous substances in
connection with the operations and activities of the Company and each Subsidiary
which could reasonably be expected to give rise to a claim for damages or
compensation.
Section 3.18 LABOR MATTERS. There is no strike, labor dispute,
slowdown or work stoppage with the employees of the Company or the Subsidiaries
which is pending or, to the knowledge of the Company, threatened, and none of
the Company or any of the Subsidiaries has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years. There
are no collective bargaining agreements or multiemployer plans covering the
employees of the Company or any of its Subsidiaries.
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<PAGE> 17
Section 3.19 INSURANCE. Each of the Company and the Subsidiaries carries
insurance in such amounts and covering such risks in such amounts as are prudent
and customary for persons of a similar size and reputation in the businesses in
which they are engaged.
Section 3.20 ERISA MATTERS. Neither the Company nor any Subsidiary has
any liability for any prohibited transaction or funding deficiency or any
complete or partial withdrawal liability with respect to any pension, profit
sharing or other plan which is subject to ERISA, to which the Company or any
Subsidiary makes or ever has made a contribution and in which any employee of
the Company or any Subsidiary is or has ever been a participant. With respect
to such plans, each of the Company and the Subsidiaries is in compliance in all
material respects with all applicable provisions of ERISA.
Section 3.21 BOOKS AND RECORDS. Each of the Company and the Subsidiaries
(i) makes and keeps books and records which are accurate in all material
respects and (ii) maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability for its
assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
Section 3.22 NO INVESTMENT COMPANY. Neither the Company nor any
Subsidiary will be an "investment company" or "promoter" or "principal
underwriter" for an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder.
Section 3.23 REGISTRATION RIGHTS. No holder of securities of the Company
(other than the Shares) will be entitled to have such securities registered
under the registration statements required to be filed by the Company pursuant
to the Registration Rights Agreement other than registration rights granted
pursuant to that certain Consolidation Agreement dated as of September 13, 1996,
as amended October 8, 1996, by and among the Company, Costilla Energy, L.L.C.,
CSL Management Corporation, Valley Gathering Company, Cadell S. Liedtke, Michael
J. Grella, Henry G. Musselman and NationsBanc Capital Corporation.
Section 3.24 SOLVENCY MATTERS. Immediately after the consummation of the
transactions contemplated by this Agreement and the application of the proceeds
of the Shares, the fair value and present fair saleable value of the assets of
each of the Company and the Subsidiaries will exceed the sum of its stated
liabilities and identified contingent liabilities; neither the Company nor any
of the Subsidiaries is, or will be after giving effect to the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, (i) left with unreasonably small capital with
which to carry on its business as it is proposed to be conducted, (ii) unable to
pay its debts (contingent or otherwise) as they mature, or (iii) otherwise
insolvent.
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Section 3.25 NO INTEGRATION. Neither the Company nor any of the
Subsidiaries nor any of their respective Affiliates (as defined in Rule 501(b)
of Regulation D under the Securities Act) has directly, or through any agent,
(i) sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of any "security" (as defined in the Securities Act) which is or could
be integrated with the sale of the Shares in a manner that would require the
registration under the Securities Act of the Shares or (ii) engaged in any form
of general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) in connection with the offering of the
Shares or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act.
Section 3.26 NO REGISTRATION. It is not necessary in connection with the
offer, sale and delivery of the Shares to the Purchasers in the manner
contemplated by this Agreement to register any of the Shares under the
Securities Act or to register or qualify such offer, sale and delivery under any
applicable state "blue sky" or securities laws, based on available non-public
offering exemptions which are based, in part, on the representations of the
Purchasers in Section 4.3.
Section 3.27 RULE 144A MATTERS. No securities of the Company are of the
same class (within the meaning of Rule 144A under the Securities Act) as the
Preferred Stock and listed on a national securities exchange registered under
Section 6 of the Exchange Act, or quoted in a U.S.
automated inter-dealer quotation system.
Section 3.28 BROKER'S OR FINDER'S COMMISSIONS. No broker's or finder's
fees or commissions will be payable by the Company in connection with the
issuance and sale of the Shares or the Transactions.
Section 3.29 NO RESTRICTIONS ON AFFILIATES. The Company is not a party
to any agreement that would purport to impose restrictions or limitations on
its Affiliates (other than its controlled Affiliates), including Purchasers and
their respective Affiliates after the Transactions.
Section 3.30 USE OF PROCEEDS; MARGIN REGULATIONS. All proceeds from the
issuance of Shares will be used by the Company only in accordance with the
provisions of Section 5.1. No part of the proceeds from the issuance of Shares
will be used by the Company to purchase or carry any "margin stock" (within the
meaning of the regulations referred to in the following sentence) or to extend
credit to others for the purpose of purchasing or carrying any "margin stock."
Neither the purchase of the Shares nor the use of the proceeds thereof will
violate or be inconsistent with the provisions of Regulations G, T, U or X of
the Federal Reserve Board.
Section 3.31 PUBLIC UTILITY HOLDING COMPANY ACT MATTERS. The Company and
each of the Subsidiaries (i) does not and will not own or operate any facility
used for the generation, transmission or distribution for sale of electric
energy or any facility used for the retail distribution of natural or
manufactured gas, each within the meaning of the Public Utility Holding Company
Act of 1935, as amended and the rules and regulations of the Commission
thereunder (the "1935 Act"), (ii) is not and will not be an "electric utility
company" or a "gas utility company" within the meaning of the 1935 Act, (iii) is
not and will not be (A) a "holding company," (B) a "subsidiary company,"
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an "affiliate" or "associate company" of a "holding company" or (C) an
"affiliate" of a "subsidiary company" of a "holding company," each within the
meaning of the 1935 Act, and (iv) is not and will not be subject to regulation
as a public utility, public utility holding company (except to the extent
certain acquisitions may be subject to the regulatory approval of the Commission
pursuant to Section 9(a)(2) of the 1935 Act) or public service company (or
similar designation) by any state in the United States, by the United States, by
any foreign country or by any agency or instrumentality of any of the foregoing;
and (v) is not subject to any other federal or state law or regulation which
purports to restrict or regulate its ability to borrow money.
Section 3.32 NO BURDENSOME RESTRICTIONS. Neither the Company nor its
Subsidiaries is a party to any agreement or instrument or subject to any other
obligation or any charter or corporate restriction or any provision of any
applicable law, rule or regulation which could have a Material Adverse Effect.
Section 3.33 NO ILLEGAL OR IMPROPER TRANSACTIONS. Neither the Company
nor any Subsidiary has, nor has any director, officer or employee of the
Company or any Subsidiary, directly or indirectly, used funds or other assets
of the Company or any Subsidiary, or made any promise or undertaking in such
regard, for (a) illegal contributions, gifts, entertainment or other expenses
relating to political activity; (b) illegal payments to or for the benefit of
governmental officials or employees, whether domestic or foreign, (c) illegal
payments to or for the benefit of any person, firm, corporation or other
entity, or any director, officer, employee, agent or representative thereof;
(d) gifts, entertainment or other expenses that jeopardize the normal business
relations between the Company or any Subsidiary and any of its customers; (e)
the establishment or maintenance of a secret or unrecorded fund; or (f)
participated in or co-operated with an international boycott as defined in
Section 999 of the Code; and there have been no knowingly false or fictitious
entries made in the books or records of the Company or any Subsidiary.
Section 3.34 COMPLETENESS OF INFORMATION. The copies of written
materials that the Company has delivered to or made available to the Purchasers
constitute accurate copies of the originals thereof, and the files and records
that the Company has delivered to or made available to the Purchasers, together
with the SEC Reports and the Prospectus constitute all material written factual
information in the possession of the Company or its affiliates concerning the
Company and its Subsidiaries. The Company is not aware of any fact, matter or
circumstance that has not been disclosed to the Purchasers that does or may
render any such materials, files, records, or other information untrue,
inaccurate, or misleading in any material respect. If any dispute arises as to
whether or not any matter was orally disclosed to the Purchasers, the Company
will have the burden of proving that such matters were in fact so disclosed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers hereby severally represent and warrant to the Company as of
the date hereof as follows:
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Section 4.1 AUTHORITY. Each of the Purchasers has all requisite
corporate or partnership power and authority to execute and deliver this
Agreement and the Registration Rights Agreement and to consummate the
Transactions to be performed by the Purchasers. The execution and delivery of
this Agreement and the Registration Rights Agreement and the consummation of the
Transactions to be performed by the Purchasers have been duly and validly
authorized by all necessary action on the part of the Board of Directors or
General Partner of the Purchaser, as the case may be, and no other corporate or
similar proceedings are necessary to authorize the execution and delivery of
this Agreement and the Registration Rights Agreement by the Purchasers or to
consummate the Transactions to be performed by the Purchasers. This Agreement
and the Registration Rights Agreement has been duly and validly executed and
delivered by each of the Purchasers and, assuming this Agreement and the
Registration Rights Agreement constitute valid and binding obligations of the
Company, this Agreement and the Registration Rights Agreement constitute a valid
and binding agreement of each of the Purchasers, enforceable against it in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
Section 4.2 CONSENTS AND APPROVAL; NO VIOLATION. Neither the
execution and delivery of this Agreement and the Registration Rights Agreement
by the Purchasers, the consummation of the Transactions to be performed by the
Purchasers, nor compliance by the Purchasers, with any of the provisions hereof
will (i) conflict with or result in any breach of any provisions of the
Articles of Incorporation, by-laws or Agreement of Limited Partnership of such
Purchaser, (ii) require any material consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, except for
consents, approvals, authorizations, permits, filings or notifications which
have been obtained or made, (iii) result in a default (with or without due
notice or lapse of time or both) or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or provisions
of any material (meaning for purposes of this representation and warranty with
respect to Purchasers only those creating a monetary liability of $50,000,000
or more) indentures, loan or credit agreements, receivables sale or financing
agreements, lease financing agreements, capital leases, mortgages, security
agreements, bonds and notes (except bonds and notes issued pursuant to the
aforesaid indentures and loan or credit agreements), and guaranties of any such
obligations to which such Purchaser is a party or by which such Purchaser or
any of its assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained, or (iv) violate any material order, writ,
injunction, decree, statute, rule or regulation applicable to such Purchaser or
any of its assets.
Section 4.3 SECURITIES LAWS. Each Purchaser has such knowledge and
experience in financial and business matters as enables it to evaluate the
merits and risks of an investment in the Shares. Each Purchaser is an
"accredited investor" as such term is defined in Rule 501 under the Securities
Act. Each Purchaser is acquiring the Shares for its own account and not with the
view to
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resale or redistribution thereof in violation of the Securities Act. Each
Purchaser acknowledges that it may not transfer the Shares or the Common Stock
underlying the Shares except pursuant to an effective registration statement
under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act, and that a legend to such effect shall be
included on the certificate representing the Shares.
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 USE OF PROCEEDS. The entire amount of the cash proceeds
from the issuance of the Shares shall be used by the Company on and after the
Closing Date to reduce indebtedness under the Company's revolving credit
facility and for general corporate purposes.
Section 5.2 CORPORATE EXISTENCE. For so long as the Purchasers or any
of their respective Affiliates or designees Own Company Securities, the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect the corporate existence, rights (charter and statutory) and
franchises of the Company and each of its Subsidiaries; provided, however, that
the Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries as
a whole and that the loss thereof is not disadvantageous in any material respect
to the Purchasers.
Section 5.3 COMPLIANCE WITH LAWS. For so long as the Purchasers or
any of their respective Affiliates or designees Own Company Securities, the
Company shall and shall cause each of its Subsidiaries to comply with all
applicable federal, state and local laws, rules and regulations, including,
without limitation, Environmental Laws, except where failure to comply will not
have a Material Adverse Effect.
Section 5.4 MAINTENANCE OF PROPERTIES AND PERMITS. For so long as the
Purchaser or any of their respective Affiliates or designees Own Company
Securities, the Company will (i) cause all properties (except as to properties
not operated by the Company or a Subsidiary, as to which the Company shall use
commercially reasonable efforts) owned by the Company or any Subsidiary or used
or held for use in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, and (ii)
keep in full force and effect or obtain valid Permits and fulfill and perform
all obligations with respect to such Permits as are necessary or advisable to
the operation of the business of the Company and the Subsidiaries, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the maintenance of any of such properties or Permits if such
discontinuance is not disadvantageous in any material respect to the Purchasers
and would not have a Material Adverse Effect.
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Section 5.5 ACCOUNTING PRACTICES. For so long as the Purchasers or
any of their respective Affiliates or designees Own Company Securities, the
Company shall not, and shall not permit any of its Subsidiaries to, materially
change any method of accounting employed in the preparation of their financial
statements from the methods employed in the preparation of the audited
consolidated financial statements of the Company for the year ended December
31, 1997, unless required to conform to generally accepted accounting
principles, recommended by the Company's independent auditors or approved in
writing by the Purchaser, which approval will not be unreasonably withheld or
delayed.
Section 5.6 RESTRICTIONS ON AFFILIATES. For so long as the Purchaser
or any of their respective Affiliates or designees Own Company Securities, the
Company and each of the Subsidiaries will not become a party to or suffer to
exist any agreement that would purport to impose restrictions or limitations on
the Purchasers and their respective Affiliates as Affiliates of the Company or
any of the Subsidiaries after the Closing Date (other than restrictions on
transactions with the Company and its Subsidiaries) without, in each case, the
prior written consent of the affected Purchaser.
Section 5.7 ACCESS TO INFORMATION. Between the date hereof and the
Closing Date, the Company will afford to the Purchasers and their authorized
representatives full access to the plant, offices, warehouses, or other
facilities and properties, including oil and gas properties, and to the books
and records of the Company and its Subsidiaries, will permit the Purchasers and
their representatives to make such reasonable inspections as they may require
and will cause its officers and those of its Subsidiaries to furnish the
Purchasers and their representatives with such financial and operating data,
environmental assessment and other information with respect to the business,
assets and properties of the Company and its Subsidiaries, as applicable, as
the Purchasers and their representatives may from time to time request. No
inspection or examination by the Purchasers or their representatives will
constitute a waiver of any claim against the Company for misrepresentation or
breach of this Agreement. Purchasers shall hold strictly confidential all
information obtained as a result of such access; provided, that Purchasers
shall not be obligated to hold confidential information which (A) was or
becomes generally available to the public other than as a result of a
disclosure by the Purchasers or their representatives, (B) was or becomes
available to the Purchasers on a nonconfidential basis from a source other than
the Company or its representatives, provided that such source is not bound by a
confidentiality agreement with the Company or otherwise prohibited from
transmitting the information to the Purchasers, or (C) is required to be
disclosed in order to comply with any applicable law, order, regulation or
ruling or the rules of any national securities exchange.
Section 5.8 SEC FILINGS. For so long as the Purchasers or any of their
respective Affiliates or designees Own Company Securities, the Company covenants
and agrees that it will (i) maintain on a current basis the filing of all
reports required to be filed by the Company pursuant to the Exchange Act and the
rules and regulations thereunder and promptly deliver to the Purchasers or their
Affiliates or designees copies of all such reports; (ii) use its reasonable best
efforts to achieve and maintain qualification for the use of Form S-3 (or any
successor form) under the Securities Act;
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and (iii) cooperate with the Purchasers whenever the Purchasers wish to dispose
of any securities of the Company owned by either of them or any of their
respective Affiliates or designees under Rule 144 and/or Rule 144A under the
Securities Act, to the full extent feasible in order to consummate such
disposition.
Section 5.9 CERTAIN PUBLIC UTILITY MATTERS. For so long as the
Purchasers or any of their respective Affiliates or designees Own Company
Securities, neither the Company nor any Subsidiary will take any action that
would be inconsistent with the representations contained in Section 3.31
hereof.
Section 5.10 RESERVATION OF COMMON STOCK. The Company has reserved
for issuance and shall at all times keep reserved, out of the authorized and
unissued shares of the Company's Common Stock, a number of shares sufficient to
provide for the exercise of the rights of conversion represented by the Shares
and shall keep such shares free of any legal or contractual preemptive rights.
The Company will take all steps necessary to keep the shares of Common Stock
issuable upon conversion of the Shares duly authorized for issuance by all
requisite corporate and other action, and to assure that such shares of Common
Stock when issued upon conversion of the Shares, and any shares of Dividend
Stock issued as a dividend on or in respect of the Shares will be validly
issued, fully paid and non-assessable and free of any legal or contractual
preemptive rights.
Section 5.11 QUOTATION ON NASDAQ. The Company shall take all
necessary steps to cause the Common Stock issuable upon conversion of the
Shares and any shares of Dividend Stock issued as a dividend on or in respect
of the Shares to be listed for quotation on the NASDAQ National Market, and the
Company will file any and all agreements, forms and other documents, including,
without limitation, The NASDAQ National Market Notification Form for Listing of
Additional Shares and take all other action necessary for the listing of the
Common Stock issuable upon conversion of the Shares and any shares of Dividend
Stock issued as a dividend on or in respect of the Shares (or, in the case of
Dividend Stock, before the date of issuance thereof). The Company shall
maintain the designation and quotation, or listing, of its Common Stock on the
NASDAQ National Market (or on the New York Stock Exchange or the American Stock
Exchange) until the conversion, redemption or retirement of all the Preferred
Stock.
ARTICLE VI
PURCHASERS' CONDITIONS
The obligations of the Purchasers to effect the closing of the Shares on
the Closing Date are subject to the satisfaction of the following conditions any
one or more of which may be waived by the Purchasers.
Section 6.1 REPRESENTATIONS AND COVENANTS. The representations and
warranties contained in Article III hereof shall be true and correct in all
material respects on and as of the Closing Date as if made, and shall be deemed
to have been remade, on and as of the Closing Date. The Company shall have
complied with all of its obligations contained herein the performance of
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which is required on or prior to the Closing Date. The Purchasers shall have
received a certificate to the foregoing effect executed by an executive officer
of the Company.
Section 6.2 CERTIFICATE OF DESIGNATION. The Certificate of
Designation in the form of Exhibit B shall have been duly adopted by all
requisite corporate action and filed with the Secretary of State of the State
of Delaware on or before the Closing Date, and shall not have been amended or
modified.
Section 6.3 REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement in the form of Exhibit A shall have been duly adopted by all requisite
corporate action, executed and delivered by the Company and be in full force and
effect.
Section 6.4 APPOINTMENT OF DIRECTOR. If requested by Purchasers, one
designee of Purchaser shall have been appointed to the Board of Directors of the
Company.
Section 6.5 DUE DILIGENCE. The Purchasers shall, prior to the Closing
Date, be satisfied, in their sole discretion, with the results of their legal
and business due diligence of the Company.
Section 6.6 MATERIAL ADVERSE EFFECT. Since December 31, 1997, there
shall have occurred no event, act, or condition which has had, or could have, a
Material Adverse Effect.
Section 6.7 REQUIRED CONSENTS AND APPROVALS. (i) The Transactions
shall have been approved by the Board of Directors or General Partner of each
of the Purchasers, as applicable, and the Company (including approval by the
Board of Directors of the Company, before the Purchasers and their respective
Affiliates and designees become Interested Stockholders of the Company, of the
Purchasers and their respective Affiliates and designees becoming Interested
Stockholders of the Company within the meaning of Section 203 of the Delaware
General Corporation Law), and (ii) all other filings, consents, approvals and
waivers necessary to the consummation of the purchase and sale of the Shares
and the Transactions or as requested by the Purchasers shall have been
obtained.
Section 6.8 NASD APPROVAL. All applications and related exhibits
and other materials necessary for the approval of the listing and trading on
the NASDAQ National Market System of the shares of Common Stock issuable upon
the conversion of the Preferred Stock shall have been filed with the National
Association of Securities Dealers, Inc.
Section 6.9 PAYMENTS. The Company shall have executed and delivered
to ECTSC a fee letter in a form reasonably acceptable to ECTSC and shall have
paid to ECTSC all fees required thereunder, and shall have paid to or on behalf
of the Purchaser all amounts payable pursuant to Section 11.6.
Section 6.10 OPINION OF COUNSEL. The Purchaser shall have received an
opinion of Cotton, Bledsoe, Tighe & Dawson, the Company's counsel, at the
Closing, in the form reasonably requested by the Purchaser.
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Section 6.11 ADDITIONAL DOCUMENTS. The Purchaser shall have
received such other certificates, instruments and documents from the Company
and each Subsidiary as it may reasonably request pursuant to this Agreement.
ARTICLE VII
COMPANY'S CONDITIONS
The obligations of the Company to issue and sell the Shares are
subject to the satisfaction of the following conditions any one or more of
which may be waived by the Company:
Section 7.1 REPRESENTATIONS AND COVENANTS. The representations and
warranties contained in Article IV hereof shall be true and correct in all
material respects on and as of the Closing Date as if made, and shall be deemed
to be remade, on and as of the Closing Date. The Purchasers shall have complied
with all of its obligations contained herein performance of which is required on
or prior to the Closing Date. The Company shall have received a certificate to
the foregoing effect executed by an officer of ECT.
Section 7.2 REQUIRED CONSENTS AND APPROVALS. (i) The Transactions
shall have been approved (A) by the Board of Directors or General Partner of
each of the Purchasers, as applicable, and the Company, and (B) the
stockholders of the Company if approval is required by the rules of NASDAQ or
requested by officials of the NASD, and (ii) all other consents, approvals and
waivers necessary to the consummation of the purchase and sale of the Shares
and the Transactions shall have been obtained.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 TERMINATION. The transactions contemplated hereby may be
abandoned at any time prior to the Closing, as follows:
(i) By the mutual written consent of the Company and each
of the Purchasers;
(ii) by the Company, on one hand, or the Purchasers, on the
other hand, if there shall have been a breach by the other party of any of the
covenants contained herein or if any representation or warranty made by any
other party is untrue in any material respect, in either case in a manner not
capable of being cured on or before the Closing Date.
Section 8.2 SURVIVAL; FAILURE TO CLOSE. All representations,
warranties, indemnities, and covenants contained herein or made in writing by
any party in connection herewith will survive the execution and delivery of
this Agreement and any investigation made at any time by or on behalf of
Purchasers, except that any claim for a breach of a representation or warranty
must be brought within the period set forth in Section 10.3. Notwithstanding
anything herein to the contrary, in the event the funding by Purchasers of
their investment has not occurred on or before June 30, 1998, because
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<PAGE> 26
one or more conditions set forth in Article VI or Article VII has not been
satisfied, either party may terminate its obligations under this Agreement by
written notice to the other; provided, however, that the provisions of this
Section 8.2 and Section 11.6 shall survive any such termination provided
further, however that no party may terminate this Agreement if such funding has
failed to occur because such party (or any Affiliate thereof) willfully or
negligently fails to perform or observe its material agreements and covenants
hereunder.
ARTICLE IX
OTHER PROVISIONS
Section 9.1 BROKERAGE FEES AND COMMISSIONS. Each party agrees to
pay, and to indemnify and hold harmless the other party from and against
liability for, any compensation to any finder, broker, agent, financial
advisor, or other intermediary (collectively, an "Intermediary") retained by
such party, or any other Intermediary in connection with the transactions
contemplated by this Agreement, and the fees and expenses of defending against
such liability or alleged liability.
Section 9.2 BUSINESS OPPORTUNITY MATTERS. (i) To the fullest extent
permitted by law, (A) the Company and Purchasers acknowledge and agree that
neither of the Purchasers nor any of their respective Affiliates or designees,
including any person(s) nominated by Purchasers pursuant to the Certificate of
Designation and serving as a member of the Board of Directors of the Company
(the "Designated Directors") shall be expressly or implicitly restricted or
proscribed pursuant to this Agreement, the relationship that exists between
Purchasers (or either of them) and the Company or otherwise, from engaging in
any type of business activity or owning an interest in any type of business
entity, regardless of whether such business activity is (or such business entity
engages in businesses that are) in direct or indirect competition with the
businesses or activities of the Company, any of the Subsidiaries or any of their
respective Affiliates. Without limiting the foregoing and to the fullest extent
permitted by law, Purchasers and the Company acknowledge and agree that (1)
neither the Company, any of the Subsidiaries or any of their respective
Affiliates nor any other person shall have any rights, by virtue of this
Agreement, the relationship that exists between Purchasers (or either of them)
and the Company or otherwise, in any business venture or business opportunity of
either Purchaser or any of their respective Affiliates or designees or the
Designated Directors, and neither of the Purchasers nor their respective
Affiliates or designees or the Designated Directors shall have any obligation to
offer any interest in any such business venture or business opportunity to the
Company, any of the Subsidiaries or any of their respective Affiliates or any
other person, or otherwise account to any of such persons in respect of any such
business ventures, (2) the activities of each Purchaser or any of their
respective Affiliates or designees or the Designated Directors that are in
direct or indirect competition with the activities of the Company, any of the
Subsidiaries or any of their respective Affiliates are hereby approved by the
Company, and (3) by virtue of this Agreement or the Transactions it shall not be
deemed a breach of any fiduciary or other duties, if any, and whether express or
implied, that may be owed by either Purchaser or their respective Affiliates or
designees or the Designated Directors to the Company, any of the Subsidiaries or
any of their respective Affiliates or the Company's stockholders for either of
the Purchasers to permit itself or one of its Affiliates or designees or the
Designated Directors to engage
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in a business opportunity in preference or to the exclusion of the Company, any
of the Subsidiaries or any of their respective Affiliates or any other person.
(ii) (A) Specifically and without limiting the generality of
the foregoing, the Designated Directors may be directors or employees of the
general partner of Joint Energy Development Investments II Limited Partnership,
directors or employees of Enron Corp. or any of its respective Subsidiaries or
Affiliates, or directors or advisors of entities in which Enron Corp., its
Subsidiaries or Affiliates or Joint Energy Development Investments II Limited
Partnership have invested or may invest (collectively, the "Positions"). In such
Positions, such Designated Directors may encounter business opportunities that
the Company, any of the Subsidiaries or any of their respective Affiliates may
desire to pursue. The Company recognizes that such opportunities may include,
but shall not be limited to, identifying, pursuing and investing in entities,
engaging investment banking firms or other underwriters for access to public and
private securities markets, and obtaining investment funds from institutional
and private investors or others.
(B) Therefore, the Company agrees that the Purchasers,
their respectivec Affiliates or designees and the Designated Directors shall
have no obligation to the Company, any of the Subsidiaries or any of their
respective Affiliates, the other stockholders of the Company or to any other
person or entity to present any such business opportunity to the Company before
presenting and allowing time to develop such opportunity to any other entities
other than such opportunities presented to a Designated Director solely in, and
as a direct result of, his or her capacity as a director of the Company;
provided, that the preceding shall in no way allow a natural person or
Designated Director to usurp a corporate opportunity solely for his or her
personal benefit without first presenting and allowing time to develop such
opportunity to the entities set forth above. Notwithstanding the preceding
sentence, if an opportunity is separately presented to and developed by any such
other entity, including Enron Corp. or any of its respective Subsidiaries or
Affiliates, such entity shall be free to pursue such opportunity even if it came
to the Designated Director's attention solely as a result of and in his or her
capacity as a director of the Company.
(C) The Company acknowledges that, in any such case, to
the extent a court might hold that the conduct of such activity is a breach of a
duty to the Company, any of the Subsidiaries or any of their respective
Affiliates, or to any other person or entity (but only to the extent the Company
has the right to assert the claim on behalf of such other person or entity), the
Company hereby waives any and all claims and causes of action that the Company,
any of the Subsidiaries or any of their respective Affiliates or any other
person or entity may have for such activities.
(D) The Company further agrees that the waivers and
agreements in this Section 9.2 identify certain types and categories of
activities which do not violate the Designated Director's duty of loyalty to the
Company, and such types and categories are not manifestly unreasonable. The
waivers and agreements in this Section 9.2 apply equally to activities conducted
in the future and that have been conducted in the past.
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(ii) For purposes of this Section 9.2, the term "Affiliate"
when used to refer to Affiliates of Purchaser, shall exclude the Company, each
of the Subsidiaries and each of their respective Affiliates.
Section 9.3 NO OBLIGATION. The Company and the Purchasers
acknowledge and agree that the Company shall not be obligated to utilize the
services of Purchasers or any of their respective Affiliates with respect to
any future business venture or opportunity which is or may become available to
the Company or any of its Affiliates.
Section 9.4 BEST EFFORTS. Subject to the terms and conditions herein
provided, the Company and the Purchasers agree to use their best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transactions (including obtaining the approval
of the Stockholders of the Company if requested by officials of the NASD).
Section 9.5 PUBLIC ANNOUNCEMENTS. The Company and the Purchasers will
consult with each other before issuing any press release or otherwise making any
public statements with respect to the existence of this Agreement or the
Transactions and shall not issue any press release or make any public statement
prior to such consultation, except as may be required by law or by obligations
pursuant to any listing agreements between the Company and NASDAQ.
ARTICLE X
INDEMNIFICATION
Section 10.1 INDEMNIFICATION BY THE COMPANY. The Company shall, to
the fullest extent permitted by law, and in addition to any such rights which
any Indemnified Party (as defined herein) may have pursuant to statute, the
Company's Certificate of Incorporation or other organizational or constituent
documents of the Company, or otherwise, indemnify and hold harmless each
Purchaser (including its subsidiaries, Affiliates, designees and persons
serving as officers, directors, partners, employees, representatives and
agents, each an "Indemnified Party") from and against any and all losses,
claims, damages, taxes, fines, penalties, costs, expenses and liabilities,
joint or several, including any investigation, legal and other expenses
incurred in connection with the investigation, defense, settlement or appeal
of, and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted ("Losses" or "Loss"), to which they, or any of them, may suffer
or incur which arise or result from the breach of any representation, warranty,
covenant or agreement of the Company under this Agreement or in any
certificate, schedule or exhibit delivered pursuant hereto, or by reason of any
claim, action or proceeding arising out of or resulting from a breach of such
representations, warranties covenants or agreements.
Section 10.2 INDEMNIFICATION PROCEDURES. Any Indemnified Party that
proposes to assert the right to be indemnified under this Article X shall,
promptly after receipt of notice of commencement of any claim or action against
such party or upon the discovery by such Indemnified Party of the Loss suffered
by it, in either case in respect of which a claim is to be made against the
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Company (the "Indemnifying Party") under Section 10.1, notify the Indemnifying
Party of the commencement of such action or the occurrence of such Loss,
enclosing a copy of all papers served or a brief description of the facts
resulting in such Loss, but the omission so to notify the Indemnifying Party
shall not relieve the Indemnifying Party from any liability that the
Indemnifying Party may have to any Indemnified Party under the foregoing
provisions of this Article X unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the Indemnifying
Party. The Indemnified Party shall have the right to retain its own counsel in
any such action and all reasonable fees, disbursements and other charges
incurred in the investigation, defense and/or settlement of such action shall be
advanced and reimbursed by the Indemnifying Party promptly as they are incurred;
provided, however, that the Indemnified Party shall agree to repay any expenses
so advanced hereunder if it is ultimately determined by a court of competent
jurisdiction that the Indemnified Party to whom such expenses are advanced is
not entitled to be indemnified as a matter of law. So long as the Indemnified
Party has reasonably concluded that no conflict of interest exists and that the
Indemnifying Party is financially capable of fulfilling its obligations under
this Article X, the Indemnifying Party may assume the defense of any action
hereunder with counsel reasonably satisfactory to the Indemnified Party;
provided, however, that the Indemnifying Party shall not settle any action or
claim for which indemnification is sought under this Article X without the prior
written consent of the Indemnified Party. In the event that the Indemnifying
Party does not assume defense of any action, it shall nonetheless have the right
to participate in (but not control) such action. The Indemnifying Party shall
not be liable for any settlement of any action or claims effected without its
written consent; provided that if such consent is withheld and such action or
claims are subsequently settled or prosecuted for a greater amount, such
Indemnifying Party or Parties shall be liable for the full amount of such
losses, damages, liabilities and expenses (including without limitation any
interest and penalties related thereto) without regard to any limitations on
indemnification set forth in this Article X.
Section 10.3 TERMINATION. The Company's obligation to indemnify the
Purchasers as set forth in this Section 10 shall terminate as to any Loss
asserted after the close of business in Houston, Texas on the third anniversary
of the Closing Date, other than any Loss suffered as a result of the breach of
any covenant contained in Sections 5.2, 5.3, 5.4, 5.5, 5.6, 5.8, and 5.9, which
may be asserted hereunder at any time the Purchasers or their respective
Affiliates and designees Own Company Securities, or as a result of the breach of
any covenant contained in Sections 5.10, 5.11 or the agreements set forth in
Section 9.2 and 11.6, which may be asserted indefinitely.
ARTICLE XI
MISCELLANEOUS
Section 11.1 DISPUTE RESOLUTION. (i) Agreement to Arbitrate. If
Purchasers and the Company are unable to resolve any controversy, dispute,
claim or other matter in question arising out of, or relating to, this
Agreement, the Registration Rights Agreement, any provision hereof or thereof,
the alleged breach hereof or thereof, or in any way relating to the subject
matter of this Agreement, the Transactions or the relationship between the
parties created by this Agreement, including questions concerning the scope and
applicability of this Section 11.1, whether sounding
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in contract, tort or otherwise, at law or in equity, under State or federal law,
whether provided by statute or common law, for damages or any other relief (any
such controversy, dispute, claim or other matter in question, a "Dispute"), on
or before the 30th day following the receipt by the Company or Purchasers of
written notice of such Dispute from the other party(ies), which notice describes
in reasonable detail the nature of the dispute and the facts and circumstances
relating thereto, the Company or Purchasers may, by delivery of written notice
to the other party(ies), require that a senior officer of the Company and of ECT
meet at a mutually agreeable time and place in an attempt to resolve such
Dispute. Such meeting shall take place on or before the 15th day following the
date of the notice requiring such meeting, and if the Dispute has not been
resolved within 15 days following such meeting, the Company or Purchasers may
cause such Dispute to be resolved by binding arbitration in Houston, Texas, by
submitting such Dispute for arbitration within 30 days following the expiration
of such 15-day period. This agreement to arbitrate shall be specifically
enforceable against the parties.
(ii) The arbitration shall be governed by and conducted
pursuant to the Federal Arbitration Act: It is the intention of the parties that
the arbitration shall be governed by and conducted pursuant to the Federal
Arbitration Act, as such Act is modified by this Section 11.1. If it is
determined the Federal Arbitration Act is not applicable to this Agreement
(e.g., this Agreement does not evidence a transaction involving interstate
commerce), this agreement to arbitrate shall nevertheless be enforceable
pursuant to applicable State law. While the arbitrators may refer to Commercial
Arbitration Rules of the American Arbitration Association for guidance with
respect to procedural matters, the arbitration proceeding shall not be
administered by the American Arbitration Association but instead shall be
self-administered by the parties until the arbitrators are selected and then the
proceeding shall be administered by the arbitrators.
(iii) Authority of the Arbitrators: The validity,
construction, and interpretation of this agreement to arbitrate, and all
procedural aspects of the arbitration conducted pursuant to this agreement to
arbitrate, including but not limited to, the determination of the issues that
are subject to arbitration (i.e., arbitrability), the scope of the arbitrable
issues, allegations of "fraud in the inducement" to enter into this Agreement or
this arbitration provision, allegations of waiver, laches, delay or other
defenses to arbitrability, and the rules governing the conduct of the
arbitration (including the time for filing an answer, the time for the filing of
counterclaims, the times for amending the pleadings, the specificity of the
pleadings, the extent and scope of discovery, the issuance of subpoenas, the
times for the designation of experts, whether the arbitration is to be stayed
pending resolution of related litigation involving third parties not bound by
this arbitration agreement, the receipt of evidence, and the like), shall be
decided by the arbitrators.
(iv) Choice of law: The rules of arbitration of the Federal
Arbitration Act, as modified by this Agreement, shall govern procedural aspects
of the arbitration; to the extent the Federal Arbitration Act as modified by
this Agreement does not address a procedural issue, the arbitrators may refer
for guidance to the Commercial Arbitration Rules then in effect with the
American Arbitration Association. The arbitrators may refer for guidance to the
Federal Rules of Civil Procedure, the Federal Rules of Civil Evidence, and the
federal law with respect to the
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discovery process, applicable legal privileges, and admissible evidence. In
deciding the substance of the parties' Dispute, the arbitrators shall refer to
the substantive laws of the State of Texas for guidance (excluding Texas
conflict-of-law rules or principles that might call for the application of the
law of another jurisdiction). Provided, however, IT IS EXPRESSLY AGREED THAT
NOTWITHSTANDING ANY OTHER PROVISION IN THIS SECTION 11.1 TO THE CONTRARY, THE
ARBITRATORS SHALL HAVE ABSOLUTELY NO AUTHORITY TO AWARD CONSEQUENTIAL DAMAGES
(SUCH AS LOSS OF PROFIT), TREBLE, EXEMPLARY OR PUNITIVE DAMAGES OF ANY TYPE
UNDER ANY CIRCUMSTANCES REGARDLESS OF WHETHER SUCH DAMAGES MAY BE AVAILABLE
UNDER TEXAS LAW, THE LAW OF ANY OTHER STATE, OR FEDERAL LAW, OR UNDER THE
FEDERAL ARBITRATION ACT, OR UNDER THE COMMERCIAL ARBITRATION RULES OF THE
AMERICAN ARBITRATION ASSOCIATION. The arbitrators shall have the authority to
assess the costs and expenses of the arbitration proceeding (including the
arbitrators' fees and expenses) against either or both parties. However, each
party shall bear its own attorneys fees and the arbitrators shall have no
authority to award attorneys fees.
(v) Selection of Arbitrators. When a Dispute has been
submitted for arbitration, within 30 days of such submission, the Company will
choose an arbitrator and Purchasers will choose an arbitrator. The two
arbitrators shall select a third arbitrator, failing agreement on which within
ninety days of the original notice, Purchasers and the Company (or either of
them) shall apply to any United States District Judge for the Southern District
of Texas, who shall appoint the third arbitrator. While the third arbitrator
shall be neutral, the two party-appointed arbitrators are not required to be
neutral and it shall not be grounds for removal of either of the two
party-appointed arbitrators or for vacating the arbitrators' award that either
of such arbitrators has past or present minimal relationships with the party
that appointed such arbitrator. Evident partiality on the part of an arbitrator
exists only where the circumstances are such that a reasonable person would have
to conclude there in fact existed actual bias and a mere appearance or
impression of bias will not constitute evident partiality or otherwise
disqualify an arbitrator. Minimal or trivial past or present relationships
between the neutral arbitrator and the party selecting such arbitrator or any of
the other arbitrators, or the failure to disclose such minimal or trivial past
or present relationships, will not by themselves constitute evident partiality
or otherwise disqualify any arbitrator. Upon selection of the third arbitrator,
each of the three arbitrators shall agree in writing to abide faithfully by the
terms of this agreement to arbitrate. The three arbitrators shall make all of
their decisions by majority vote. If one of the party-appointed arbitrators
refuses to participate in the proceedings or refuses to vote, the decision of
the other two arbitrators shall be binding. If an arbitrator dies or becomes
physically incapacitated and is unable to fulfill his or her duties as an
arbitrator, the arbitration proceeding shall continue with a substitute
arbitrator selected as follows: if the incapacitated arbitrator is a party-
appointed arbitrator, the party shall promptly select a new arbitrator, and if
the incapacitated arbitrator is the neutral arbitrator, the two-party appointed
arbitrators shall select a substitute neutral arbitrator, failing agreement on
which Purchasers and the Company (or either of them) shall apply to any United
States District Judge for the Southern District of Texas, who shall appoint the
substitute neutral arbitrator.
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(vi) Final Hearing and Arbitrators' Award: The final hearing
shall be conducted within 120 days of the selection of the third arbitrator. The
final hearing shall not exceed ten working days, with each party to be granted
one-half of the allocated time to present its case to the arbitrators. There
shall be a transcript of the hearing before the arbitrators. The arbitrators
shall render their ultimate decision within twenty days of the completion of the
final hearing completely resolving all of the disputes between the parties that
are the subject of the arbitration proceeding. The arbitrators' ultimate
decision after final hearing shall be in writing, but shall be as brief as
possible, and the arbitrators shall assign their reasons for their ultimate
decision. In the case the arbitrators award any monetary damages in favor of
either party, the arbitrators shall certify in their award that they have not
included any treble, exemplary or punitive damages.
(vii) Finality of the Arbitrators' Award: The arbitrators'
award shall, as between the parties to this Agreement and those in privity with
them, be final and entitled to all of the protections and benefits of a final
judgment, e.g., res judicata (claim preclusion) and collateral estoppel (issue
preclusion), as to all Disputes, including compulsory counterclaims, that were
or could have been presented to the arbitrators. The arbitrators' award shall
not be reviewable by or appealable to any court, except to the extent permitted
by the Federal Arbitration Act.
(viii) Use of the courts to assist in the enforcement of the
Arbitrators' decisions and the Arbitrators' Award: It is the intent of the
parties that the arbitration proceeding shall be conducted expeditiously,
without initial recourse to the courts and without interlocutory appeals of the
arbitrators' decisions to the courts. However, if a party refuses to honor its
obligations under this agreement to arbitrate, the other party may obtain
appropriate relief compelling arbitration in any court having jurisdiction over
the parties; the order compelling arbitration shall require that the arbitration
proceedings take place in Houston, Texas, as specified above. The parties may
apply to any court for orders requiring witnesses to obey subpoenas issued by
the arbitrators. Moreover, any and all of the arbitrators' orders and decisions
may be enforced if necessary by any court. The arbitrators' award may be
confirmed in, and judgment upon the award entered by, any federal or State court
having jurisdiction over the parties.
(ix) Confidentiality: To the fullest extent permitted by law,
this arbitration proceeding and the arbitrators award shall be maintained in
confidence by the parties. However, a violation of this covenant shall not
affect the enforceability of this arbitration agreement or of the arbitrators'
award.
(xi) The parties' obligations under this arbitration provision
are enforceable even if the Agreement has terminated or is breached;
severability: A party's breach of this Agreement shall not affect this agreement
to arbitrate. Moreover, the parties' obligations under this arbitration
provision are enforceable even after this Agreement has terminated. The
invalidity or unenforceability of any provision of this arbitration agreement
shall not affect the validity or enforceability of the parties' obligation to
submit their disputes to binding arbitration or the other provisions of this
agreement to arbitrate.
- 32 -
<PAGE> 33
Section 11.2 ENTIRE AGREEMENT. This Agreement and the Registration
Rights Agreement constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
Section 11.3 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by facsimile, with confirmation of
receipt, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
If to the Company:
Costilla Energy, Inc.
400 West Illinois
Suite 1000
Midland, Texas 79701
Fax: 915-686-6080
Attn: Mr. Michael J. Grella
President and Chief Executive Officer
With a copy to:
Cotton, Bledsoe, Tighe & Dawson
500 West Illinois
Suite 300
Midland, Texas 79701-4337
Fax: 915-682-3672
Attn: Richard T. McMillan
If to the Purchasers:
Enron Capital & Trade Resources Corp.
1400 Smith
Houston, Texas 77002
Fax: 713-646-3640
Attn: Timothy J. Detmering
Vice President
With a copy to:
Enron Capital & Trade Resources Corp.
1400 Smith
Houston, Texas 77002
Fax: 713-646-4039
- 33 -
<PAGE> 34
Attn: Donna W. Lowry
With an additional copy to:
Vinson & Elkins L.L.P.
1001 Fannin Street, 23rd Floor
Houston, Texas 77002-6760
Fax: 713-615-5457
Attn: Ronald T. Astin
Section 11.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws in the State of Texas applicable to
agreements made and wholly performed in the State of Texas.
Section 11.5 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement unless the consummation of the Transactions contemplated
hereby is materially and adversely affected thereby.
Section 11.6 EXPENSES. Except as otherwise provided herein or in the
Registration Rights Agreement, each party shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with transactions
contemplated hereby, including fees and expenses of its representatives,
provided, however, that the Company shall pay all filing fees associated with
all filings, applications, notifications or requests for consent, approval or
permission that may be required by statute regulation or judicial decrees in
connection with the Transactions and shall also pay all of the Purchasers' legal
fees, professional fees and other transaction costs (collectively, the "Costs")
up to $50,000, and one half of the Costs in excess of $50,000, incurred in
connection with the evaluation, preparation and negotiation of the Transactions
contemplated hereby.
Section 11.7 DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience of reference only and do not constitute a
part of and shall not be utilized in interpreting this Agreement.
Section 11.8 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same agreement.
Section 11.9 ASSIGNMENT. Except as provided in this Section 11.9,
neither of the Purchasers nor the Company may assign its rights or obligations
hereunder; provided, however, the Purchasers may assign their respective rights
to acquire the Shares to an Affiliate or designee, provided such assignment
shall not relieve the Purchaser of its obligations hereunder.
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<PAGE> 35
Section 11.10 AMENDMENTS; WAIVERS. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Company or
Purchasers therefrom, shall in any event be effective unless the same shall be
in writing and signed by each Purchaser and the Company in the case of
amendments, and each Purchaser or the Company, as the case may be, in the case
of waivers.
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<PAGE> 36
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed and delivered as of the day and year first set above.
COSTILLA ENERGY, INC.
By: /s/ MICHAEL J. GRELLA
------------------------------------------
Name: Michael J. Grella
-----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ TIMOTHY J. DETMERING
------------------------------------------
Name: Timothy J. Detmering
-----------------------------------------
Title: Vice President
---------------------------------------
JOINT ENERGY DEVELOPMENT INVESTMENTS II
LIMITED PARTNERSHIP
By: Enron Capital Management Limited Partnership,
its General Partner
By: Enron Capital II Corp.,
its General Partner
By: /s/ TIMOTHY J. DETMERING
-------------------------------------
Name: Timothy J. Detmering
------------------------------------
Title: Agent and Attorney-in-Fact
----------------------------------
- 36 -
<PAGE> 1
EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT (this "Registration Rights Agreement") is entered into as
of the 3rd day of June, 1998 between Costilla Energy, Inc., a Delaware
corporation (the "Company"), Enron Capital & Trade Resources Corp., a Delaware
corporation and Joint Energy Development Investments II Limited Partnership
(collectively, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company and Purchasers have entered into that certain
Securities Purchase Agreement (the "Agreement") dated as of June 3, 1998,
whereby Purchasers have agreed, for the consideration set forth therein, to
purchase an aggregate of 50,000 shares (the "Shares") of Series A Preferred
Stock, $0.10 par value per share (the "Preferred Stock"), of the Company; and
WHEREAS, in order to induce Purchasers to enter into the Agreement, the
Company has agreed to enter into this Registration Rights Agreement and to
grant the Rights (as hereinafter defined) to Purchasers contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
SECTION 1.
CERTAIN DEFINITIONS AND TERMS.
The following terms have the meanings indicated:
"Affiliate" shall have the meaning given to such term in Rule 405 under the
Securities Act.
"Commission" means the Securities and Exchange Commission or any successor
thereof.
"Common Stock" means the common stock, $0.10 par value per share, of the
Company.
"Controlling Person" has the meaning ascribed thereto in Section 4(a) of
this Registration Rights Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Existing Registration Rights Agreement" means article IV of that certain
Consolidation Agreement dated as of September 13, 1996, as amended October 8,
1996, by and among the Company, Costilla Energy, L.L.C., CSL Management
Corporation, Valley Gathering Company, Cadell S. Liedtke, Michael J. Grella,
Henry G. Musselman and NationsBanc Capital Corporation.
<PAGE> 2
"Existing Rights Holder" shall have the meaning ascribed thereto in
Section 2(a)(vii) of this Registration Rights Agreement.
"Form S-3" means Form S-3 as promulgated by the Commission on the date
hereof or any successor form or method of registration that provides for the
incorporation by reference of historical information regarding the Company's
business and financial affairs and permits registration of resales of
Registrable Securities for a continuous and indefinite period of time of no
less than two years pursuant to such form or method of registration.
"Holder" means Purchasers and any other Person holding Registrable
Securities; provided, that such Person acquired such Registrable Securities in
accordance with Section 7 of this Registration Rights Agreement.
"Indemnitee" has the meaning ascribed thereto in Section 4(d) of this
Registration Rights Agreement.
"Indemnitor" has the meaning ascribed thereto in Section 4(d) of this
Registration Rights Agreement.
"Initiating Seller" has the meaning ascribed thereto in Section 2(b)(iii)
of this Registration Rights Agreement.
"Majority" shall mean more than 50.00%.
"NBCC" shall mean NationsBanc Capital Corporation.
"Person" means any individual, firm, corporation, trust, association,
partnership, limited partnership, limited liability company, joint venture or
other entity.
"Registrable Securities" means all shares of Common Stock of the Company
issued or issuable to a Holder upon conversion of the Shares or any Common
Stock or other securities issued or issuable as a dividend or other
distribution upon or with respect to such Shares or such Common Stock.
"Register", "registered" and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance with
the Securities Act and the declaration or ordering of effectiveness of such
registration statement.
"Rights" means all rights, remedies, powers, benefits, and privileges
granted to the Holders pursuant to this Registration Rights Agreement.
"Rule 415" means Rule 415 under the Securities Act as promulgated by the
Commission on the date hereof or any successor rule or method of registration
that permits the registration of resales of
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<PAGE> 3
Registrable Securities for a continuous and indefinite period of time of no
less than two years pursuant to such rule or method of registration.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
SECTION 2.
REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. (i) On any date after the date
of the earlier of (A) the mailing by any Holder of a notice of conversion of
Shares for Registrable Securities or (B) the issuance of Registrable
Securities, any Holder or Holders possessing in the aggregate a Majority of the
Registrable Securities shall have the right to request, in writing specifying
that such request is made pursuant to this Section 2(a), that the Company file
a registration statement under the Securities Act covering not less than
250,000 Registrable Securities (unless fewer Registrable Securities are held by
the Holders, in which case, covering all such Registrable Securities). Such
request shall set forth the proposed plan of distribution for the Registrable
Securities to be registered. Within five days of such request, the Company
shall give written notice of such request to all other Holders of Registrable
Securities and shall include in the registration in respect of which notice has
been given all Registrable Securities with respect to which the Company has
received written requests from Holders for inclusion therein within ten days
after the Company's notice regarding such registration has been given as
provided in Section 11(a) of this Registration Rights Agreement. Within 45
days of such request, or, in the event that Form S-3 under the Securities Act
is available to the Company to effect such registration, within 30 days of such
request, the Company shall file a registration statement to register under the
Securities Act all Registrable Securities subject to such request; provided,
however, that the Company may defer its obligations under this Section 2(a) for
a period of no more than 30 days (which 30 days shall be in addition to the
45-day or 30-day period, as applicable, permitted above) if the Company obtains
written advice from the Company's outside securities counsel (which counsel
shall be a nationally recognized securities law firm or a law firm acceptable
to the Holders) that filing such a registration statement would require public
disclosure by the Company of any material non-public development; provided,
further, that if such written advice is received by the Company, the request
for registration may be withdrawn by the Holder who requested such registration
(and shall not be treated as a registration hereunder for any purpose); and
provided further, that if such request for registration has not been withdrawn,
once such information has been publicly disclosed by the Company, the Company
shall promptly proceed to fulfill its obligations under this Section 2(a).
(ii) Notwithstanding the foregoing, in the event the
Company reasonably expects to file, within 60 days of a request made pursuant
to this Section 2(a), a registration statement pertaining to securities for the
account of the Company (except a registration statement on Form S-4 or Form S-8
or with respect to a transaction subject to Rule 145 under the Securities Act)
then such request shall constitute a request made pursuant to Section 2(b)
hereof to include in such registration
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<PAGE> 4
statement all Registrable Securities subject to such request and the Company
shall not be obligated to file a separate registration statement for the
Registrable Securities subject to such request; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing of such registration statement is made in good faith.
(iii) Except as provided in Section 2(a)(iv), the Company
shall be obligated to effect only three registrations in the aggregate pursuant
to this Section 2(a) with respect to all Holders (including Purchasers and all
of their direct and indirect transferees pursuant to Section 7 hereof);
provided, however, that a registration requested pursuant to this Section 2(a)
shall not be deemed to be a "registration" for purposes of any provision of
this Section 2(a), (A) if a registration statement with respect thereto has not
been declared effective by the Commission, (B) if after such registration
statement has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not the fault of a holder of
Registrable Securities and all of the Registrable Securities covered thereby
have not been sold, (C) if the conditions to closing specified in the selling
agreement or underwriting agreement entered into in connection with such
registration are not satisfied or waived by the parties thereto other than a
holder of Registrable Securities, or (D) if the Holders of Registrable
Securities are not able to register and sell all of the Registrable Securities
requested to be included in such registration by Holders entitled to
registration rights pursuant to this Registration Rights Agreement.
(iv) At any time the Company is eligible to register
Registrable Securities for resale for a continuous and indefinite period of
time of not less than two years on Form S-3 pursuant to Rule 415 or otherwise,
at the election of Holders holding a Majority of the Registrable Securities,
the number of registrations the Company shall be obligated to effect pursuant
to this Section 2(a) shall be reduced to one, if within 30 days of receipt by
the Company of notice from such Holders of such election, the Company files a
registration statement to register under the Securities Act all Registrable
Securities for continuous and indefinite resale for a period of not less than
two years, and such registration is declared effective by the Commission and
remains continuously effective for the lesser of (A) two years from the
effective date of such registration, or (B) the date after which all
Registrable Securities have been sold by the Holders thereof.
(v) Distribution by the Holder or Holders of the
Registrable Securities registered pursuant to this Section 2(a) may be made in
any lawful manner, including underwritten public offerings and non-underwritten
"at the market" distributions. If any such offering is to be an underwritten
public offering, the Holder or Holders of a Majority of such Registrable
Securities shall have the right to select the managing underwriter or
underwriters, subject to the approval of the Company, which approval shall not
be unreasonably withheld.
(vi) The Holders shall not make a request to the Company
to effect any registration pursuant to this Section 2(a) during the 180-day
period beginning on the effective date of the first registration of Registrable
Securities made pursuant to this Section 2(a) or during the 90-day period
A - 4
<PAGE> 5
beginning on the effective date of any registration statement relating to any
registration of Registrable Securities made pursuant to Section 2(b) of this
Registration Rights Agreement.
(vii) (A) Whenever the Company shall effect a registration
pursuant to this Section 2(a), (1) the Company may include securities of the
Company in such registration for sale for its own account, and (2) any Person
other than a Holder who is entitled to a piggy-back registration rights under
the Existing Registration Rights Agreement with respect to a registration
statement filed to effect a registration under this Section 2(a) ("Existing
Rights Holders") may include securities of the Company with respect to which
such rights apply in such registration for sale, in each case in accordance
with the method of disposition specified by the Holders requesting registration
of Registrable Securities unless (if the method of disposition shall be an
underwritten public offering) the lead managing underwriter advises the Holders
that market factors would materially reduce the price received by the Holders
if the securities held by such Existing Rights Holders and the Company are
included therein or would reduce the number of Registrable Securities that
could be sold by Holders participating in such registration if the securities
of such Existing Rights Holders and the Company are included therein.
(B) If the lead managing underwriter for the
offering advises that marketing factors require the inclusion in such
registration of some or all of the Registrable Securities sought to be
registered by the Company or such Existing Rights Holders to be limited or that
the number of securities to be registered at the insistence of the Company and
any Existing Rights Holders plus the number of Registrable Securities sought to
be registered by the Holders should be limited due to marketing factors, the
number of Registrable Securities sought to be registered by the Company and
such Existing Rights Holders shall be reduced as follows: (1) the number of
securities to be registered by the Company shall first be reduced, to the
number recommended by the managing underwriter; (2) if, after all securities
sought to be registered by the Company have been eliminated, the managing
underwriter still recommends a reduction in the number of securities to be
offered, the number of securities sought to be registered by Existing Rights
Holders shall be reduced, pro rata, based on the number of securities sought to
be registered by each such Holder, to the number recommended by the managing
underwriter; and in no event shall the number of securities offered by the
Holders be reduced.
(viii) The Company agrees (A) not to effect any public sale
or distribution of its equity securities (other than pursuant to Form S-4,
Form S-8 or any successor form thereto and, in the case of any registration
under Section 2(b), equity securities being sold for the account of the Company
in any registration which includes Registrable Securities of Holders) during
the 14-day period prior to, and during the 90-day period beginning on, the
effective date of a registration statement filed pursuant to Section 2(a) or
2(b), and (B) to cause each holder of its privately placed equity securities
possessing registration rights purchased from the Company at any time on or
after the date of this Registration Rights Agreement to agree not to effect any
public sale or distribution (including sales pursuant to Rule 144 under the
Securities Act) of any such securities during such period.
A - 5
<PAGE> 6
(b) PIGGYBACK REGISTRATION RIGHTS. (i) If the Company at
any time proposes to register any of its Common Stock under the Securities Act
(other than registrations on Forms S-4 or S-8 or any successor forms thereto or
registrations of securities in connection with a Rule 145 transaction), whether
of its own accord or at the request of any holder or holders of its securities,
it shall each such time promptly give written notice to all Holders of its
intention to do so.
(ii) Upon the written request of a Holder or Holders
delivered to the Company within 10 business days after receipt of any such
notice, the Company shall use its best efforts (subject to the provisions of
this Section 2(b)) to cause all Registrable Securities, the Holders of which
shall have so requested registration thereof, to be registered under the
Securities Act, all to the extent requisite to permit the sale or other
disposition by the Holder or Holders of all of such Registrable Securities;
provided, however, the Company may elect not to file a registration statement
pursuant to this Section 2(b) or may withdraw any registration statement filed
pursuant to this Section 2(b) at any time prior to the effective date thereof.
(iii) If the lead managing underwriter for the respective
offering advises that marketing factors require the exclusion from such
registration of some or all of the Registrable Securities sought to be
registered by the Holders or that the total number of securities to be
registered at the insistence of the Company and any other selling shareholders
plus the number of Registrable Securities sought to be registered by the
Holders should be limited due to marketing factors, the number of Registrable
Securities and other securities sought to be registered by each Holder, the
Company and such other selling shareholders shall be reduced as follows:
(A) if the offering is an offering of securities
for the account of the Company, (1) the number of securities to be registered
by selling Persons other than the Company, NBCC, Purchasers and other Holders
shall first be reduced, pro rata, based on the number of securities sought to
be registered by each such other selling Person, to the number recommended by
the lead managing underwriter; (2) if, after all securities sought to be
registered by selling Persons other than the Company, NBCC, Purchasers and
other Holders have been eliminated, the lead managing underwriter still
recommends a reduction in the number of securities to be offered, the number of
Registrable Securities sought to be registered by Holders other than the
Purchasers shall be reduced, pro rata, based on the number of Registrable
Securities sought to be registered by each such Holder, to the number
recommended by the managing underwriter; (3) if, after all Registrable
Securities sought to be registered by such other Holders have been eliminated,
the lead managing underwriter still recommends a reduction in the number of
securities to be offered, the number of Registrable Securities sought to be
registered by the Purchasers shall be reduced, pro rata, based on the number of
Registrable Securities sought to be registered by each such Purchaser, to the
number recommended by the lead managing underwriter, and (4) if, after all
Registrable Securities sought to be registered by Purchasers have been
eliminated, the lead managing underwriter still recommends a reduction in the
number of securities to be offered, the number of Registrable Securities sought
to be registered by NBCC shall be reduced, pro rata, based on the number of
Registrable Securities sought to be registered by NBCC, to the number
recommended by the lead managing underwriter; and in no event shall the number
of securities offered by the Company be reduced;
A - 6
<PAGE> 7
(B) if the offering is an offering of securities
initiated for the benefit of an Existing Rights Holder other than NBCC, then
(1) up to 50% of the total amount of securities recommended by the lead
managing underwriter to be registered shall be reserved for securities owned,
and requested to be registered, by NBCC and the remainder shall be allocated
among Existing Rights Holders other than NBCC, the Company, Purchasers, Holders
and other selling Persons; (2) the number of securities to be registered by
the Company, Existing Rights Holders other than NBCC, Purchasers, Holders and
such other selling Persons shall first be reduced, pro rata, based on the
number of securities sought to be registered by the Company and each such other
selling Person, to the number recommended by the lead managing underwriter; (3)
if, after all securities sought to be registered by the Company and such other
selling Persons have been eliminated, the lead managing underwriter still
recommends a reduction in the number of securities to be offered, the number of
Registrable Securities sought to be registered by Holders other than the
Purchasers shall be reduced, pro rata, based on the number of Registrable
Securities sought to be registered by each such Holder, to the number
recommended by the lead managing underwriter; (4) if, after all Registrable
Securities sought to be registered by such other Holders have been eliminated,
the lead managing underwriter still recommends a reduction in the number of
securities to be offered, the number of Registrable Securities sought to be
registered by the Purchasers shall be reduced, pro rata, based on the number of
Registrable Securities sought to be registered by each such Purchaser, to the
number recommended by the lead managing underwriter; and (5) if, after all
Registrable Securities sought to be registered by Purchasers have been
eliminated, the lead managing underwriter still recommends a reduction in the
number of securities to be offered, the number of securities sought to be
registered by the Existing Rights Holders other than NBCC shall be reduced, pro
rata, based on the number of securities sought to be registered by each such
Existing Rights Holder other than NBCC, to the number recommended by the lead
managing underwriter; and
(C) if the offering is an offering of securities
initiated for the benefit of selling shareholders other than Holders and other
than as described under (B) above, (1) the number of securities to be
registered by selling Persons (including the Company) other than the selling
shareholder(s) who initiated the registration (the "Initiating Seller") and
Holders shall first be reduced, pro rata, based on the number of securities
sought to be registered by each such other selling Person, to the number
recommended by the lead managing underwriter, (2) if, after all securities
sought to be registered by selling Persons other than the Initiating Seller and
Holders have been eliminated, the lead managing underwriter still recommends a
reduction in the number of securities to be offered, the number of Registrable
Securities sought to be registered by Holders other than the Purchasers shall
be reduced, pro rata, based on the number of Registrable Securities sought to
be registered by each such Holder, to the number recommended by the lead
managing underwriter; and (iii) if, after all securities sought to be
registered by selling Persons other than the Initiating Seller and the
Purchasers have been eliminated, the lead managing underwriter still recommends
a reduction in the number of securities to be offered, the number of
Registrable Securities sought to be registered by the Purchasers shall be
reduced, pro rata, based on the number of Registrable Securities sought to be
registered by each such Purchaser, to the number recommended by the lead
managing underwriter.
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<PAGE> 8
(c) REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of this Section 2 to effect the registration of any
Registrable Securities under the Securities Act, the Company shall, as
expeditiously as possible,
(i) cooperate with any underwriters for, and the Holders
of, such Registrable Securities, and shall enter into a usual and customary
underwriting agreement with respect thereto and take all such other reasonable
actions as are necessary or advisable to permit, expedite and facilitate the
disposition of such Registrable Securities in the manner contemplated by the
related registration statement, including without limitation, the inclusion in
such registration statement of any information relating to the Company or its
subsidiaries which such Holders or underwriters deem reasonably necessary to
facilitate such disposition, in each case to the same extent as if all the
securities then being offered were for the account of the Company, and the
Company shall provide to any Holder of such Registrable Securities, any
underwriter participating in any distribution thereof pursuant to a
registration statement, and any attorney, accountant or other agent retained by
any Holder or underwriter, reasonable access to appropriate Company officers
and employees to answer questions and to supply information reasonably
requested by any such Holder, underwriter, attorney, accountant or agent in
connection with such registration statement; provided, however, that each such
party shall be required to maintain in confidence and not to disclose to any
other person any information or records reasonably designated by the Company in
writing as being confidential, until such time as (A) such information becomes
a matter of public record (whether by virtue of its inclusion in such
registration statement or otherwise), or (B) such person shall be required so
to disclose such information pursuant to the subpoena or order of any court or
other governmental agency or body having jurisdiction over the matter (subject
to the requirements of such order, and only after such person shall have given
the Company prompt prior written notice of such requirement), or (C) such
information is required to be set forth in such registration statement or the
prospectus included therein or in an amendment to such registration statement
or an amendment or supplement to such prospectus in order that such
registration statement, prospectus, amendment or supplement, as the case may
be, does not contain an untrue statement of a material fact or omit to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
(ii) furnish or cause to be furnished to each Holder of
the Registrable Securities covered by such registration statement, on the date
that such Registrable Securities are to be delivered to the underwriters for
sale pursuant to such registration or, if such Registrable Securities are not
being sold through underwriters, on the date the registration statement with
respect to such Registrable Securities becomes effective (A) an opinion, dated
such date, of the outside counsel representing the Company for the purposes of
such registration, addressed to the underwriters, if any, and to the Holders,
stating, among other things, that such registration statement has become
effective under the Securities Act and that (1) to the knowledge of such
counsel, no stop order suspending the effectiveness of such registration
statement has been instituted or is pending or contemplated under the
Securities Act; and (2) the registration statement, the related prospectus, and
each amendment or supplement thereto, including all documents incorporated by
reference therein, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and
A - 8
<PAGE> 9
regulations of the Commission thereunder (except that such counsel need express
no opinion as to financial statements or other financial or statistical or
reserve data contained or incorporated by reference therein); and such counsel
shall state in customary form that no facts have come to the attention of such
counsel that caused such counsel to believe (with customary qualifications)
that either the registration statement or the prospectus, or any amendment or
supplement thereto, including all documents incorporated by reference therein,
in light of the circumstances under which they were made, contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading
(except that such counsel need express no belief as to financial statements or
other financial or statistical or reserve data contained or incorporated by
reference therein or as to any information provided by the Holders or any
underwriter for inclusion therein); and (B) a letter, dated such date, from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and to the Holders, stating, among other things, that
they are independent certified public accountants within the meaning of the
Securities Act and that in the opinion of such accountants, the financial
statements and other financial data of the Company included in the registration
statement or the prospectus, or any amendment or supplement thereto, including
all documents incorporated by reference therein, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act. Such letter from the independent certified public accountants shall
additionally cover such other customary financial matters (including
information as to the period ending not more than five business days prior to
the date of such letter) with respect to the registration in respect of which
such letter is being given as such underwriters, if any, or the Holders may
reasonably request;
(iii) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become and remain effective for a
period of not more than 90 days (or in the event of (A) a firm underwritten
offering such longer period as may be customary, or (B) the registration
described in Section 2(a)(iv), the period of time specified in such Section
2(a)(iv)), and prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective during such period and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
covered by such registration statement; provided that no such registration
statement or amendment thereto shall be filed by the Company until the Holders
of the Registrable Securities included therein and their counsel shall have had
a reasonable opportunity to review the same, to exercise their rights under
Section 2(c)(i) above with respect thereto and to approve or disapprove any
portion of such registration statement describing or referring to such Holders;
(iv) furnish to each Holder and to each underwriter, if
any, such numbers of copies of a summary prospectus or other prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as such Holder may reasonably request
in order to facilitate the public sale or other disposition of such Holder's
Registrable Securities;
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<PAGE> 10
(v) notify the selling Holders promptly (A) when a
registration statement, prospectus, offering circular or other offering
material or any supplement or amendment thereto has been filed, and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective under the Securities Act and each applicable state or
foreign law, (B) of any request by the Commission or any other United States or
foreign federal or state governmental authority for amendments or supplements
to a registration statement, or related prospectus (or other legally required
offering material) or for additional information, (C) of the issuance by the
Commission or any other United States or foreign federal or state governmental
body or agency of any action, including without limitation a stop order,
suspending or withdrawing the authorization for the offering or the
effectiveness of a registration statement, or the initiation of any proceedings
for that purpose, (D) if at any time the representations or warranties of the
Company contained in any agreement (including any underwriting, purchase or
agency agreement) entered into in connection with the offering or sale of
securities of the Company as contemplated by this Registration Rights Agreement
cease to be true and correct in any material respect, (E) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose, (F) of the discovery that, or of the happening of any event as a
result of which, the registration statement, related prospectus, offering
circular, other offering materials or any document incorporated or deemed to be
incorporated therein by reference includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or that requires the
making of any changes in such registration statement, prospectus, offering
circular or other offering materials so that, in the case of the registration
statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the prospectus,
offering circular or other offering materials, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or that such document
otherwise fails to comply with applicable laws, and (G) of the Company's
reasonable determination that a post-effective amendment to a registration
statement would be appropriate;
(vi) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under the state
securities or blue sky laws of such United States jurisdictions as each Holder
shall request, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder to consummate the public sale or
other disposition in such United States jurisdictions of the Registrable
Securities owned by such Holder, except that the Company shall not for any such
purpose be required (A) to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified, (B) to file therein any
general consent to service, or (C) to subject itself to taxation in any such
jurisdiction;
(vii) in the event of the issuance of any stop order
suspending the effectiveness of any registration statement or of any order
suspending or preventing the use of any prospectus or
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<PAGE> 11
suspending the qualification of such Registrable Securities for sale in any
jurisdiction, use its reasonable efforts promptly to obtain its withdrawal;
(viii) if any event contemplated by Section 2(c)(v)(F) or
(G) above shall occur, as promptly as practicable prepare a supplement or
amendment or post-effective amendment to such registration statement, related
prospectus, offering circular or other offering materials or any document
incorporated therein by reference or promptly file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, the prospectus, offering circular and other offering materials will
not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading or otherwise will not fail to comply with applicable
law.
(ix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, beginning with the first fiscal
quarter beginning after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
(x) list such securities on any securities exchange or
consolidated reporting system on which the Common Stock of the Company is then
listed, if the listing of such securities is then permitted under the rules of
such exchange or consolidated reporting system.
(d) HOLDERS' OBLIGATIONS IN PIGGYBACK REGISTRATIONS. In
connection with any offering involving an underwriting of shares being issued
by the Company, the Company shall not be required to include any of the
Holders' Registrable Securities in such underwriting pursuant to Section 2(b)
unless the Holders accept the terms of the underwriting as agreed upon between
the Company and the underwriters; provided, however, that the only
representations and warranties any Holder shall be required to make in
connection therewith shall be with respect to such Holder's ownership of the
Registrable Securities to be sold by it and its ability to convey title thereto
free and clear of all liens, encumbrances or adverse claims and such other
customary representations and warranties reasonably requested by the
underwriters; and provided further, that the only indemnity any Holder shall be
required to make in connection therewith shall be to the effect of Sections
4(b) and 4(c) hereof.
(e) PRICING OF PIGGYBACK REGISTRATIONS. The Registrable
Securities proposed to be registered under any registration statement under
Section 2(b) hereof shall be offered for sale at the same public offering price
as the shares of Common Stock offered for sale by the Company or any other
selling shareholder covered thereby.
(f) PRIOR DEMAND RIGHT. Purchasers and each other Holder or
Holders, acknowledge and agree that their rights under Section 2 are subject to
the prior right of NBCC (i) to require demand registrations pursuant to article
IV. B. of the Existing Registration Rights Agreement and (ii) to the extent
mandatorily applicable and not specifically described herein, to certain of the
rights to
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<PAGE> 12
participate in incidental registrations pursuant to article IV. A. of the
Existing Registration Rights Agreement, in each case of NBCC.
SECTION 3.
EXPENSES OF REGISTRATION.
All expenses incurred in connection with each registration of Registrable
Securities pursuant to Section 2(a) and any registration of Registrable
Securities pursuant to Section 2(b), including without limitation (i) all
Commission and state registration and qualification fees, (ii) all printing,
engineering and accounting fees, (iii) all fees and disbursements of counsel
for the Company, (iv) the fee payable to the National Association of Securities
Dealers, Inc., (v) all fees and disbursements of one law firm selected by the
Holders of a Majority of the Registrable Securities to be registered to
represent all the Holders, shall be borne by the Company, and (vi) all fees and
disbursements of any underwriters (including fees and disbursements of
underwriters' counsel, if applicable); provided, however, that the Company
shall not be required to pay, and the Holders shall pay, any underwriter
discounts, commissions and other underwriter compensation, to the extent such
fees, discounts, commissions and compensation relate to the Registrable
Securities.
SECTION 4.
INDEMNIFICATION.
(a) In the event of any registration of Registrable Securities
under the Securities Act pursuant to this Registration Rights Agreement, the
Company shall indemnify and hold harmless the Holder of such Registrable
Securities, such Holder's directors and officers, and each other Person, if
any, who controls such Holder within the meaning of the Securities Act (a
"Controlling Person"), against any losses, claims, damages or liabilities,
joint or several, to which such Holder or any such director, officer or
Controlling Person may become subject under the Securities Act or any other
statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any alleged untrue statement of any material fact contained, on the effective
date thereof, in any registration statement under which such Registrable
Securities were registered under the Securities Act, or in any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or (ii) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse such Holder or such director, officer or
Controlling Person for any legal or any other expenses reasonably incurred by
such Holder, director, officer or Controlling Person in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of or
is based upon any alleged untrue statement or alleged omission made in such
registration statement, preliminary prospectus, prospectus, or amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed or provided by
such Holder or an underwriter specifically for use therein. Such indemnity
shall remain in full force and
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<PAGE> 13
effect regardless of any investigation made by or on behalf of such Holder,
director, officer or Controlling Person, and shall survive the transfer of such
Registrable Securities by such Holder.
(b) It shall be a condition to the Company's obligation to
register the Registrable Securities of any Holder that such Holder shall enter
into an agreement to indemnify and hold harmless the Company, its directors and
officers and each other Person, if any, who controls the Company against any
losses, claims, damages or liabilities, joint or several, to which the Company
or any such director or officer or any such Person may become subject under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any alleged untrue statement or omission of any material
fact contained, on the effective date thereof, in any registration statement
under which such Holder's Registrable Securities were registered under the
Securities Act, or in any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or (ii) any alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such alleged untrue statement or omission was
contained in written information furnished to the Company through an instrument
duly executed or provided by such Holder specifically for use therein, and to
reimburse the Company or such director, officer or other Person for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) Indemnification similar to that specified in Section 4(b)(i)
and (ii) above shall be given by the Company and each Holder (with such
modifications as shall be appropriate) to any underwriter with respect to any
required registration or other qualification of any Registrable Securities
registered under this Registration Rights Agreement under any federal or state
law or regulation of governmental authority. The indemnity and expense
reimbursements obligations of the Company and the Holders under Section 4(b)(i)
and(ii) above shall be in addition to any liability the Company and the Holders
may otherwise have.
(d) Each Person (an "Indemnitor") who under the preceding
provisions of this Section 4 agrees to indemnify another Person (an
"Indemnitee") shall have the right, subject to the provisions hereto, to
designate counsel (which counsel shall be a nationally recognized securities
law firm or a law firm acceptable to the Holders) or to defend any case or
proceeding against the Indemnitee arising in respect of any claim of liability
for which such indemnification may be claimed, to the end that duplication of
legal expense may be minimized; provided that, if the Indemnitee notifies the
Indemnitor that the former has been advised by its counsel that any single
counsel in such case or proceeding would have a conflict of interest in
representing both the Indemnitor and the Indemnitee, the Indemnitee may
designate one counsel of its own in such case or proceeding and, to the extent
so provided above in this Section 4, shall be entitled to be reimbursed for its
legal expenses reasonably incurred in connection with defending itself in such
case or proceeding.
(e) The Indemnitee shall give notice to the Indemnitor promptly
after such Indemnitee has actual knowledge of any claim as to which indemnity
may be sought, provided that the failure
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<PAGE> 14
of any Indemnitee to give notice as provided herein shall not relieve the
Indemnitor of its obligations hereunder except to the extent that the
Indemnitor's defense of such claim is prejudiced thereby.
SECTION 5.
CONTRIBUTION.
(a) In the event the indemnity provisions provided for in Section
4 of this Registration Rights Agreement are for any reason held to be
unenforceable by the indemnified parties, the Company, the Holders and the
underwriters, if any, shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by said indemnity
provisions incurred by the Company, the Holders and the underwriters in
proportion to the relative fault of each such party in connection with the
statements or omissions that resulted in such losses, liabilities, claims,
damages and expenses. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by one of the parties and such parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. Notwithstanding the foregoing, no
Holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total price at which the Registrable Securities sold
by it exceeds the amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
(b) Notwithstanding the foregoing provisions of this Section 5, no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
Section, each person, if any, who controls an underwriter within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution as such
underwriter, and each director of the Company, each officer of the Company who
signed such registration statement and each person, if any, who controls the
Company or any Holder within the meaning of Section 15 of the 1933 Act shall
have the same rights to contribution as the Company or such Holder, as the case
may be.
SECTION 6.
SALES PURSUANT TO RULE 144.
Upon written request, the Company shall deliver to any Holder a written
statement as to whether it has complied with all rules and regulations of the
Commission applicable in connection with use of Rule 144 (or any successor
thereto), including the timely filing of all reports required to be filed by
the Company with the Commission. The Company shall cause any restrictive
legends to be removed and any transfer restrictions to be rescinded with
respect to any sale of Registrable Securities which is exempt from registration
under the Securities Act pursuant to Rule 144.
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<PAGE> 15
SECTION 7.
TRANSFER OF REGISTRATION RIGHTS.
The registration rights of Holders under this Registration Rights
Agreement may be assigned or transferred upon written notice to the Company to
any transferee acquiring Registrable Securities, other than in a public
offering pursuant to a registration statement or in a transaction pursuant to
Rule 144. Any transferee must acknowledge in writing its acceptance of all
terms, conditions and obligations of this Registration Rights Agreement.
SECTION 8.
TERMINATION.
The Company shall not be obligated to take any action to effect any
registration, qualification or compliance pursuant to this Registration Rights
Agreement, and this Registration Rights Agreement shall terminate and be of no
force and effect (except any obligations of the Company under Section 6 of this
Registration Rights Agreement) with respect to any Holder (and such Holder
only) who may sell all of such Holder's Registrable Securities in reliance upon
Rule 144(k) (or any successor rule) promulgated under the Securities Act.
SECTION 9.
REMEDIES.
The Company recognizes that money damages may be inadequate to compensate
the Holders for a breach by the Company of its obligations under this
Registration Rights Agreement, and the Company agrees that in the event of such
a breach any of the Holders may apply for an injunction of specific performance
or the granting of such other equitable remedies as may be awarded by a court
of competent jurisdiction in order to afford the Holders the benefits of this
Registration Rights Agreement and that the Company shall not object to such
application, entry of such injunction or granting of such other equitable
remedies on the grounds that money damages shall be sufficient to compensate
the Holders.
SECTION 10.
PRIORITY OF REGISTRATION RIGHTS.
The Company shall not grant to any Person while this Registration Rights
Agreement remains in effect the right to request the Company to register any
securities of the Company under the Securities Act which right has priority
over or is inconsistent with the rights granted to the Holders hereby.
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<PAGE> 16
SECTION 11.
MISCELLANEOUS.
(a) NOTICES.
(i) All communications under this Registration Rights
Agreement shall be in writing and shall be sent:
(A) if to any party hereto at its address or
facsimile number for notices specified beneath its name on the signature
page hereof, or at such other address or facsimile number as it may have
furnished in writing to each other party hereto;
(B) if to any other person or entity who is the
registered holder of any Registrable Securities to the address or
facsimile number of such holder as it appears in the stock ledger of the
Company.
(ii) Any notice shall be deemed to have been duly given
and received (A) at the time of delivery when delivered by hand, if personally
delivered, (B) if sent by mail, two business days after being deposited in the
mail, postage prepaid, return receipt requested, and (C) when sent by
facsimile, with confirmation of receipt, so long as a duplicate of such notice
is deposited in the mail, first class postage prepaid, on the date such
facsimile is sent.
(b) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the permitted successors and assigns of each of
the parties whether so expressed or not.
(c) AMENDMENT AND WAIVER. ETC. This Agreement may be amended, and
the observance of any term of this Registration Rights Agreement may be waived,
but only with the written consent of the Company and the Holders of a Majority
of the Registrable Securities. No failure or delay on the part of the Holders
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Holders at
law or in equity or otherwise. No waiver of or consent to any departure by the
Company from any provision of this Registration Rights Agreement shall be
effective unless in writing and signed by the Holders of a Majority of the
Registrable Securities.
(d) DUPLICATE ORIGINALS. Two or more duplicate originals of this
Registration Rights Agreement may be signed in counterpart by the parties, each
of which shall be an original but all of which together shall constitute one
and the same instrument.
(e) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity,
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<PAGE> 17
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby.
(f) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the substantive law of Texas without giving effect
to the principles of conflicts of law thereof.
(g) ENTIRE AGREEMENT. This Agreement constitutes and contains the
entire agreement of the parties and supersedes any and all prior negotiations,
correspondence, undertakings and agreements between the parties hereto
respecting the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Registration Rights Agreement as of the date first above written.
COSTILLA ENERGY, INC.,
a Delaware corporation
400 West Illinois, Suite 1100
Midland, Texas 79701
Facsimile: (915) 686-6080
Attention: President and Chief Executive Officer
By: /s/ MICHAEL J. GRELLA
---------------------------------------------------
Name: Michael J. Grella
-------------------------------------------------
Title: President and Chief Executive Officer
------------------------------------------------
ENRON CAPITAL & TRADE RESOURCES CORP.,
a Delaware corporation
1400 Smith
Houston, Texas 77002
Facsimile: (713) 646-3640
Attention: Timothy J. Detmering, Vice President
With a copy to:
Donna W. Lowry
Facsimile: (713) 646-4039
By: /s/ TIMOTHY J. DETMERING
---------------------------------------------------
Name: Timothy J. Detmering
-------------------------------------------------
Title: Vice President
------------------------------------------------
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<PAGE> 18
JOINT ENERGY DEVELOPMENT INVESTMENTS II
LIMITED PARTNERSHIP
By: Enron Capital Management Limited Partnership,
its General Partner
By: Enron Capital II Corp.,
its General Partner
By: /s/ TIMOTHY J. DETMERING
---------------------------------------
Name: Timothy J. Detmering
---------------------------------------
Title: Agent and Attorney-in-Fact
---------------------------------------
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<PAGE> 1
EXHIBIT 3
CERTIFICATE OF DESIGNATIONS
OF
7% (8% PAID IN KIND) SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
($0.10 Par Value)
OF
COSTILLA ENERGY, INC.
-------------------
Pursuant to Section 151 of the Delaware General Corporation Law
-------------------
COSTILLA ENERGY, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES in this
document (the "Certificate of Designation") that the following resolutions were
duly adopted by the Board of Directors of the Corporation pursuant to authority
conferred upon the Board of Directors by the provisions of the Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), which
authorizes the issuance of up to 3,000,000 shares of preferred stock, $0.10 par
value, and pursuant to authority conferred upon the Board of Directors by
Section 151(a) of the Delaware General Corporation Law, at a meeting of the
Board of Directors duly held on May 29, 1998.
1. The Board of Directors on May 29, 1998 adopted the following
resolutions authorizing the issuance of a series of preferred stock, and fixing
the voting powers, designations, preferences, rights and qualifications,
limitations and restrictions thereof:
RESOLVED, that the Board of Directors hereby deems it
advisable and in the best interest of the Corporation to issue and sell
a series of 50,000 shares of preferred stock, $0.10 par value per share
of the Corporation (the "Preferred Stock"), convertible into shares of
common stock, $0.10 par value per share of the Corporation (the "Common
Stock"), at a price of $1,000.00 per share and having the other voting
powers, designations, preferences, rights and qualifications,
limitations and restrictions set forth below in these resolutions, and
such shares when so issued for the consideration described in this
resolution shall be validly issued, fully paid and nonassessable shares
of Preferred Stock.
RESOLVED, that pursuant to authority expressly granted to and
vested in the Board of Directors of the Corporation pursuant to the
provisions of the Certificate of Incorporation
<PAGE> 2
and Section 151(a) of the Delaware General Corporation Law, a series of
preferred stock, $0.10 par value per share, which shall consist of
50,000 of the 3,000,000 shares of preferred stock which the Corporation
now has authority to issue, be, and the same hereby is, authorized and
created and is approved for issuance, and the powers, designations,
preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are hereby fixed as set forth in
these resolutions as follows:
1. NUMBER OF SHARES AND DESIGNATION. 50,000 shares of the Preferred
Stock, $0.10 par value per share, of the Corporation are hereby constituted as a
series of the preferred stock designated as "7% (8% Paid in Kind) Series A
Cumulative Convertible Preferred Stock". For so long as any of the Preferred
Stock is outstanding, the Corporation shall not authorize, create or issue any
class or series of capital stock or Convertible Securities, whether by
resolution of the Board of Directors pursuant to authority granted by the
Certificate of Incorporation, amendment to or restatement of the Certificate of
Incorporation, by contract or otherwise, that ranks prior to, or on a parity
with, the Preferred Stock as to dividends or as to the distribution of assets
upon liquidation, dissolution or winding up without the prior consent of the
Preferred Stock as provided in Section 9(g)(ii) hereof.
2. DEFINITIONS. (a) For purposes of the Preferred Stock and this
Certificate of Designation, the following terms shall have the meanings
indicated; particular terms having a specific meaning for only a portion of this
Certificate of Designation are defined in italics where they are so employed:
"Affiliate" and the terms contained in the definition thereof which are
themselves defined terms shall have the respective meanings given to such terms
in Rule 405 under the Securities Act.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to perform
any of its responsibilities with respect to the Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the City of Houston, Texas are authorized
or obligated by law or executive order to close.
"Cash Blockage Period" shall have the meaning set forth in Section 3(b)
hereof.
"Certificate of Designation" has the meaning set forth in the first
paragraph hereof.
"Certificate of Incorporation" has the meaning set forth in the first
paragraph of this Certificate of Designation.
B - 2
<PAGE> 3
"Closing Price" with respect to a particular security on any day shall
mean on such day the last reported sales price, regular way, for such security
or, in case no sale takes place on such day, the average of the reported closing
bid and asked prices, regular way, for such security in either case as reported
on the New York Stock Exchange, on the principal national securities exchange on
which such security is listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, on the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ National Market System") or, if such security is not
quoted on the NASDAQ National Market System, the average of the closing bid and
asked prices for such security in the over-the-counter market as reported by
NASDAQ or, if bid and asked prices for such security on each such date shall not
have been reported by NASDAQ, the average of the bid and asked prices for such
security for such day as furnished by any National Association of Securities
Dealers, Inc. ("NASD") member firm regularly making a market in such security
selected for such purpose by the board of directors or similar governing body of
the issuer of such security or, if no such quotations are available, the fair
market value of such security furnished by any NASD member firm selected from
time to time by the board of directors or similar governing body of the issuer
of such security for that purpose.
"Common Stock" shall mean the Common Stock of the Corporation, $0.10
par value per share.
"Conversion Price" shall mean the conversion price per share of Common
Stock into which the Preferred Stock is convertible, as such Conversion Price
may be adjusted pursuant to Section 7 hereof. The initial Conversion Price will
be $12.39 (initially equivalent to the rate of approximately 80.71 shares of
Common Stock for each share of Preferred Stock).
"Convertible Securities" means securities convertible into or
exchangeable for (i) Common Stock, or (ii) securities, or options, warrants,
rights to acquire securities, convertible into or exchangeable for Common Stock.
"Corporate Change" shall have the meaning set forth in Section 9(g)
hereof.
"Credit Facility" means a credit facility that is currently in effect
or may be entered into among the Corporation and the lenders parties thereto,
including any related note guarantees, collateral documents, instruments and
agreements executed in connection therewith and in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreements extending the
maturity of, renewing, refunding, replacing, refinancing, increasing or
otherwise restructuring all or any portion of the indebtedness under such
agreements.
"Current Market Price" per share of Common Stock on any date shall mean
the average of the daily Closing Prices (weighted by volume) for the 20
consecutive Trading Dates commencing 22 Trading Dates before the date of
determination.
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<PAGE> 4
"Defaulted Preferred Stock" shall have the meaning set forth in Section
9(c) hereof.
"Default Event" shall have the meaning set forth in Section 9(c)
hereof.
"dividend payment date" shall have the meaning set forth in Section
3(a) hereof.
"dividend payment record date" shall have the meaning set forth in
Section 3(a) hereof.
"Dividend Periods" shall mean quarterly dividend periods commencing on
the sixteenth day of March, June, September and December of each year and ending
on and including the day preceding the first day of the next succeeding Dividend
Period (other than the initial Dividend Period which shall commence on the Issue
Date and end on and include September 15, 1998).
"Dividend Stock" shall have the meaning set forth in Section 3(b)
hereof.
"Eligible Holders" shall have the meaning set forth in Section 9(b)
hereof.
"Excluded Stock" shall mean shares of Common Stock issued or reserved
for issuance by the Corporation as a stock dividend payable in shares of Common
Stock (including Dividend Stock paid as a dividend on the Preferred Stock as
provided in Section 3(b) hereof), or upon any sub-division or split-up of the
outstanding shares of Common Stock or Preferred Stock, or upon conversion of the
Preferred Stock.
"Issue Date" shall mean the first date on which shares of Preferred
Stock are issued.
"Liquidation Preference" shall have the meaning set forth in Section
4(a) hereof.
"Majority" shall mean more than 50.00%.
"NASD" shall have the meaning set forth in the definition of Closing
Price herein.
"NASDAQ National Market System" shall have the meaning set forth in the
definition of Closing Price herein.
"Notes" shall mean the Corporation's $180,000,000 aggregate principal
amount of 10 1/4% Senior Notes Due 2006, including the terms of the related
Indenture dated as of October 1, 1996 as amended by the First Supplemental
Indenture dated as of January 16, 1998 between the Company and State Street Bank
and Trust Company, as Trustee as such Notes and Indenture are constituted on the
date on which this Certificate of Designation is first filed with the Secretary
of State of the State of Delaware.
"Own Corporation Securities" means the direct or indirect beneficial
ownership of any shares of Preferred Stock or Common Stock underlying the
Preferred Stock in the following amounts: (i)
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<PAGE> 5
in the case of Preferred Stock, any shares of Preferred Stock, or (ii) in the
case of Common Stock, an amount which constitutes 5% or more of the then
outstanding shares of Common Stock.
"Person" shall mean any individual, firm, partnership, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
"Preferred Stock" shall mean the 7% (8% Paid in Kind) Series A
Cumulative Convertible Preferred Stock, $0.10 par value per share, of the
Corporation.
"Purchasers" shall mean Enron Capital & Trade Resources Corp. and Joint
Energy Development Investments II Limited Partnership.
"Redemption Price" shall have the meaning set forth in Section 5(a)
hereof.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of June 3, 1998 between the Corporation, Enron Capital &
Trade Resources Corp. and Joint Energy Development Investments II Limited
Partnership, as amended from time to time.
"Securities" shall have the meaning set forth in Section 7 (d)(iii)
hereof.
"Securities Purchase Agreement" means that certain Securities Purchase
Agreement dated as of June 3, 1998 between the Corporation, Enron Capital &
Trade Resources Corp. and Joint Energy Development Investments II Limited
Partnership.
"Subsidiary" means, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity. Such term shall also refer to any other
partnership, limited partnership, limited liability company, joint venture,
trust, or other business entity in which such entity has a material interest.
"Trading Date" with respect to any security means (i) if such security
is listed or admitted for trading on the New York Stock Exchange or another
national securities exchange, a day on which the New York Stock Exchange or such
other national securities exchange is open for trading, (ii) if such security is
quoted on the NASDAQ National Market System, or any similar system of automated
dissemination of quotations of securities prices, a day on which trades may be
made on such system, (iii) if not listed or admitted for trading on a national
securities exchange as described in clause (i) or quoted as described in clause
(ii), a day on which quotations are reported by the National Quotation Bureau
Incorporated, or (iv) otherwise, any Business Day.
"Transaction" shall have the meaning set forth in Section 7(e) hereof.
"Transfer Agent" means Boston EquiServe, L.P. or such other agent or
agents of the Corporation as may be designated by the Board of Directors as the
transfer agent or conversion agent for the Preferred Stock.
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<PAGE> 6
"Unissued Preferred Stock" shall mean any of the authorized preferred
stock, $0.10 par value per share, of the Corporation other than the Preferred
Stock.
(b) Whenever the context requires, the gender of all words used in this
Certificate of Designation includes the masculine, feminine, and neuter. Except
as specified otherwise, all references to Sections refer to sections of this
Certificate of Designation. The word "including" shall mean "including, without
limitation" unless the context otherwise requires.
3. DIVIDENDS. (a) The holders of shares of the Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of funds
legally available therefor, cumulative cash dividends at an annual rate of
$70.00 per share of Preferred Stock, except to the extent, and only to the
extent, that dividends may be paid in Dividend Stock as provided in Section 3(b)
hereof. Dividends which are paid in Dividend Stock as provided in Section 3(b)
hereof shall be paid cumulative dividends at an annual rate of $80 per share.
Such dividends shall be cumulative from the Issue Date, whether or not in any
Dividend Period or Dividend Periods there shall be funds of the Corporation
legally available for the payment of such dividends and whether or not such
dividends are declared, and shall be payable quarterly, when and as declared by
the Board of Directors, on March 15, June 15, September 15 and December 15 in
each year (each a "dividend payment date"), commencing on September 15, 1998. If
any dividend payment date shall be on a day other than a Business Day, then the
dividend payment date shall be on the next succeeding Business Day. Each such
dividend shall be payable in arrears to the holders of record of shares of the
Preferred Stock, as they appear on the stock records of the Corporation at the
close of business on those dates (each such date, a "dividend payment record
date"), not less than 10 days nor more than 60 days preceding the dividend
payment dates thereof, as shall be fixed by the Board of Directors. Dividends on
the Preferred Stock shall accrue (whether or not declared) on a daily basis from
the Issue Date and accrued dividends for each Dividend Period shall accumulate
to the extent not paid on the dividend payment date first following the Dividend
Period for which they accrue. As used herein, the term "accrued" with respect to
dividends includes both accrued and accumulated dividends. Accrued and unpaid
dividends for any past Dividend Periods may be declared and paid at any time,
without reference to any regular dividend payment date, to holders of record on
such date, not exceeding 45 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(b) During any period in which the Corporation does not have legally
available funds for the payment of dividends in cash or is contractually
precluded by the terms of the Notes from paying dividends in cash on the
Preferred Stock (a "Cash Blockage Period"), the Corporation, at the election of
its Board of Directors, may pay dividends on the Preferred Stock in additional
duly and validly issued, fully paid and nonassessable shares of Common Stock
(the "Dividend Stock"), and, thereafter during the continuance of any such Cash
Blockage Period, dividends may be paid, at the sole election of the Corporation,
in shares of Dividend Stock. The number of shares of Dividend Stock payable on
the Preferred Stock for each quarterly dividend period during a Cash Blockage
Period shall be computed by dividing the amount of the full dividend by the
Current Market Price of the Common Stock as of the record date for determining
holders of record of Preferred Stock to whom the
B - 6
<PAGE> 7
dividend is payable. No fractional shares of Dividend Stock shall be issued by
the Corporation. Instead of any fractional share of Dividend Stock that would
otherwise be issuable to a holder by way of a dividend on the Preferred Stock,
the Corporation shall either (i) pay a cash adjustment in respect of such
fractional share in an amount equal to the product of (A) the Closing Price of
the Common Stock (computed to the nearest whole cent) on the Trading Date
immediately preceding the dividend payment date, and (B) the fraction of a share
of Common Stock represented by such fractional interest or (ii) if cash
adjustments may not be paid because the Corporation is contractually precluded
by the terms of the Notes from paying dividends in cash on the Preferred Stock,
aggregate all such fractional shares into a whole number of shares and sell such
aggregated fractional shares on behalf of the holders entitled thereto in a
public or private sale and distribute the net cash proceeds from the sale
thereof to such holders pro rata. If the Corporation determines to aggregate and
sell such fractional shares, it shall endeavor to use its best efforts to secure
the best available sales price for such shares. The amount of Dividend Stock
issuable to a holder by way of a dividend shall be computed on the basis of the
aggregate number of shares of Preferred Stock registered in such holder's name
on the record date fixed for the payment of such dividend.
(c) The amount of dividends payable for each full Dividend Period for
the Preferred Stock shall be computed by dividing the annual dividend amount (at
the applicable dividend rate) by four (rounded down to the nearest cent). The
amount of dividends payable for the initial Dividend Period on the Preferred
Stock and any other period shorter or longer than a full Dividend Period on the
Preferred Stock shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. Holders of shares of Preferred Stock called for redemption
on a redemption date falling between the close of business on a dividend payment
record date and the opening of business on the corresponding dividend payment
date shall, in lieu of receiving such dividend on the dividend payment date
fixed therefor, receive such dividend payment together with all other accrued
and unpaid dividends on the date fixed for redemption (unless such holder
converts such shares in accordance herewith). Holders of shares of Preferred
Stock shall not be entitled to any dividends, whether payable in cash, Dividend
Stock, property or securities, in excess of cumulative dividends, as herein
provided, on the Preferred Stock. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on the
Preferred Stock which are in arrears.
(d) If the Corporation declares or pays a dividend upon the Common
Stock payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for (i) a dividend or other distribution paid in
connection with the dissolution, termination or winding up of the Corporation,
or (ii) a stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the Corporation shall pay to the holders of the Preferred Stock
at the time of payment thereof the Liquidating Dividends which would have been
paid on the shares of Common Stock into which the outstanding shares of
Preferred Stock are then convertible at the then applicable Conversion Price had
all of the outstanding shares of such Preferred Stock been converted immediately
prior to the date on which a record is taken for such Liquidating Dividend, or,
if no record is taken, the date as of which the record holders of Common Stock
entitled to such Liquidating Dividend are to be determined.
B - 7
<PAGE> 8
(e) So long as any shares of the Preferred Stock are outstanding and
only during any period stock ranking on a parity with the Preferred Stock has
been issued with the consent of the Preferred Stock as provided in Section
9(g)(ii), no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any class or series of
stock of the Corporation ranking, as to dividends, on a parity with the
Preferred Stock, for any period unless full cumulative dividends on all
outstanding shares of Preferred Stock have been or contemporaneously are
declared and paid (as to contemporaneous dividends, declared and paid in cash or
in Dividend Stock if such parity stock permits payment of dividends thereon in
Common Stock) or dividends in like consideration have been declared and a sum
sufficient for the payment thereof set apart for such payment for all Dividend
Periods terminating on or prior to the date of payment, or setting apart for
payment, of such full cumulative dividends on such parity stock. When dividends
are not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, upon the shares of the Preferred Stock and any other class or series
of stock ranking on a parity as to dividends with the Preferred Stock, all
dividends declared upon such other stock shall be declared and paid pro rata so
that in all cases the amounts of dividends per share declared and paid on the
Preferred Stock and such other stock shall bear to each other the same ratio
that accrued and unpaid dividends per share on the shares of the Preferred Stock
and on such other stock bear to each other. Except as set forth above in this
paragraph, so long as any shares of the Preferred Stock are outstanding, no
dividends shall be declared or paid or set apart for payment on any class or
series of stock of the Corporation ranking, as to dividends, on a parity with
the Preferred Stock, for any period.
(f) So long as any shares of the Preferred Stock are outstanding and
only during any period stock ranking on a parity with the Preferred Stock has
been issued with the consent of the Preferred Stock as provided in Section
9(g)(ii), no other stock of the Corporation ranking on a parity with the
Preferred Stock as to dividends or upon liquidation, dissolution or winding up
shall be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund or otherwise for the
purchase or redemption of any shares of any such stock) by the Corporation
(except by conversion into or exchange for stock of the Corporation ranking
junior to the Preferred Stock as to dividends and upon liquidation, dissolution
or winding up) unless (i) the full cumulative dividends, if any, accrued on all
outstanding shares of the Preferred Stock shall have been paid or cash
sufficient to pay such accrued dividends has been set apart for payment for all
past Dividend Periods and (ii) sufficient funds shall have been set apart for
the payment of the dividend for the current Dividend Period with respect to the
Preferred Stock. Except as set forth above in this paragraph, so long as any
shares of the Preferred Stock are outstanding, no other stock of the Corporation
ranking on a parity with the Preferred Stock as to dividends or upon
liquidation, dissolution or winding up shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund or otherwise for the purchase or redemption of any shares of any
such stock) by the Corporation.
(g) So long as any shares of the Preferred Stock are outstanding, no
dividends (other than dividends or distributions paid in shares of Common Stock
or other stock ranking junior to the Preferred Stock as to dividends and upon
liquidation, dissolution or winding up) shall be declared
B - 8
<PAGE> 9
or paid or set apart for payment and no other distribution shall be declared or
made or set apart for payment, in each case upon the Common Stock or any other
stock of the Corporation ranking junior to the Preferred Stock as to dividends
or upon liquidation, dissolution or winding up, nor shall any Common Stock nor
any other such stock of the Corporation ranking junior to the Preferred Stock as
to dividends or upon liquidation, dissolution or winding up be redeemed,
purchased or otherwise acquired for any consideration (or any moneys be paid to
or made available for a sinking fund or otherwise for the purchase or redemption
of any shares of any such stock) by the Corporation (except by conversion into
or exchange for stock of the Corporation ranking junior to the Preferred Stock
as to dividends and upon liquidation, dissolution or winding up) unless, in each
case (i) the full cumulative dividends, if any, accrued on all outstanding
shares of the Preferred Stock and (only if any stock ranking on a parity with
the Preferred Stock has been authorized by the Preferred Stock in accordance
with the provisions of Section 9(g)(ii)) any other stock of the Corporation
ranking on a parity with the Preferred Stock as to dividends shall have been
paid or set apart in cash for payment for all past Dividend Periods and all past
dividend periods with respect to such other stock and (ii) sufficient funds
shall have been set apart in cash for the payment of the dividend for the
current Dividend Period with respect to the Preferred Stock and (only if any
stock ranking on a parity with the Preferred Stock has been authorized by the
Preferred Stock in accordance with the provisions of Section 9(g)(ii)) for the
current dividend period with respect to any other stock of the Corporation
ranking on a parity with the Preferred Stock as to dividends.
(h) The Company shall take all actions required or permitted under
Delaware law to permit the payment of dividends on the Preferred Stock in the
manner and in the amounts specified herein.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Common Stock or any other series or
class or classes of stock of the Corporation ranking junior to the Preferred
Stock upon liquidation, dissolution or winding up, the holders of the shares of
Preferred Stock shall be entitled to receive $1,000.00 per share (the
"Liquidation Preference") plus an amount per share equal to all dividends
(whether or not earned or declared) accrued and unpaid thereon to the date of
final distribution to such holders; but such holders shall not be entitled to
any further payment. No payment on account of any liquidation, dissolution or
winding up of the Corporation shall be made to the holders of any class or
series of stock ranking on a parity with the Preferred Stock in respect of the
distribution of assets upon dissolution, liquidation or winding up unless (i)
the authorization and issuance of such shares of stock ranking on a parity with
the Preferred Stock was approved as provided in Section 9(g)(ii), and (ii) there
shall likewise be paid at the same time to the holders of the Preferred Stock
like proportionate amounts determined ratably in proportion to the full amounts
to which the holders of all outstanding shares of Preferred Stock and the
holders of all outstanding shares of such parity stock are respectively entitled
with respect to such distribution. If, upon any liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation, or proceeds
B - 9
<PAGE> 10
thereof, distributable among the holders of the shares of Preferred Stock shall
be insufficient to pay in full the Liquidation Preference plus an amount per
share equal to all dividends (whether or not earned or declared) accrued and
unpaid thereon to the date of final distribution as aforesaid and liquidating
payments on any other shares of stock authorized as provided in Section 9(g)(ii)
and ranking, as to liquidation, dissolution or winding up, on a parity with the
Preferred Stock, then such assets, or the proceeds thereof, shall be distributed
among the holders of shares of Preferred Stock and any such other stock ratably
in accordance with the respective amounts which would be payable on such shares
of Preferred Stock and any such other stock if all amounts payable thereon were
paid in full. For the purposes of this Section 4, neither a consolidation or
merger of the Corporation with one or more corporations or other entities nor a
sale, lease, exchange or transfer of all or any part of the Corporation's assets
for cash, securities or other property shall be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series or
class or classes of stock which has been authorized as provided in Section
9(g)(ii) and which ranks on a parity with or prior to the Preferred Stock upon
liquidation, dissolution or winding up, upon any liquidation, dissolution or
winding up of the Corporation, after payment shall have been made in full to the
holders of Preferred Stock, as provided in this Section 4, any other series or
class or classes of stock ranking junior to the Preferred Stock upon
liquidation, dissolution or winding up shall, subject to the respective terms
and provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of Preferred Stock
shall not be entitled to share therein.
5. OPTIONAL REDEMPTION.
(a) Preferred Stock may not be redeemed by the Corporation prior to
June 15, 2001. On or after such date the Corporation, at its option, may redeem
the shares of Preferred Stock, in whole or in part, out of funds legally
available therefor, from time to time, subject to the notice provisions and
provisions for partial redemption described below, at any time in each of the
twelve-month periods beginning on June 15 in each of the following years if the
average (weighted by volume) Closing Price of the Common Stock, for at least
twenty of the thirty Trading Days on which trading in the Common Stock occurred
preceding the date on which notice of redemption is given by the Corporation as
provided herein equals or exceeds 150% of the then applicable Conversion Price
of the Preferred Stock, at the following redemption prices per share (expressed
as a percentage of the Liquidation Preference) plus an amount equal to accrued
and unpaid dividends, if any, to (and including) the date fixed for redemption,
whether or not earned or declared (the "Redemption Price").
<TABLE>
<CAPTION>
YEAR PRICE PER SHARE
- ---- ---------------
<S> <C>
2001 107%
2002 103.5%
2003 101.75%
2004 and 100%
thereafter
</TABLE>
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<PAGE> 11
(b) In the event the Corporation shall redeem shares of Preferred
Stock, notice of such redemption shall be given by first class mail, postage
prepaid, mailed not less than 60 nor more than 90 days prior to the redemption
date, to each holder of record of the shares to be redeemed, at such holder's
address as the same appears on the stock records of the Corporation. Each such
notice shall state: (i) the redemption date; (ii) the number of shares of
Preferred Stock to be redeemed and, if less than all the shares held by such
holder are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the Redemption Price; (iv) the place or places where certificates
for such shares are to be surrendered for payment of the Redemption Price; (v)
the then current Conversion Price; and (vi) that dividends on the shares to be
redeemed shall cease to accrue on such redemption date. If, on the date fixed
for redemption, funds necessary for the redemption shall be available therefor
and shall have been irrevocably deposited or set aside, then, notwithstanding
that the certificates evidencing any shares of Preferred Stock so called for
redemption shall not have been surrendered, the dividends with respect to the
shares so called shall cease to accrue after the date fixed for redemption, such
shares shall no longer be deemed outstanding, all rights of the holders of such
shares as stockholders of the Company shall cease, and all rights whatsoever
with respect to the shares so called for redemption (except the right of the
holders to receive the Redemption Price without interest upon surrender of their
certificates therefor) shall terminate.
(c) Upon surrender in accordance with said notice of the certificates
for any such shares so redeemed (properly endorsed or assigned for transfer, if
the Board of Directors shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the applicable Redemption Price
aforesaid. If fewer than all the outstanding shares of Preferred Stock are to be
redeemed, shares to be redeemed shall be selected by the Corporation from
outstanding shares of Preferred Stock not previously called for redemption pro
rata (as near as may be). If fewer than all the shares represented by any
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
(d) In the event that the Corporation has failed to pay accrued and
unpaid dividends on the Preferred Stock, it may not redeem less than all of the
then outstanding shares of the Preferred Stock until all such accrued and unpaid
dividends and the then current quarterly dividends have been paid in full in
cash.
(e) Notwithstanding the foregoing, if notice of redemption has been
given pursuant to this Section 5(a) and any holder of shares of Preferred Stock
shall, prior to the close of business on the redemption date, give written
notice to the Corporation pursuant to Section 7(b) hereof of the conversion of
any or all of the shares to be redeemed held by such holder (accompanied by a
certificate or certificates for such shares, duly endorsed or assigned to the
Corporation), then (i) the Corporation shall not have the right to redeem such
shares, (ii) the conversion of such shares to be redeemed shall become effective
as provided in Section 7 and (iii) any funds which shall have been deposited for
the payment of the Redemption Price for such shares shall be returned to the
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<PAGE> 12
Corporation immediately after such conversion (subject to declared dividends
payable to holders of shares of Preferred Stock on the dividend payment record
date for such dividends being so payable, to the extent set forth in Section 7
hereof, regardless of whether such shares are converted subsequent to such
dividend payment record date and prior to the related dividend payment date).
6. SHARES TO BE RETIRED. All shares of Preferred Stock purchased,
redeemed, exchanged or converted by the Corporation shall be retired and
canceled and shall be restored to the status of authorized but unissued shares
of preferred stock, without designation as to series, and may thereafter be
reissued.
7. CONVERSION. Holders of shares of Preferred Stock shall have the
right to convert all or a portion of such shares into shares of Common Stock, as
follows:
(a) Subject to and upon compliance with the provisions of this Section
7, a holder of shares of Preferred Stock shall have the right, at such holder's
option, at any time to convert all or any of such shares into the number of duly
and validly issued and fully paid and nonassessable shares of Common Stock
obtained by dividing the aggregate Liquidation Preference of the shares to be
converted by the then applicable Conversion Price and by surrender of such
shares, such surrender to be made in the manner provided in paragraph (b) of
this Section 7; provided, however, that the right to convert shares called for
redemption pursuant to Section 5 hereof shall terminate at the close of business
on the date fixed for such redemption. No share of Preferred Stock may be
converted in part into Common Stock; further provided, however, that a Holder
may provisionally convert any shares of Preferred Stock that are the subject of
a pending registration under Section 2(a) or 2(b) of the Registration Rights
Agreement, such conversion to be effective as of the effective date of the
related registration statement by so stating in the notice given in accordance
with paragraph (b) of this Section 7, and such conversion shall be effective
only if (i) the related registration statement is declared effective by the
Securities and Exchange Commission, (ii) no stop order or similar proceeding is
instituted by any regulatory authority having jurisdiction with respect to such
registration statement, and (iii) the Common Stock issuable upon such conversion
and registered under the registration statement is sold within 90 days after the
registration statement is declared effective, and , if effective, shall be
deemed to have been effective as of the close of business on the effective date
of the related registration statement; otherwise such shares of Preferred Stock
shall be deemed for all purposes hereunder (including accrual and payment of
dividends) to be and have been outstanding as shares of Preferred Stock during
any period in which such provisional conversion was pending.
(b) (i) In order to exercise the conversion right, the holder of each
share of Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent in the Borough of Manhattan, City of
New York, accompanied by written notice to the Corporation that the holder
thereof elects to convert such share of Preferred Stock and stating whether or
not the conversion is a provisional conversion in connection with a registration
under the Registration Rights Agreement as provided in the final proviso of
Section 7(a). Unless the shares issuable on conversion are to be
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<PAGE> 13
issued in the same name as the name in which such share of Preferred Stock is
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or such holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax (or evidence reasonably satisfactory to the
Corporation demonstrating that such taxes have been paid or are not required to
be paid).
(ii) Holders of shares of Preferred Stock who surrender their
shares of Preferred Stock for conversion shall be entitled to payment in cash by
the Corporation of all accrued and unpaid dividends to the date the Preferred
Stock is surrendered for conversion (or deemed to have been converted, in the
case of shares provisionally converted as provided in the final proviso to
Section 7(a)), prorated for any portion of the then current Dividend Period
during which the Preferred Stock is surrendered for conversion, whether or not
any dividend in respect of such then current dividend period has been declared
or set aside by the Board of Directors of the Corporation. Such payment,
together with any payment for fractional shares as provided in paragraph (c) of
this Section 7, shall be paid by the Corporation as promptly as practicable
following surrender of certificates for shares of Preferred Stock for conversion
as provided herein (or following the sale of the underlying Common Stock, in the
case of shares which are provisionally converted and are subsequently sold as
provided in the final proviso to Section 7(a)), and, when applicable, shall
accompany the certificates for Common Stock into which such shares of Preferred
Stock have been converted which are delivered in accordance with the following
paragraph.
(iii) As promptly as practicable after the surrender of
certificates for shares of Preferred Stock as aforesaid (unless such shares are
issued in connection with a provisional conversion in connection with a
registration under the Registration Rights Agreement), the Corporation shall
issue and shall deliver at such office to such holder, or on such holder's
written order, a certificate or certificates for the number of shares of Common
Stock issuable upon the conversion of such shares in accordance with the
provisions of this Section 7, and any fractional interest in respect of a share
of Common Stock arising upon such conversion shall be settled as provided in
paragraph (c) of this Section 7. If shares are surrendered for provisional
conversion, the Corporation shall either (A) reissue certificates for the number
of shares of Preferred Stock surrendered for provisional conversion if the
conditions of clauses (i) - (iii) of the final proviso to Section 7(a) are not
fulfilled, or (B) issue certificates for the number of shares of Common Stock
into which the shares provisionally surrendered have been converted to the order
of the purchaser thereof, if the conditions of clauses (i) - (iii) of the final
proviso to Section 7(a) are fulfilled, and any fractional interest in respect of
a share of Common Stock arising upon such conversion shall be settled as
provided in paragraph (c) of this Section 7.
(iv) Each conversion (other than provisional conversions)
shall be deemed to have been effected immediately prior to the close of business
on the date on which the certificates for shares of Preferred Stock shall have
been surrendered and such notice received by the Corporation as aforesaid, and
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares represented thereby at
such time on such date and such
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<PAGE> 14
conversion shall be at the Conversion Price in effect at such time on such date,
unless the stock transfer books of the Corporation shall be closed on that date,
in which event such person or persons shall be deemed to have become such holder
or holders of record at the close of business on the next succeeding day on
which such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such shares shall have been
surrendered and such notice received by the Corporation. All shares of Common
Stock delivered upon conversion of the Preferred Stock will upon delivery be
duly and validly issued and fully paid and nonassessable.
(c) In connection with the conversion of any shares of Preferred Stock,
no fractional shares or scrip representing fractions of shares of Common Stock
shall be issued upon conversion of the Preferred Stock. Instead of any
fractional interest in a share of Common Stock which would otherwise be
deliverable upon the conversion of a share of Preferred Stock, the Corporation
shall pay to the holder of such share an amount in cash (computed to the nearest
cent) equal to the Closing Price of Common Stock on the Trading Date immediately
preceding the date of conversion multiplied by the fraction of a share of Common
Stock represented by such fractional interest. If more than one share of
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares of
Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) In case the Corporation shall after the Issue Date (A) pay a
dividend or make a distribution on its Common Stock that is paid or made (1) in
shares of its Common Stock or (2) in rights to purchase stock or other
securities if such rights are not separable from the Common Stock except upon
the occurrence of a contingency, (B) subdivide or split its outstanding Common
Stock into a greater number of shares, (C) combine its outstanding Common Stock
into a smaller number of shares or (D) issue any shares of capital stock by
reclassification of its Common Stock, the Conversion Price in effect immediately
prior thereto shall be adjusted, or in the case of clause (A)(2) other provision
shall be made, so that the holder of any share of Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock of the Corporation and rights to purchase stock or other securities
which such holder would have owned or have been entitled to receive after the
occurrence of any of the events described above had such share been surrendered
for conversion immediately prior to the occurrence of such event or the record
date therefor, whichever is earlier. In the event of the redemption of any
rights referred to in clause (A), such holder shall have the right to receive,
in lieu of any such rights, any cash, property or securities paid in respect of
such redemption. An adjustment made pursuant to this subparagraph (i) shall
become effective immediately after the close of business on the record date for
determination of stockholders entitled to receive such dividend or distribution
in the case of a dividend or distribution (except as provided in paragraph (h)
below) and shall become effective immediately after the close of business on the
effective date in the case of a subdivision, split, combination or
reclassification. Any shares of Common Stock issuable in payment of a dividend
shall be deemed to have been issued immediately prior to the close of business
on the record date
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<PAGE> 15
for such dividend for purposes of calculating the number of outstanding shares
of Common Stock under clauses (ii), (iii) and (iv) below.
(ii) In case the Corporation shall issue after the Issue Date
options, rights or warrants to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock, or Convertible Securities, at an
exercise, purchase, conversion or exchange price or rate per share of Common
Stock less than the Current Market Price per share of Common Stock at the record
date for the determination of stockholders entitled to receive such options,
rights or warrants (or if no record date is taken, the issuance date thereof),
then the Conversion Price in effect immediately prior thereto shall be adjusted
to equal the price determined by multiplying (A) the Conversion Price in effect
immediately prior to the date of issuance of such options, rights or warrants by
(B) a fraction, the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding on the date of issuance of such options,
rights or warrants (without giving effect to any such issuance) and (2) the
number of shares which the aggregate proceeds from the exercise of such options,
rights or warrants (and the proceeds from the conversion or exchange of the
Convertible Securities acquired upon the exercise of any such options, warrants
or rights) for Common Stock would purchase at such Current Market Price, and the
denominator of which shall be the sum of (1) the number of shares of Common
Stock outstanding on the date of issuance of such options, rights or warrants
(without giving effect to any such issuance) and (2) the number of additional
shares of Common Stock offered for subscription or purchase upon the exercise of
such options, rights or warrants and upon the conversion or exchange of such
Convertible Securities. Such adjustment shall be made successively whenever any
such options, rights or warrants are issued, and shall become effective
immediately after such record date. In determining whether any options, rights
or warrants (or the related Convertible Securities) entitle the holders of
Common Stock to subscribe for or purchase shares of Common Stock at less than
such Current Market Price, there shall be taken into account any consideration
received by the Corporation upon issuance and upon exercise of such options
rights or warrants (and the conversion or exchange of such Convertible
Securities).
(iii) In case the Corporation shall issue after the Issue Date
any Common Stock (other than Excluded Stock) or Convertible Securities without
consideration or for a consideration per share of Common Stock less than the
Current Market Price per share of Common Stock on the date of such issuance,
then the Conversion Price in effect immediately prior thereto shall be reduced
to equal the price determined by multiplying (A) the Conversion Price in effect
immediately prior to the date of issuance of such Common Stock or Convertible
Securities by (B) a fraction, the numerator of which shall be the sum of (1) the
number of shares of Common Stock outstanding on the date of issuance of such
additional Common Stock or Convertible Securities (without giving effect to any
such issuance) and (2) the number of shares which the aggregate proceeds from
the issuance of such additional Common Stock and the conversion or exchange of
such Convertible Securities would purchase at such Current Market Price, and the
denominator of which shall be the sum of (3) the number of shares of Common
Stock outstanding on the date of issuance of such additional Common Stock or
Convertible Securities (without giving effect to any such issuance) and (4) the
number of additional shares of Common Stock issued plus the number of shares of
Common
B - 15
<PAGE> 16
Stock issuable upon conversion or exchange of Convertible Securities for no
consideration or for a consideration less than the Current Market Price per
share of Common Stock on the date of such issuance. Such adjustment shall be
made successively whenever any such Common Stock or Convertible Securities
(other than Excluded Stock) are issued without consideration or for a
consideration per share of Common Stock less than the Current Market Price per
share of Common Stock on the date of such issuance, and shall become effective
immediately after such issuance date. In determining whether any shares of
Common Stock are being issued at less than such Current Market Price, there
shall be taken into account any consideration received by the Corporation upon
issuance of Common Stock or Convertible Securities and upon conversion or
exchange of Convertible Securities.
(iv) In case the Corporation shall pay a dividend or make a
distribution to all holders of its Common Stock after the Issue Date of any
shares of capital stock of the Corporation or its subsidiaries (other than
Common Stock), or Convertible Securities, or evidences of its indebtedness or
assets, including securities (any of the foregoing being hereinafter in this
subparagraph (iv) called the "Securities") and cash to the extent in excess of
regular periodic cash dividends in an amount equal to that paid by the
Corporation on the Common Stock on the Issue Date (if any), but excluding
options, rights, warrants, dividends and distributions referred to in
subparagraphs (i) and (ii) above, regular periodic cash dividends in an amount
not greater than that paid by the Corporation on the Common Stock on the Issue
Date payable out of the Corporation's surplus that may from time to time be
declared by the Board of Directors and dividends and distributions in connection
with the liquidation, dissolution or winding up of the Corporation, then in each
such case, the Conversion Price shall be adjusted so that it shall equal the
price determined by multiplying (A) the Conversion Price in effect on the record
date mentioned below by (B) a fraction, the numerator of which shall be the
Current Market Price per share of the Common Stock on the record date mentioned
below less the then fair market value as determined by the Board of Directors
(whose determination shall, if made in good faith, be conclusive) as of such
record date of the portion of the Securities applicable to one share of Common
Stock, and the denominator of which shall be the Current Market Price per share
of the Common Stock on such record date; provided, however, that in the event
the then fair market value (as so determined) of the portion of Securities so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price per share of Common Stock on the record date mentioned
above, in lieu of the foregoing adjustment, adequate provision shall be made so
that each holder of shares of Preferred Stock shall have the right to receive
the amount and kind of Securities such holder would have received had such
holder converted each such share of Preferred Stock immediately prior to the
record date for the distribution of the Securities. Except as provided in
paragraph (h) below, such adjustment shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
distribution.
(v) Upon the expiration or termination of the options, rights
or warrants described in Section 7(d)(ii) above, if any such options, rights or
warrants shall not have been exercised, then the Conversion Price shall
forthwith be readjusted and thereafter be the rate which it would have been had
an adjustment been made on the basis that (A) the only options, rights or
warrants so issued
B - 16
<PAGE> 17
or sold were those so exercised and they were issued or sold for the
consideration actually received by the Corporation upon such exercise, plus the
consideration, if any, actually received by the Corporation for the granting of
all such rights or warrants whether or not exercised, plus the consideration, if
any, actually received by the Corporation upon the conversion or exercise of any
Convertible Securities issuable upon the exercise of such options, rights or
warrants and (B) the Corporation issued and sold a number of shares of Common
Stock equal to those actually issued upon exercise of such options, rights or
warrants or such conversion or exchange, and such shares were issued and sold
for a consideration equal to the sum of the aggregate exercise price in effect
under the options, rights or warrants actually exercised at the respective dates
of their exercise plus the aggregate conversion or exchange price under
Convertible Securities actually converted or exchanged at the respective dates
of conversion or exchange. For purposes of subparagraphs (ii) and (iii), the
aggregate consideration received by the Corporation in connection with the
issuance of shares of Common Stock or of options, rights or warrants or
Convertible Securities shall be deemed to be equal to the sum of the aggregate
offering price (before deduction of underwriting discounts or commissions and
expenses payable to third parties) of all such securities plus the minimum
aggregate amount, if any, payable upon the exercise of such options, rights or
warrants or upon the conversion or exchange of such Convertible Securities into
shares of Common Stock. In the case of the issuance of Common Stock (otherwise
than upon the conversion of Preferred Stock or other Convertible Securities of
the Corporation) for a consideration in whole or in part other than cash,
including securities acquired in exchange therefor (other than securities by
their terms so exchangeable), the consideration other than cash shall be the
fair value thereof as determined by the Board of Directors, irrespective of any
accounting treatment; provided, that such fair value as determined by the Board
of Directors shall not exceed the aggregate Current Market Price of the shares
of Common Stock being issued as of the date the Board of Directors authorizes
the issuance of such shares.
(vi) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
subparagraph (vi) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment; and further provided, however, that
any adjustment shall be required and shall be made in accordance with the
provisions of this Section 7 (other than this subparagraph (vi)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the holders of shares of Common Stock. All calculations under
this Section 7 shall be made to the nearest cent (with $.005 being rounded
upward) or to the nearest 1/100th of a share (with .005 of a share being rounded
upward), as the case may be. Anything in this paragraph (d) to the contrary
notwithstanding, the Corporation shall be entitled, to the extent permitted by
law, to make such reductions in the Conversion Price, in addition to those
required by this paragraph (d), as it in its discretion shall determine to be
advisable in order that any stock dividend, subdivision of shares, distribution
of rights or warrants to purchase stock or securities, or distribution of other
assets or any other transaction which could be treated as any of the foregoing
transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as
amended, hereafter made by the Corporation to its stockholders shall not be
taxable to such stockholders.
B - 17
<PAGE> 18
(e) In case the Corporation shall be a party to any transaction
(including without limitation a merger, consolidation, statutory share exchange,
sale of all or substantially all of the Corporation's assets or recapitalization
of the Common Stock (each of the foregoing being referred to as a
"Transaction"), in each case as a result of which shares of Common Stock shall
be converted into the right to receive stock, securities or other property
(including cash or any combination thereof), then the Preferred Stock remaining
outstanding will thereafter no longer be subject to conversion into Common Stock
pursuant to Section 7, but instead shall be convertible into the kind and amount
of shares of stock and other securities and property receivable (including cash)
upon the consummation of such Transaction by a holder of that number of shares
or fraction thereof of Common Stock into which one share of Preferred Stock was
convertible immediately prior to such Transaction. The Corporation shall not be
a party to any Transaction unless the terms of such Transaction are consistent
with the provisions of this Section 7(e) and it shall not consent or agree to
the occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the Preferred Stock which will contain provisions
enabling the holders of the Preferred Stock which remains outstanding after such
Transaction to convert into the consideration received by holders of Common
Stock at the Conversion Price immediately after such Transaction. In the event
that at any time, as a result of an adjustment made pursuant to this Section 7,
the Preferred Stock shall become subject to conversion into any securities other
than shares of Common Stock, thereafter the number of such other securities so
issuable upon conversion of the shares of Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of Preferred Stock
contained in this Section 7. The provisions of this Section 7(e) shall similarly
apply to successive Transactions.
(f) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock that would cause an adjustment to the
Conversion Price of the Preferred Stock pursuant to the terms of any of the
paragraphs above;
(ii) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe for or purchase
Convertible Securities or any shares of any other class or any other rights or
warrants;
(iii) there shall be any reclassification or change of the
Common Stock (other than an event to which Section 7(d)(i) applies) or any
consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or a statutory
share exchange, or a self tender offer by the Corporation for all or
substantially all of its outstanding shares of Common Stock, or the sale or
transfer of all or substantially all of the assets of the Corporation; or
B - 18
<PAGE> 19
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of shares of the Preferred Stock at their
addresses as shown on the stock records of the Corporation, as promptly as
possible, but at least 15 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution or rights or
warrants are to be determined or (B) the date on which such reclassification,
change, consolidation, merger, statutory share exchange, sale, transfer,
dissolution, liquidation or winding up is expected to become effective or occur,
and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reclassification, change, consolidation,
merger, statutory share exchange, sale, transfer, dissolution, liquidation or
winding up. Failure to give such notice or any defect therein shall not affect
the legality or validity of the proceedings described in this Section 7.
(g) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officers' certificate
signed by the President or a Vice President and the Chief Financial Officer or
the Secretary of the Corporation setting forth the Conversion Price after such
adjustment, the method of calculation thereof and setting forth a brief
statement of the facts requiring such adjustment and upon which such adjustment
is based. If the calculation of the adjustment requires a determination by the
Board of Directors pursuant to Section 7(d)(iv) or any similar provision, such
certificate shall include a copy of the resolution of the Board of Directors
relating to such determination. Promptly after delivery of such certificate, the
Corporation shall prepare a notice of such adjustment of the Conversion Price
setting forth the adjusted Conversion Price, the facts requiring such adjustment
and upon which such adjustment is based and the date on which such adjustment
becomes effective and shall mail such notice of such adjustment of the
Conversion Price to the holder of each share of Preferred Stock at such holder's
last address as shown on the stock records of the Corporation.
(h) In any case in which Section 7(d) provides that an adjustment shall
become effective immediately after a record date for an event and the date fixed
for conversion pursuant to Section 7 occurs after such record date but before
the occurrence of such event, the Corporation may defer until the actual
occurrence of such event (i) issuing to the holder of any share of Preferred
Stock surrendered for conversion the additional shares of Common Stock issuable
upon such conversion by reason of the adjustment required by such event over and
above the Common Stock issuable upon such conversion before giving effect to
such adjustment and (ii) paying to such holder any amount in cash in payment of
accrued but unpaid dividends pursuant to paragraph (b)(ii), or in lieu of any
fraction pursuant to paragraph (c), of this Section 7.
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<PAGE> 20
(i) For purposes of this Section 7, the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock then
owned or held by or for the account of the Corporation or any corporation
controlled by the Corporation.
(j) If any single action would require adjustment pursuant to more than
one paragraph of this Section 7, only one adjustment shall be made and such
adjustment shall be the amount of adjustment which has the highest absolute
value to the holders of the Preferred Stock.
(k) In case the Corporation shall take any action affecting the Common
Stock, other than action described in this Section 7, which in the opinion of
the Board of Directors would materially adversely affect the conversion rights
of the holders of the shares of Preferred Stock, the Conversion Price for the
Preferred Stock shall be adjusted, to the extent permitted by law, in such
manner, if any, and at such time, as the Board of Directors may determine to be
equitable in the circumstances. Subject to the foregoing, there shall be no
adjustment of the Conversion Price in case of the issuance of any stock of the
Corporation in a reorganization, acquisition or other similar transaction except
as specifically set forth in this Section 7.
(l) The Corporation shall at all times reserve and keep available, free
from contractual or statutory preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, for the purpose of effecting conversion of
the Preferred Stock, the full number of shares of Common Stock deliverable upon
the conversion of all outstanding shares of Preferred Stock not theretofore
converted. For purposes of this paragraph (l), the number of shares of Common
Stock which shall be deliverable upon the conversion of all outstanding shares
of Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single holder.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value of the shares of Common Stock
deliverable upon conversion of the Preferred Stock, the Corporation will take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.
The Corporation will make the shares of Common Stock required to be
delivered upon conversion of the Preferred Stock eligible for trading upon the
NASDAQ National Market System or upon any national securities exchange upon
which the Common Stock shall then be traded, prior to such delivery.
Prior to the delivery of any securities which the Corporation shall be
obligated to deliver upon conversion of the Preferred Stock, the Corporation
will comply with all federal and state laws and regulations thereunder requiring
the registration of such securities with, or any approval of or consent to the
delivery thereof by, any governmental authority.
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<PAGE> 21
(m) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of the
shares of Preferred Stock (or any other securities issued on account of the
Preferred Stock pursuant hereto) or shares of Common Stock on conversion of or
as payment of a dividend or distribution on the Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue or
delivery of shares of Preferred Stock (or any other securities issued on account
of the Preferred Stock pursuant hereto) and the Corporation shall not be
required to make any issue or delivery unless and until the person requesting
such issue or delivery has paid to the Corporation the amount of any such tax or
has established, to the reasonable satisfaction of the Corporation, that such
tax has been paid or is not required to be paid.
(n) The Corporation shall not take any action which results in an
adjustment of the number of shares of Common Stock issuable upon conversion of a
share of Preferred Stock if the total number of shares of Common Stock issuable
after such action upon conversion of the Preferred Stock then outstanding,
together with the total number of shares of Common Stock then outstanding, would
exceed the total number of shares of Common Stock then authorized under the
Certificate of Incorporation. Subject to the foregoing, the Corporation shall
take all such actions as it may deem reasonable under the circumstances to
provide for the issuance of such number of shares of Common Stock as would be
necessary to allow for the conversion from time to time, and taking into account
adjustments as herein provided, of outstanding shares of the Preferred Stock in
accordance with the terms and provisions of the Certificate of Incorporation.
8. RANKING. Any class or classes of stock of the Corporation shall
be deemed to rank as follows:
(a) So long as any shares of the Preferred Stock are outstanding and
only during any period stock ranking prior to the Preferred Stock has been
issued with the consent of the Preferred Stock as provided in Section 9(g)(ii),
PRIOR TO the Preferred Stock, as to dividends or as to the distribution of
assets upon liquidation, dissolution or winding up, if the holders of such class
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Preferred Stock;
(b) So long as any shares of the Preferred Stock are outstanding and
only during any period stock ranking on a parity with the Preferred Stock has
been issued with the consent of the Preferred Stock as provided in Section
9(g)(ii), ON A PARITY WITH the Preferred Stock, as to dividends or as to the
distribution of assets upon liquidation, dissolution or winding up, whether or
not the dividend rates, dividend payment dates or redemption or liquidation
prices per share thereof be different from those of the Preferred Stock, if the
holders of such class of stock and the Preferred Stock shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in proportion to their respective amounts of
accrued and unpaid dividends per share or liquidation prices, without preference
or priority of one over the other; and
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<PAGE> 22
(c) JUNIOR TO the Preferred Stock, as to dividends or as to the
distribution of assets upon liquidation, dissolution or winding up, if such
stock shall be the Common Stock or if the holders of Preferred Stock shall be
entitled to receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to the
holders of shares of such stock.
9. VOTING.
(a) Except as herein provided or as otherwise from time to time
required by law, holders of Preferred Stock shall have no voting rights.
(b) For so long as the Purchasers or any of their respective
Affiliates, designees or direct or indirect transferees of Preferred Stock
(collectively, "Eligible Holders") collectively Own Corporation Securities, the
Eligible Holders, acting by the vote of a Majority of the Preferred Stock (if
any Preferred Stock is then outstanding), or by a Majority of the Common Stock
held by Eligible Holders (if no Preferred Stock is then outstanding) issued upon
conversion of the Preferred Stock, shall have the right (i) collectively, to
nominate one person for election to the Board of Directors of the Corporation,
or (ii) individually, (A) to receive prior notice of any proposed action by the
Corporation's Board of Directors, and to receive reasonable notice of and to
have one representative attend any meeting of the Corporation's Board of
Directors, (B) to receive, promptly after they are produced, all management
reports and management accounts relating to the Corporation and (C) upon
reasonable notice, to have access to the books and records of the Corporation.
The Corporation will take all steps necessary to increase the then authorized
number of members of the Board of Directors by one and to have the person
initially designated by the Eligible Holders appointed to the Corporation's
Board of Directors on the Issue Date. At each subsequent election of directors
at which the term of the nominee of the Eligible Holders as a director of the
Corporation expires, the Corporation will nominate the designee of the Eligible
Holders for election to the Corporation's Board of Directors for the succeeding
term for which directors are elected, will recommend his or her election to the
Corporation's stockholders and otherwise will use its best efforts to cause the
Corporation's stockholders to elect the designee of the Eligible Holders to the
Corporation's Board of Directors. The rights set forth in this Section 9(b)
shall survive any conversion of the Preferred Stock for so long as Eligible
Holders collectively Own Corporation Securities as set forth herein.
(c) (i) In addition to the rights of Eligible Holders set forth in
Section 9(b), whenever, at any time or times, (A) dividends payable on the
shares of Preferred Stock at the time outstanding have not been declared and
paid in an aggregate amount equal to at least four consecutive quarterly
dividends on such shares or dividends on the Preferred Stock are paid in
Dividend Stock as provided in Section 3(c) hereof for four quarters in the
aggregate, (B) there occurs an event of default under the Notes or any then
outstanding Credit Facility which enables the holders of the Notes or of the
indebtedness outstanding under such Credit Facility, as the case may be, to
accelerate any of the indebtedness represented thereby, (C) the Corporation
breaches or otherwise fails to observe or perform any other representation,
warranty, covenant or agreement set forth in this
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<PAGE> 23
Certificate of Designation, the Securities Purchase Agreement or the
Registration Rights Agreement, (D) the entry by a court having jurisdiction in
the premises of (1) a decree or order for relief in respect of the Corporation
or any Subsidiary of the Corporation in an involuntary case or proceeding under
United States bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal, state, or foreign bankruptcy, insolvency, or other similar
law or (2) a decree or order adjudging the Corporation or any Subsidiary of the
Corporation a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of, or in respect
of, the Corporation or any Subsidiary of the Corporation under United States
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal, state or foreign bankruptcy, insolvency, or similar law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Corporation or any Subsidiary of the Corporation or of
any substantial part of the property of the Corporation or any Subsidiary of the
Corporation, or ordering the winding-up or liquidation of the affairs of the
Corporation or any Subsidiary of the Corporation, and the continuance of any
such decree or order for relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive calendar days; or (E) (1) the
commencement by the Corporation or any Subsidiary of the Corporation of a
voluntary case or proceeding under United States Bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state, or foreign
bankruptcy, insolvency or other similar law or of any other case or proceeding
to be adjudicated a bankrupt or insolvent; or (2) the consent by the Corporation
or any Subsidiary of the Corporation to the entry of a decree or order for
relief in respect of the Corporation or any subsidiary of the Corporation in an
involuntary case or proceeding under United States bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state, or foreign
bankruptcy, insolvency, or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against the Corporation or any
Subsidiary of the Corporation; or (3) the filing by the Corporation or any
Subsidiary of the Corporation of a petition or answer or consent seeking
reorganization or relief under United States bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal, state or foreign
bankruptcy, insolvency or other similar law; or (4) the consent by the
Corporation or any Subsidiary of the Corporation to the filing of such petition
or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the
Corporation or any Subsidiary of the Corporation or of any substantial part of
the property of the Corporation or any Subsidiary of the Corporation, or the
making by the Corporation or any Subsidiary of the Corporation of an assignment
for the benefit of creditors; or (5) the admission by the Corporation or any
Subsidiary of the Corporation in writing of its inability to pay its debts
generally as they become due; or (6) the taking of corporate action by the
Corporation or any Subsidiary of the Corporation in furtherance of any such
action (each of the foregoing events in Section 9(c)(i) (A)through (E) being
referred to herein as a "Default Event"), the holders of Preferred Stock shall
have the right, voting separately as a class (the Preferred Stock for purposes
hereof, the "Defaulted Preferred Stock"), to elect that number of directors
which most closely approximates, as a portion of the entire Board of Directors,
but which is no greater than, the ratio that the number of shares of Common
Stock issuable at the then applicable Conversion Price upon the conversion of
the Preferred Stock would bear to the total number of shares of Common Stock
then outstanding (assuming all of the Preferred Stock were then converted), but
in no event less than two directors of the Corporation (including in any
computation hereunder any director
B - 23
<PAGE> 24
nominated by the Eligible Holders and elected to the Board of Directors as
provided in Section 9(b)) at the Corporation's next annual meeting of the
stockholders and at each subsequent annual meeting of stockholders; provided,
however, that if such voting rights shall become vested more than 90 days or
less than 20 days before the date prescribed for the annual meeting of
stockholders, thereupon the holders of the shares of Defaulted Preferred Stock
shall be entitled to exercise their voting rights at a special meeting of the
holders of shares of Defaulted Preferred Stock as set forth herein. At elections
for such directors, each holder of Preferred Stock shall be entitled to one vote
for each share held. Upon the vesting of such right of the holders of Defaulted
Preferred Stock, the then authorized number of members of the Board of Directors
shall automatically be increased by the number of directors which the Defaulted
Preferred Stock are entitled to elect as provided herein, and the vacancies so
created shall be filled by vote of the holders of outstanding Defaulted
Preferred Stock as hereinafter set forth. The right of holders of Defaulted
Preferred Stock, voting separately as a class, to elect members of the Board of
Directors as aforesaid shall continue (x) if the right to elect such directors
arose because of an event described in clause (A) (to the extent such right
arose because of the payment of dividends in Dividend Stock) or (D) or (E) of
this Section 9(b)(i), until all of the shares of the Preferred Stock have been
converted, redeemed or otherwise retired, (y) if the right to elect such
directors arose because of an event described in clause (B) or (C) of this
Section 9(b)(i), until the event of default, breach or failure has been cured,
or (z) otherwise, until such time as all dividends accumulated on Defaulted
Preferred Stock shall have been paid, or declared and funds set aside for
payment in full, at which time such right shall terminate, except as herein or
by law expressly provided, subject to revesting in the event of each and every
subsequent default of the character above mentioned. As long as any shares of
Preferred Stock shall remain outstanding, the number of directors of the
Corporation (excluding any directors elected by vote of the holders of shares of
Defaulted Preferred Stock) elected at any meeting of stockholders of the
Corporation at which directors are to be elected shall not be such as would
cause the number of directors in office after such meeting (excluding any
directors elected by vote of the holders of shares of Defaulted Preferred Stock)
to exceed a number less than the maximum number of directors permitted by the
Certificate of Incorporation which is the number which most closely
approximates, as a portion of the entire Board of Directors so elected, but
which is no greater than, the ratio that the number of shares of Common Stock
issuable at the then applicable Conversion Price upon the conversion of the
Preferred Stock would bear to the total number of shares of Common Stock then
outstanding (assuming all of the Preferred Stock were then converted), but in no
event less than two.
(ii) Upon the occurrence of a Default Event with respect to the
Corporation, within 10 days after such occurrence, the Corporation shall mail to
each registered holder of Preferred Stock a notice of such occurrence setting
forth in reasonable detail a description of the event constituting the Default
Event.
(d) Whenever such voting right shall have vested, such right may be
exercised initially either at a special meeting of the holders of shares of
Defaulted Preferred Stock called as hereinafter provided, or at any annual
meeting of stockholders held for the purpose of electing directors, and
thereafter at such meetings, or by the written consent of such holders pursuant
to Section 228 of the Delaware General Corporation Law.
B - 24
<PAGE> 25
(e) At any time when such voting right shall have vested in the holders
of shares of Defaulted Preferred Stock entitled to vote thereon, and if such
right shall not already have been initially exercised, an officer of the
Corporation shall, upon the written request of 10% of the holders of record of
shares of such Defaulted Preferred Stock then outstanding, addressed to the
Secretary of the Corporation, call a special meeting of holders of shares of
such Defaulted Preferred Stock. Such meeting shall be held at the earliest
practicable date upon the notice to holders of Defaulted Preferred Stock given
as required for annual meetings of stockholders at the place for holding annual
meetings of stockholders of the Corporation or, if none, at a place designated
by the Secretary of the Corporation. If such meeting shall not be called by the
proper officers of the Corporation within 30 days after the personal service of
such written request upon the Secretary of the Corporation, or within 30 days
after mailing the same within the United States, by registered mail, addressed
to the Secretary of the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
holders of record of 10% of the shares of Defaulted Preferred Stock then
outstanding may designate in writing any person to call such meeting at the
expense of the Corporation, and such meeting may be called by such person so
designated upon the notice to holders of Defaulted Preferred Stock given as
required for annual meetings of stockholders and shall be held at the same place
as is elsewhere provided in this Section 9(e). Any holder of shares of Defaulted
Preferred Stock then outstanding that would be entitled to vote at such meeting
shall have access to the stock books of the Corporation for the purpose of
causing a meeting of stockholders to be called pursuant to the provisions of
this paragraph. Notwithstanding the provisions of this Section 9(e), however, no
such special meeting shall be called or held during a period within 45 days
immediately preceding the date fixed for the next annual meeting of
stockholders.
(f) The directors elected as provided herein shall serve for the term
set forth in the bylaws or until their respective successors shall be elected
and shall qualify; any director elected by the holders of Defaulted Preferred
Stock may be removed without cause by, and shall not be removed without cause
otherwise than by, the vote of the holders of a majority of the outstanding
shares of the Defaulted Preferred Stock who are entitled to participate in such
election of directors, voting separately as a class, at a meeting called for
such purpose or by written consent as permitted by law and the Certificate of
Incorporation and By-laws of the Corporation. If the office of any director
elected by the holders of Defaulted Preferred Stock, voting separately as a
class, becomes vacant by reason of death, resignation, retirement,
disqualification or removal from office or otherwise, the remaining director
elected by the holders of Defaulted Preferred Stock, voting separately as a
class, may choose a successor who shall hold office for the unexpired term in
respect of which such vacancy occurred. Upon any termination of the right of the
holders of Defaulted Preferred Stock to vote for directors as herein provided,
the term of office of all directors then in office elected by the holders of
Defaulted Preferred Stock, voting separately as a class, shall terminate
immediately. Whenever the terms of office of the directors elected by the
holders of Defaulted Preferred Stock, voting separately as a class, shall so
terminate and the special voting powers vested in the holders of Defaulted
Preferred Stock shall have expired, the number of directors shall be reduced by
the number of directors whose term of office shall have terminated as provided
hereinabove.
B - 25
<PAGE> 26
(g) So long as any shares of the Preferred Stock remain outstanding,
the affirmative vote or consent of the holders of at least a Majority of the
shares of Preferred Stock outstanding at the time given either by written
consent or in person or by proxy at any special or annual meeting, and voting
separately as a separate class, shall be necessary to permit, effect or
validate:
(i) any transaction involving the sale, lease, transfer, conveyance
or other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the assets of the
Corporation and its subsidiaries taken as a whole or any transaction involving
any purchase, sale, acquisition, disposition, share exchange, merger or
consolidation or other business combination (collectively, a "Corporate Change")
if, after and giving effect to such Corporate Change, (A) the holders of the
Corporation's Common Stock immediately prior to the transaction do not own a
Majority or more of the voting power of the common stock or other equity
securities having ordinary voting rights in the election of directors of the
corporation or other Person resulting from or surviving the transaction, or (B)
individuals who before such Corporate Change was first publicly announced
constituted the Board of Directors of the Corporation cease for any reason to
constitute a majority of the Board of Directors of the Person resulting from or
surviving such Corporate Change;
(ii) any amendment, alteration or repeal, whether by merger,
consolidation, resolution of the Board of Directors, certificate of designation,
or otherwise, of the Certificate of Incorporation that will (A) increase or
decrease the aggregate number of authorized shares of Preferred Stock or of the
Unissued Preferred Stock, (B) increase or decrease the par value of the
Preferred Stock, (C) effect an exchange, reclassification or cancellation of all
or part of the shares of the Preferred Stock, (D) effect an exchange, or create
a right of exchange, of all or any part of the shares of another class into the
shares of Preferred Stock, (E) change the designations, preferences, limitations
or relative rights of the shares the Preferred Stock, (F) change the shares of
the Preferred Stock into the same or a different number of shares of the same
class or series or another class or series, (G) create a new class or series of
shares having rights and preferences on a parity with, prior or superior to the
shares of the Preferred Stock, or increase the rights and preferences of any
class or series having rights and preferences on a parity with, prior or
superior to the shares of the Preferred Stock, or increase the rights and
preferences of any class or series having rights or preferences later or
inferior to the shares of the Preferred Stock in such a manner as to become on a
parity with, prior or superior to the shares of the Preferred Stock, (H) limit
or deny the existing preemptive rights of the shares of the Preferred Stock, or
(I) cancel or otherwise affect dividends on the shares of the Preferred Stock
that had accrued but had not been declared. If the holders of the outstanding
shares of Preferred Stock are entitled to vote as a class on a proposed
amendment and the amendment would affect all series of such class (other than
any series of which no shares are outstanding or any series that is not affected
by the amendment) equally, then the holders of the separate series shall not be
entitled to separate class votes, but shall instead vote together as one class;
or
(iii) the issuance of any class or series of capital stock
senior to, or on a parity with, the Preferred Stock.
B - 26
<PAGE> 27
(h) The Corporation covenants and agrees promptly after the Issue Date
to take any steps which may be necessary to amend the Certificate of
Incorporation and/or bylaws of the Corporation to provide for any increase in
the number of authorized directors of the Corporation necessary for the
Corporation to comply with its obligations under this Section 9.
10. RECORD HOLDERS. The Corporation and the Transfer Agent may deem and
treat the record holder of any shares of Preferred Stock as the true and lawful
owner thereof for all purposes, and neither the Corporation nor the Transfer
Agent shall be affected by any notice to the contrary.
11. NOTICE. Except as may otherwise be provided by law or provided for
herein, all notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon receipt, in the case of a
notice of conversion given to the Corporation as contemplated in Section 7(b)
hereof, or, in all other cases, upon the earlier of receipt of such notice or
three Business Days after the mailing of such notice if sent by registered mail
(unless first-class mail shall be specifically permitted for such notice under
the terms hereof) with postage prepaid, addressed: if to the Corporation, to its
offices at 400 West Illinois, Suite 1000, Midland, Texas 79701 (Attention:
Secretary) or other agent of the Corporation designated as permitted hereby; or,
if to any holder of the Preferred Stock, to such holder at the address of such
holder of the Preferred Stock as listed in the stock record books of the
Corporation (which shall include the records of the Transfer Agent), or to such
other address as the Corporation or holder, as the case may be, shall have
designated by notice similarly given.
12. REGISTRATION OF TRANSFER. Upon the surrender of any certificate
representing Preferred Stock to the Transfer Agent, the Corporation shall cause
the Transfer Agent, at the request of the record holder of such certificate, to
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor, of Preferred Stock representing in the
aggregate the number of shares of Preferred Stock represented by the surrendered
certificate. Each such new certificate shall be registered in such name and
shall represent such number of shares of Preferred Stock as is requested by the
holder of the surrendered certificate and shall be substantially identical in
form to the surrendered certificate, and dividends shall accrue on the Preferred
Stock represented by such new certificate from the date to which dividends have
been fully paid on such Preferred Stock represented by the surrendered
certificate.
13. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to
the Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of Preferred Stock of
such class represented by such lost, stolen, destroyed or mutilated certificate
and dated the date of such lost, stolen,
B - 27
<PAGE> 28
destroyed or mutilated certificate, and dividends shall accrue on the Preferred
Stock represented by such new certificate from the date to which dividends have
been fully paid on such lost, stolen, destroyed or mutilated certificate.
IN WITNESS WHEREOF, this Certificate has been signed on behalf of the
Corporation by its President and attested to by its Assistant Secretary, all as
of the 3rd day of June, 1998.
COSTILLA ENERGY, INC.
By: /s/ MICHAEL J. GRELLA
-------------------------------------
Michael J. Grella, President
and Chief Executive Officer
Attest:
By: /s/ BOBBY W. PAGE
--------------------
Bobby W. Page , Secretary
--------------------
STATE OF TEXAS )
)
COUNTY OF MIDLAND )
This instrument was acknowledged before me on May 29, 1998, by Michael
J. Grella, as President and Chief Executive Officer of Costilla Energy, Inc.
/s/ RETHA HUNNICUTT
- ------------------------------------------
Notary Public
(My Commission Expires 5/24/00)
B - 28
<PAGE> 1
EXHIBIT 4
REVOLVING CREDIT AGREEMENT
Dated as of May 26, 1998
Among
JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP
as Borrower
and
THE BANKS NAMED HEREIN
as Banks
and
THE CHASE MANHATTAN BANK
as Administrative Agent
and
BARCLAYS BANK PLC
as Documentation Agent
Co-Agents:
CREDIT LYONNAIS NEW YORK BRANCH
CREDIT SUISSE FIRST BOSTON
DRESDNER BANK, NEW YORK BRANCH
THE FUJI BANK, LTD. HOUSTON AGENCY
NATIONAL WESTMINSTER BANK PLC, NEW YORK BRANCH
NATIONSBANK, N.A.
PARIBAS
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.04. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 1.05. Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE II
AMOUNT AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.02. Making the Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.03. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.04. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.05. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.06. Additional Interest on LIBOR Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.07. Automatic Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.08. Voluntary Conversion of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.09. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.10. Increased Costs; Capital Adequacy, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.11. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.14. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.15. Ratable Reduction or Termination of the Commitments . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.16. Increase of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.17. Termination of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.18. Replacement of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE III
CONDITIONS TO ADVANCES
SECTION 3.01. Initial Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.02. Additional Conditions Precedent to Each Advance . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.03. Additional Reg U Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.02. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.02. Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.03. Agent and Its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.04. Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.05. Certain Rights of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.06. Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.07. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.08. Resignation by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
SECTION 7.09. Liability of Co-Arrangers, Co-Agents and Documentation Agent . . . . . . . . . . . . . . . 60
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.04. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.05. Right of Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.06. Binding Effect; Assignments; Participations . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.07. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.08. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.09. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.11. Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.12. Non-Recourse Nature of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.13. SUBMISSION TO JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.14. Successor to ECM II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.15. Successor to the Enron Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Schedule I - Applicable Lending Offices
Schedule II - Information
Schedule III - Listed Subsidiaries
Schedule IV - Primary Countries
Exhibit A - Form of Note
Exhibit B - Form of General Partner Undertaking
Exhibit C - Form of Parent Performance Agreement
Exhibit D - Notice of Borrowing
Exhibit E - Opinion of Senior Vice President and General Counsel of the Parent
Exhibit F - Opinion of General Counsel of Enron Capital II
Exhibit G - Opinion of Vinson & Elkins, L.L.P.,
Counsel to the Parent and Affiliates
Exhibit H - Opinion of Bracewell & Patterson, L.L.P.,
Counsel to the Agent
Exhibit I - Form of Assignment
Exhibit J - Form of Officer's Certificate
</TABLE>
-iv-
<PAGE> 5
REVOLVING CREDIT AGREEMENT
Dated as of May 26, 1998
This Revolving Credit Agreement dated as of May 26, 1998, is
among Joint Energy Development Investments II Limited Partnership, a Delaware
limited partnership, the Banks party hereto, The Chase Manhattan Bank, as
Agent, and Barclays Bank PLC, as Documentation Agent. The parties hereto agree
as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined):
"Additional Condition" means that a reasonable likelihood
exists that any Partner will not be required to make further capital
contributions to the Borrower (other than as a result of (i) a Section 3.03(e)
or 4.02(f) Condition or the circumstances contemplated by Section 8.04 of the
Partnership Agreement, (ii) an event or circumstance that, if it occurred,
would become a Suspension Event or Liquidation Event, (iii) each Partner having
contributed its full capital commitment as set forth on Exhibit A to the
Partnership Agreement (plus any increase thereto pursuant to Section 3.04(a) of
the Partnership Agreement), or (iv) the termination of the Commitment Period
(as defined in the Partnership Agreement) on December 30, 2000, as such date
may be extended, as contemplated by the Partnership Agreement).
"Adjusted Cash Flow" means, for any period, an amount,
determined in accordance with GAAP, equal to the sum of
(i) the net cash provided by operating activities
of the Borrower (computed in the same manner as set forth in
the Borrower's consolidated statement of cash flows for the
quarter ended March 31, 1998 referred to in Section 4.01(i),
except that determinations shall be made for the Borrower on
an unconsolidated basis and shall exclude all interest,
dividends, cash, proceeds, fees, distributions and other
amounts received on account of any Intangible Interest on
which there is any Intangible Interest Lien) for such period,
plus
-1-
<PAGE> 6
(ii) the net cash provided by operating activities
of each Non-Excluded Subsidiary (computed in the same manner
as set forth in the Borrower's consolidated statement of cash
flows for the quarter ended March 31, 1998 referred to in
Section 4.01(i), excluding all interest, dividends, cash,
proceeds, fees, distributions and other amounts received on
account of any Intangible Interest on which there is any
Intangible Interest Lien) for such period, multiplied by the
Borrower's applicable ownership percentage of each such
Non-Excluded Subsidiary, plus
(iii) Cash Interest Expense for such period, plus
(iv) Available GP Advances on the last day of such
period.
"Adjusted Cash Flow to Interest Ratio" means for any Interest
Ratio Period, the ratio of (i) Adjusted Cash Flow for such Interest Ratio
Period to (ii) Cash Interest Expense for such Interest Ratio Period; provided
that if such Interest Ratio Period ends on or before September 30, 1998, such
Cash Interest Expense and the elements of such Adjusted Cash Flow set forth in
clauses (i), (ii) and (iii) of the definition herein of Adjusted Cash Flow
shall be annualized for purposes of this definition.
"Advance" means an advance by a Bank to the Borrower pursuant
to Article II hereof, and refers to a Base Rate Advance or a LIBOR Advance
(each of which shall be a "Type" of Advance).
"Agent" means The Chase Manhattan Bank in its capacity as
administrative agent pursuant to Article VII and any successor in such capacity
pursuant to Section 7.08.
"Agreement" means this Revolving Credit Agreement dated as of
May 26, 1998 among the Borrower, the Banks, the Agent and the Documentation
Agent, as same may be amended, waived or otherwise modified from time to time
in accordance herewith.
"Applicable Commitment Fee Rate" means (i) at all times during
which the Applicable LIBOR Margin is 0.875% or less, 0.20% per annum, (ii) at
all times during which the Applicable LIBOR Margin is greater than 0.875% and
less than or equal to 1.25%, 0.25% per annum, (iii) at all times during which
the Applicable LIBOR Margin is greater than 1.25% and less than or equal to
1.50%, 0.30% per annum and (iv) at all times during which the Applicable LIBOR
Margin is greater than 1.50%, 0.35% per annum. Any change in the Applicable
Commitment Fee Rate resulting from any change in the Applicable LIBOR Margin
shall occur on the same day that such change in the Applicable LIBOR Margin
occurs.
"Applicable Lending Office" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of a Base Rate Advance and such
Bank's Eurodollar Lending Office in the case of a LIBOR Advance.
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<PAGE> 7
"Applicable LIBOR Margin" means
(i) for each day during the first Applicable LIBOR Margin Period,
0.65% per annum;
(ii) for each day during an Applicable LIBOR Margin Period (other
than a day covered by clause (i) of this definition), if Unfunded Partners
Capital as of the end of the month immediately preceding the first day of such
Applicable LIBOR Margin Period is greater than or equal to the outstanding
principal amount of Senior Debt as of the end of such month, either (a) if the
Margin Increase Condition does not exist as of the end of such month, 0.65% per
annum or (b) if the Margin Increase Condition does exist as of the end of such
month, 0.775% per annum;
(iii) for each day during an Applicable LIBOR Margin Period (other
than a day covered by clause (i) of this definition), if Unfunded Partners
Capital as of the end of the month immediately preceding the first day of such
Applicable LIBOR Margin Period is less than the outstanding principal amount of
Senior Debt as of the end of such month and is greater than $500,000,000, the
sum of (a) either (1) if the Margin Increase Condition does not exist as of the
end of such month, zero or (2) if the Margin Increase Condition does exist as
of the end of such month, 0.125% per annum plus (b) the rate per annum
determined pursuant to the following grid (based on the Applicable Monthly TCAC
Ratio as of the end of such month and Unfunded Partners Capital as of the end
of such month):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Applicable Monthly TCAC Ratio Unfunded Partners Capital
----------------------------------------------------------
> $750 million > $500 million
and < or = to $750 million
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
> or = to 1.7 .65% .65%
- -------------------------------------------------------------------------------------------------------
> or = to 1.6 and ( 1.7 .65% .75%
- -------------------------------------------------------------------------------------------------------
> or = to 1.5 and ( 1.6 .75% .875%
- -------------------------------------------------------------------------------------------------------
> or = to 1.4 and ( 1.5 .875% 1.125%
- -------------------------------------------------------------------------------------------------------
< 1.4 1.00% 1.125%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(iv) for each day during an Applicable LIBOR Margin Period (other
than a day covered by clause (i) of this definition), if Unfunded Partners
Capital as of the end of the month immediately preceding the first day of such
Applicable LIBOR Margin Period is less than the outstanding principal amount of
Senior Debt as of the end of such month and is less than or equal to
$500,000,000, the sum of (a) either (1) if the Margin Increase Condition does
not exist as of the end of such month, zero or (2) if the Margin Increase
Condition does exist as of the end of such month, 0.125% per annum plus (b) the
rate per annum determined pursuant to the following grid (based on the
Applicable Monthly TCAC Ratio as of the end of such month and Unfunded Partners
Capital as of the end of such month):
-3-
<PAGE> 8
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Unfunded Partners Capital
--------------------------------------------------------------------------------
Applicable Monthly TCAC Ratio < or = to $500 million and > $250 million < or = to $250 million
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
> or = to 3.0 .75% .75%
- ------------------------------------------------------------------------------------------------------------------------
> or = to 2.75 and ( 3.00 .75% .875%
- ------------------------------------------------------------------------------------------------------------------------
> or = to 2.50 and ( 2.75 .75% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
> or = to 2.25 and ( 2.5 .875% 1.125%
- ------------------------------------------------------------------------------------------------------------------------
> or = to 2.00 and ( 2.25 1.00% 1.25%
- ------------------------------------------------------------------------------------------------------------------------
> or = to 1.85 and ( 2.0 1.125% 1.375%
- ------------------------------------------------------------------------------------------------------------------------
> or = to 1.70 and ( 1.85 1.25% 1.625%
- ------------------------------------------------------------------------------------------------------------------------
< 1.70 1.375% 1.625%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(v) Any change in the Applicable LIBOR Margin shall be effective
on the fifth Business Day of each month based on the relevant factors (Unfunded
Partners Capital, principal amount of Senior Debt, whether or not the Margin
Increase Condition exists and Applicable Monthly TCAC Ratio), as of the end of
the prior month, that are used to determine the Applicable LIBOR Margin.
"Applicable LIBOR Margin Period" means each period beginning
on and including the fifth Business Day of each month and ending on and
including the day (whether or not a Business Day) immediately preceding the
fifth Business Day of the next month, provided that the first Applicable LIBOR
Margin Period shall be the period from the date hereof through the day
immediately preceding the fifth Business Day of June, 1998.
"Applicable Monthly TCAC Ratio" means, as of the end of any
month, the Total Capital and Asset Coverage Ratio as of the end of such month,
provided that the fair value of assets acquired on or before the end of the
fiscal quarter (or fiscal year in the case of the last fiscal quarter of any
fiscal year of the Borrower) of the Borrower as to which financial information
has most recently been delivered pursuant to Section 5.01(a)(i) or (ii), as the
case may be, shall be determined (subject to the limitations set forth in, and
otherwise in accordance with, the definition herein of "Conforming Asset") as
of the end of such fiscal quarter or fiscal year, as the case may be, to the
extent such assets have not been disposed of since the end of such fiscal
quarter or fiscal year, as the case may be.
"Assignment" means an assignment agreement entered into by a
Bank and an Eligible Additional Lender, in substantially the form of Exhibit I
or in such other form as may be reasonably acceptable to the Agent and the
Borrower.
-4-
<PAGE> 9
"Available GP Advances" means, on any day, the unborrowed
principal amount of the GP Advance Facility that the Borrower is entitled to
borrow on such day.
"Banks" means the lenders listed on the signature pages hereof
and each Eligible Additional Lender that becomes a party hereto pursuant to
Section 2.16, Section 2.18 or Section 8.06 hereof.
"Base Rate" at any time means the higher from time to time of
(i) the Prime Commercial Lending Rate as in effect from time to time and (ii)
the Federal Funds Rate as in effect from time to time plus 1/2 of 1%.
"Base Rate Advance" means an Advance which bears interest as
provided in Section 2.05(a).
"Base Rate Margin" means (i) at all times during which the
Applicable LIBOR Margin is equal to or less than 1.50%, zero, and (ii) at all
times during which the Applicable LIBOR Margin is greater than 1.50%, a rate
per annum equal to the Applicable LIBOR Margin minus 1.50%. Any change in the
Base Rate Margin resulting from a change in the Applicable LIBOR Margin shall
occur on the same day that such change in the Applicable LIBOR Margin occurs.
"Borrower" means Joint Energy Development Investments II
Limited Partnership, a Delaware limited partnership.
"Borrowing" means a borrowing hereunder consisting of Advances
of the same Type (and if the Advances are LIBOR Advances, having the same
Interest Period) made on the same day by the Banks.
"Business Day" means (i) any day of the year except Saturday,
Sunday and any day on which banks are required or authorized to close in New
York City and (ii) if the applicable Business Day relates to any LIBOR
Advances, any day which is a "Business Day" described in clause (i) and which
is also a day for trading by and between banks in the London interbank
Eurodollar market.
"CalPERS" means the California Public Employees' Retirement
System, a unit of the State and Consumer Services Agency of the State of
California.
"Capital Contribution" shall have the meaning set forth in the
Partnership Agreement.
"Cash Interest Expense" means, for any period, an amount,
determined in accordance with GAAP on a consolidated basis, equal to (i) the
interest expense of the Borrower and the Non-Excluded Subsidiaries minus (ii)
non- cash items included in such interest expense.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time (by SARA
or otherwise), set forth at 42 U.S.C. Sections 9601 et seq.
-5-
<PAGE> 10
(1988), state and local analogs and all rules and regulations promulgated under
the foregoing, in each case as now or hereafter in effect.
"Co-Agents" means Credit Lyonnais New York Branch, Credit
Suisse First Boston, Dresdner Bank, New York Branch, The Fuji Bank, Ltd.
Houston Agency, National Westminster Bank Plc, New York Branch, NationsBank,
N.A., Paribas and Westdeutsche Landesbank Girozentrale, New York Branch.
"Co-Arrangers" means Chase Securities Inc. and Barclays
Capital.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor Federal tax code, and any reference to any
statutory provision of the Code shall be deemed to be a reference to any
successor provision or provisions.
"Commitment" has the meaning specified in Section 2.01.
"Commitment Period" shall have the meaning set forth in the
Partnership Agreement.
"Conforming Asset" means the fair value, determined in
accordance with GAAP, of all investments owned by the Borrower and reflected on
the Borrower's balance sheet, provided that (a) the fair value of Wind,
Geothermal, Waste-to-Energy, Oil Shale and Solar investments and investments
that consist primarily of software, patents, trademarks, copyrights or similar
intangibles not approved in writing by the Majority Banks shall be deemed to be
zero, (b) the fair value of any investment or group of related investments
shall be deemed not to exceed $150,000,000 or such greater amount, if any, as
may be approved by the Majority Banks in writing, and (c) the fair value of any
investment in a Person referred to in the proviso to Section 5.02(q) shall be
deemed to be zero. For purposes of clause (a) of this definition but for no
other purpose, licenses to use seismic data, sub-licenses to use seismic data
and marketing agreements to use or license seismic data will not be considered
to be intangibles. For purposes of clause (b) of this definition but for no
other purpose, (i) all investments in the same Person and all investments in
Subsidiaries of such Person shall be treated as a group of related investments,
(ii) all investments in Persons that are Subsidiaries of the same Person shall
be treated as a group of related investments, and (iii) "group of related
investments" shall include all investments in the same asset, project or
facility, irrespective of whether such investments are made in different
Persons or at different times. An investment that is capital stock of, any
partnership interest of, any other ownership interest of or any other security
of, or is a payment obligation of, any Person shall be deemed to be an
investment in clause (a) of this definition if and only if the majority of the
assets of such Person are the types of assets described in clause (a) of this
definition, whether or not all or a majority of the assets of one or more
Subsidiaries of such Person are assets of such types.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of another Type pursuant to
Section 2.07 or Section 2.08.
-6-
<PAGE> 11
"Debt" of any Person means, at any date (without duplication):
(i) all obligations of such Person to repay borrowed
money (including, with respect to the Borrower, advances made by the General
Partner to the Borrower from time to time);
(ii) all obligations of such Person evidenced by bonds,
debentures or notes;
(iii) all obligations of such Person as lessee under
leases which, in accordance with GAAP, are capital leases;
(iv) all obligations of such Person to repay obligations
that constitute debt under GAAP (excluding, with respect to the Borrower, debt
consolidated from its Subsidiaries that is non-recourse to the Borrower and
that does not otherwise constitute Debt of the Borrower pursuant to the
provisions of this definition other than this clause (iv));
(v) all obligations of such Person to pay the deferred
purchase price of property or services (excluding accounts payable arising in
the ordinary course of business, unfunded commitments to purchase Qualified
Investments, obligations to acquire property or services before such property
is conveyed or services are provided and deferred employee compensation);
(vi) all non-contingent obligations of such Person to
reimburse the issuer of a letter of credit in respect of amounts paid under
such letter of credit (only to the extent such issuer is not so reimbursed on
or before five Business Days after the amounts are paid under such letter of
credit);
(vii) all obligations of such Person in excess of
$20,000,000 (in the case of the Borrower and the Non-Excluded Subsidiaries,
determined in the aggregate for the Borrower and all Non-Excluded Subsidiaries)
in respect of Financing Transactions;
(viii) all recourse financial obligations of such Person
under a Receivables Purchase Facility, excluding obligations relating to the
conduct of operations to assure collection of accounts or receivables;
(ix) all obligations of such Person under Guaranties
issued to or for the benefit of a creditor to secure obligations (only of the
type described in clauses (i) through (viii) above or (xi) or (xii) below) of
another Person;
(x) to the extent secured by a Lien on the property of
such Person, obligations of another Person (only of the type described in
clauses (i) through (ix) above or (xi) or (xii) below);
-7-
<PAGE> 12
(xi) the present value (discounted at the rate of 10% per
annum) of all obligations of such Person to pay the minimum rental commitments
as lessee over the remaining non-cancelable terms of leases (other than capital
leases and mineral leases), but (in the case of the Borrower and the
Non-Excluded Subsidiaries) only to the extent that such present value exceeds
$20,000,000 in the aggregate for the Borrower and all Non-Excluded Subsidiaries;
and
(xii) all obligations of such Person in respect of surety
obligations securing judgments in excess of $10,000,000 in the aggregate.
Notwithstanding the provisions of this definition to the
contrary, Debt shall not include (a) obligations arising pursuant to any Swap
Transaction or pursuant to any Guaranty of any Swap Transaction, in each case
that is not otherwise a Financing Transaction; (b) obligations of the Borrower
owed to and held by a Non-Excluded Subsidiary that is wholly-owned by the
Borrower; or (c) obligations of a Non-Excluded Subsidiary that is wholly-owned
by the Borrower owed to and held by the Borrower or another Non-Excluded
Subsidiary that is wholly-owned by the Borrower.
"Documentation Agent" means Barclays Bank PLC, in its capacity
as Documentation Agent hereunder.
"Domestic Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "Domestic Lending Office" opposite its
name on Schedule I hereto, in the document pursuant to which it became a party
hereto as contemplated by Section 2.16 or in the Assignment pursuant to which
it became a party hereto as contemplated by Section 2.18 or Section 8.06(b) or
such other office of such Bank as such Bank may from time to time specify to
the Borrower and the Agent.
"ECM II" means Enron Capital Management II Limited
Partnership, a Delaware limited partnership, until a New GP shall have been
substituted pursuant to clause (ii) of Section 8.14, and thereafter "ECM II"
shall mean the New GP that has most recently been substituted pursuant to
clause (ii) of Section 8.14.
"ECM II Agreement" means the partnership agreement of ECM II
dated as of December 1, 1997, between Enron Capital II and the ECM II Limited
Partners, as amended, waived or otherwise modified from time to time if such
amendment, waiver or other modification does not constitute an Event of Default
pursuant to Section 6.01(n).
"ECM II Limited Partners" means Enron Capital III Corp., a
Delaware corporation, and any other substitute or additional limited partner of
ECM II.
"ECT" means Enron Capital & Trade Resources Corp., a Delaware
corporation (formerly known as Enron Gas Services Corp.).
-8-
<PAGE> 13
"Eligible Additional Lender" means any Bank listed on the
signature pages hereof, each commercial bank that becomes a party hereto
pursuant to Section 2.16 and, with the consent of the Agent and the Borrower
(which consent will not be unreasonably withheld by the Agent or by the
Borrower), any other commercial bank or financial institution.
"Eligible Assignee" means any Person that (i) has outstanding
senior unsecured long-term debt rated at least BBB by S&P or Baa2 by Moody's
and (ii) has a net worth of at least $2,000,000,000.
"Enron Capital II" means Enron Capital II Corp., a Delaware
corporation, until a Substitute Corporate Partner shall have been substituted
pursuant to clause (iii) of Section 8.14, and thereafter "Enron Capital II"
shall mean the Substitute Corporate Partner that has most recently been
substituted pursuant to clause (iii) of Section 8.14.
"Enron Capital IV" means Enron Capital IV Corp., a Delaware
corporation, until a Substitute ELP Corporate Partner shall have been
substituted pursuant to clause (iii) of Section 8.15, and thereafter "Enron
Capital IV" shall mean the Substitute ELP Corporate Partner that has most
recently been substituted pursuant to clause (iii) of Section 8.15.
"Enron L.P. Limited Partners" means Enron Capital V Corp., a
Delaware corporation, and any substitute or additional limited partner of the
Enron Limited Partner.
"Enron Limited Partner" means Enron Capital Management III
Limited Partnership, a Delaware Limited Partnership, until a New ELP shall have
been substituted pursuant to clause (ii) of Section 8.15, and thereafter "Enron
Limited Partner" shall mean the New ELP that has most recently been substituted
pursuant to clause (ii) of Section 8.15.
"Enron Limited Partner Agreement" means the partnership
agreement of the Enron Limited Partner dated as of December 1, 1997, between
Enron Capital IV and the Enron L.P. Limited Partners, as amended, waived or
otherwise modified from time to time if such amendment, waiver or other
modification does not constitute an Event of Default pursuant to Section
6.01(n).
"Enron Stock" means the common stock, no par value, of the
Parent.
"Environment" shall have the meaning set forth in 42 U.S.C.
Section 9601(8) (1988).
"Environmental" means associated with or relating to the
Environment, Hazardous Materials or any Environmental Protection Law.
"Environmental Protection Law" means any law, statute,
ordinance, rule, regulation, order, decision, decree, judgment, permit,
license, authorization or agreement (all as amended from time to time)
-9-
<PAGE> 14
arising from, in connection with or relating to pollution, protection or
regulation of the Environment or the protection or regulation of health,
whether the foregoing are required or promulgated by any government or agency
or other authority of or in the United States of America (whether local, state
or federal) or any foreign country or subdivision thereof, including CERCLA,
RCRA and other laws, statutes, ordinances, rules and regulations relating to
the presence, disposal, removal, remediation, release, treatment, storing,
handling, processing, recycling or transporting of or exposure to Hazardous
Materials, wherever located, and any order, decision, decree or judgment issued
in connection with such laws, statutes, ordinances, rules or regulations by any
government, agency or other authority of or in the United States of America
(whether local, state or federal) or of any foreign country or subdivision
thereof, in each case as now or hereafter in effect.
"EPA" means the United States Environmental Protection Agency,
or any successor thereto.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute of similar
import, together with the regulations thereunder, as in effect from time to
time and any reference to any statutory provision of ERISA shall be deemed to
be a reference to any successor provision or provisions.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is a member of a group of which the Borrower is a member
and which is under common control within the meaning of the regulations under
Section 414 of the Code.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Federal Reserve Board, as in effect from time to
time.
"Eurodollar Lending Office" means, with respect to any Bank,
the office of such Bank specified as its "Eurodollar Lending Office" opposite
its name on Schedule I hereto, in the document pursuant to which it became a
party hereto as contemplated by Section 2.16 or in the Assignment pursuant to
which it became a party hereto as contemplated by Section 2.18 or Section
8.06(b) (or, if no such office is specified, its Domestic Lending Office) or
such other office of such Bank as such Bank may from time to time specify to
the Borrower and the Agent.
"Events of Default" has the meaning specified in Section 6.01.
"Events of Termination" has the meaning specified in Section
6.02.
"Excluded Subsidiaries" means each Subsidiary of the Borrower
that is not a Non-Excluded Subsidiary.
"Federal Funds Rate" means, for any day, a fluctuating
interest rate per annum equal for such day to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal
-10-
<PAGE> 15
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any federal agency or authority of the United States
from time to time succeeding to its function.
"Financing Transaction" means any forward sale of oil, gas or
other minerals (other than sales of production payments and royalties) that is
intended primarily as a borrowing of funds and any Swap Transaction that is
intended primarily as a borrowing of funds.
"Funded Debt" means Debt of the Borrower.
"GAAP" means generally accepted accounting principles and
policies consistent with those applied in the preparation of the financial
statements referred to in Section 4.01(i).
"General Partner" means ECM II in its capacity as general
partner of the Borrower or any successor general partner in such capacity.
"General Partner Undertaking" means the General Partner
Undertaking dated as of May 26, 1998 executed by ECM II in the form of Exhibit
B, as the same may be amended, supplemented or modified from time to time in
accordance therewith.
"General Partner Undertaking Default" shall have the meaning
set forth in the General Partner Undertaking.
"Geothermal" investment means any direct or indirect
investment in any asset or technology that may be used in the production of
electricity, hot water or steam using heat from the interior of the earth.
"GP Advance Facility" means a $100,000,000 committed revolving
credit facility made available by ECM II to the Borrower through July 3, 2001,
as set forth in the Loan Agreement dated as of May 26, 1998 between ECM II and
the Borrower, and supported by the Parent pursuant to the Parent Performance
Agreement.
"Guaranty" means an agreement issued to or for the benefit of
a creditor obligating a Person to (i) guarantee (including any guaranty by way
of a letter of credit creating a financial guaranty) or purchase or acquire
obligations of another Person, (ii) maintain the net worth or other financial
statement condition of another Person, or (iii) purchase property of another
Person with the intent of creating a financial guaranty of such other Person's
obligations.
-11-
<PAGE> 16
"Hazardous Materials" means (i) any substance or material
identified as a hazardous substance pursuant to CERCLA; (ii) any substance or
material identified or regulated as a hazardous waste pursuant to RCRA; and
(iii) any other material or substance regulated under any Environmental
Protection Law. "Hazardous Materials" shall include, without limitation,
pollutants, contaminants, toxic substances, hazardous materials, radioactive
materials, oil, petroleum and petroleum products, polychlorinated biphenyls and
asbestos.
"Insufficiency" means, with respect to any Plan, the amount,
if any, by which the present value of the accrued benefits under such Plan
exceeds the fair market value of the assets of such Plan allocable to such
benefits, provided that with respect to any offset arrangement between any
Plans, the assets of the Plans attributable to such offset arrangement shall be
aggregated in determining whether an Insufficiency exists for the Plan to which
the offset applies.
"Intangible Interest Lien" means any Lien encumbering an
Intangible Interest (other than a Permitted Lien of the type described in
clauses (i), (ii), (iii), (v) and (vi) of the definition herein of "Permitted
Lien" for so long as there is not a reasonable likelihood of a foreclosure of
such Permitted Lien or the seizure of the Intangible Interest or any of the
dividends or distributions from the Intangible Interest).
"Intangible Interests" means all capital stock, partnership
interests and other equity ownership interests (including all capital stock,
partnership interests and other equity ownership interests in Subsidiaries).
"Interest Period" means, with respect to each LIBOR Advance,
the period commencing on the date of such Advance or the date of the Conversion
of any Advance into such an Advance and ending on the last day of the period
selected by the Borrower pursuant to the provisions below and, thereafter, each
subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of each such Interest
Period shall be one, two, three or six months or (subject to Section 2.02(e))
nine or twelve months, in each case as the Borrower may, upon notice received
by the Agent not later than 11:00 A.M. on the third Business Day prior to the
first day of such Interest Period, select; provided that:
(i) Interest Periods for Advances comprising part of the
same Borrowing shall commence on the same date and be of the same
duration;
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided that if such extension would cause the last day
of such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next preceding
Business Day;
(iii) no Interest Period may be selected if it would end
after the Maturity Date;
-12-
<PAGE> 17
(iv) subject to Section 2.02(e), the duration of any
Interest Period may be less than one month if the Agent agrees; and
(v) any Interest Period which begins on the last Business
Day of the calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar
month in which it would have ended if there were a numerically
corresponding day in such calendar month.
"Interest Ratio Period" means (i) the period from January 1,
1998 through March 31, 1998, (ii) the period from January 1, 1998 through June
30, 1998, (iii) the period from January 1, 1998 through September 30, 1998, and
(iv) after September 30, 1998, each period of four consecutive fiscal quarters
of the Borrower.
"Investor Limited Partner" shall have the meaning set forth in
the Partnership Agreement.
"LIBO Rate" means, for any Interest Period for each LIBOR
Advance, an interest rate per annum equal to the rate per annum reported, on
the date two Business Days prior to the first day of such Interest Period, on
Telerate Access Service Page 3750 (British Bankers Association Interest
Settlement Rates) provided by Telerate Systems Incorporated (or, if such Page
shall cease to be publicly available, as reported by Reuters or any other
publicly available source of similar market data selected by the Agent) as the
London Interbank Offered Rate for U.S. dollar deposits having a term comparable
to such Interest Period.
"LIBOR Advance" means an Advance which bears interest as
provided in Section 2.05(b).
"Lien" means any mortgage, pledge, security interest or lien
or any other charge or claim encumbering property to secure or intended to
secure an obligation (including any agreement to grant any Lien and the
interest of a lessor under a capital lease), in each case whether or not filed,
recorded or otherwise perfected under applicable law.
"Limited Partners" means CalPERS, the Enron Limited Partner
and each other Limited Partner (as defined in the Partnership Agreement).
"Liquidation Event" shall have the meaning set forth in the
Partnership Agreement.
"Loan Documents" means this Agreement, each Note, each Notice
of Borrowing, the General Partner Undertaking, the Parent Performance
Agreement, each amendment of any Loan Document and each other document or
instrument executed and delivered in connection with this Agreement.
"Majority Banks" means at any time Banks holding at least 51%
of the then aggregate unpaid principal amount of the Notes held by Banks, or,
if no such principal amount is then outstanding, Banks having
-13-
<PAGE> 18
at least 51% of the Commitments; provided that, for purposes of the definition
herein of "Unfunded Partners Capital" and for purposes of any modification of
such definition, "Majority Banks" shall mean at any time Banks holding at least
66-2/3% of the then aggregate unpaid principal amount of the Notes held by
Banks, or, if no such principal amount is then outstanding, Banks having at
least 66-2/3% of the Commitments; provided further that in the case of consent
by the Majority Banks to a new Limited Partner (as contemplated by the
definition of Unfunded Partners Capital) that is an Eligible Assignee, such
percentage shall remain at 51%.
"Majority Nuclear Entity" means any Person if the sum of (i)
the aggregate value of the Nuclear Assets of such Person plus (ii) the
aggregate value of such Person's direct and indirect interests in Nuclear
Assets exceeds fifty percent of the aggregate value of all such Person's
assets.
"Margin Increase Condition" exists on any day if on such day
(i) any senior unsecured long-term debt of the Parent is rated lower than BBB-
by S&P or lower than Baa3 by Moody's, (ii) any senior unsecured long-term debt
of the Parent is rated BBB- by S&P, unless such debt is also rated Baa2 or
higher by Moody's, (iii) any senior unsecured long-term debt of the Parent is
rated Baa3 by Moody's, unless such debt is also rated BBB or higher by S&P,
(iv) there is no senior unsecured long-term debt of the Parent rated by S&P or
Moody's, or (v) if any senior unsecured long-term debt of CalPERS or any new
Limited Partner consented to by the Majority Banks as contemplated by the
definition herein of Unfunded Partners Capital is rated by S&P or Moody's, such
debt (a) is rated lower than BBB- by S&P or lower than Baa3 by Moody's, (b) is
rated BBB- by S&P, unless such debt is also rated Baa2 or higher by Moody's or
(c) is rated Baa3 by Moody's, unless such debt is also rated BBB or higher by
S&P.
"Margin Stock Event" has the meaning specified in Section
5.01(a)(xi).
"Material Adverse Effect" means a material adverse effect on
the Borrower's ability to meet its obligations to the Banks under the Loan
Documents or a material adverse effect on the business, operations, assets or
financial condition of the Borrower.
"Maturity Date" means June 30, 2001 or such earlier date as
all of the outstanding Notes may become due pursuant to the terms hereof.
"Moody's" means Moody's Investors Service, Inc. and any
successor thereto that is a nationally recognized rating agency.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of
the preceding five plan years made or accrued an obligation to make
contributions.
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"Multiple Employer Plan" means an employee benefit plan, other
than a Multiemployer Plan, subject to Title IV of ERISA to which the Borrower
or any ERISA Affiliate, and more than one employer other than the Borrower or
an ERISA Affiliate, is making or accruing an obligation to make contributions
or, in the event that any such plan has been terminated, to which the Borrower
or any ERISA Affiliate made or accrued an obligation to make contributions
during any of the five plan years preceding the date of termination of such
plan.
"New ELP" has the meaning specified in Section 8.15.
"New GP" has the meaning specified in Section 8.14.
"Non-Enron Limited Partner" means CalPERS and each other
Limited Partner (other than the Enron Limited Partner).
"Non-Excluded Subsidiary" means any Subsidiary of the Borrower
if (i) neither such Subsidiary nor any of its Subsidiaries has any Debt (other
than Debt owed to and held by the Borrower or another Non-Excluded Subsidiary
that is wholly-owned by the Borrower), has any Preferred Stock issued or
outstanding (other than Preferred Stock owned by the Borrower or another
Non-Excluded Subsidiary that is wholly-owned by the Borrower), has any asset
subject to any Lien other than a Permitted Lien (except a Permitted Lien
permitted only by clause (viii) of the definition of "Permitted Liens"), is a
party to any Sale Leaseback Transaction, has any Securities Repurchase
Obligation or has any Upstream Limitation, (ii) such Subsidiary is a direct
Subsidiary of the Borrower or another Non-Excluded Subsidiary, and (iii) none
of the Intangible Interests issued by such Subsidiary and held by the Borrower
or any Non-Excluded Subsidiary is subject to any Intangible Interest Lien.
"Non-Recourse Persons" has the meaning specified in Section
8.12.
"Note" means a promissory note of the Borrower payable to the
order of any Bank, in substantially the form of Exhibit A, evidencing the
aggregate indebtedness of the Borrower to such Bank resulting from the Advances
owed to such Bank.
"Notice of Borrowing" has the meaning specified in Section
2.02.
"Nuclear Asset" means any "production facility" (as defined in
the Atomic Energy Act of 1954, as amended, but excluding the last sentence of
such definition), (ii) any "utilization facility" (as defined in the Atomic
Energy Act of 1954, as amended), (iii) any facility, installation or other
asset relating to the generation or production of power using nuclear fuel,
(iv) any nuclear fuel, or (v) any facility, installation or other asset
relating to the generation or production of nuclear fuel or weapons or relating
to the storing, dismantling, salvaging, decommissioning or decontamination of
any Nuclear Asset.
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"Oil Shale" investment means any direct or indirect investment
in any asset or technology that may be used to extract or process oil from
shale.
"Other Taxes" has the meaning specified in Section 2.13(c).
"Parent" means Enron Corp., an Oregon corporation, and any
successor thereto that is permitted under Section 14 of the Parent Performance
Agreement.
"Parent Credit Agreement" means at any time the revolving
credit agreement of the Parent with the largest commitment then in effect (or,
if more than one such revolving credit agreement with the largest commitment is
then in effect, that one of such revolving credit agreements with the largest
commitment that is dated the earliest, without giving effect to any amendment
or amendment and restatement thereof) or if no such revolving credit agreement
is then in effect, the revolving credit agreement of the Parent most recently
in effect. As of the date hereof, the Second Amended and Restated Revolving
Credit Agreement dated as of December 3, 1996 among the Parent, The Chase
Manhattan Bank and the other parties thereto constitutes the Parent Credit
Agreement.
"Parent Credit Agreement Default " means any default by or
relating to the Parent or any of its Subsidiaries under the Parent Credit
Agreement that entitles any lender or the agent thereunder to accelerate debt
outstanding thereunder or terminate any commitment thereunder, unless such
default has been consented to or waived by the lenders under the Parent Credit
Agreement in writing.
"Parent Performance Agreement" means the Parent Performance
Agreement dated as of May 26, 1998 executed by the Parent in the form of
Exhibit C, as the same may be amended, supplemented or modified from time to
time in accordance therewith.
"Parent Performance Agreement Default" shall have the meaning
set forth in the Parent Performance Agreement.
"Partners" means the General Partner and all Limited Partners.
"Partnership Agreement" means the Partnership Agreement of the
Borrower dated as of December 30, 1997 entered into by the General Partner, the
Enron Limited Partner and CalPERS, as amended, as in effect on the date hereof,
and as further amended, waived or otherwise modified from time to time if such
amendment, waiver or other modification does not constitute an Event of Default
pursuant to Section 6.01(n).
"Payment Office" means the office of the Agent located at 1
Chase Manhattan Plaza, New York, New York 10081 or such other office as the
Agent may designate by written notice to the other parties hereto.
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<PAGE> 21
"PBGC" means the Pension Benefit Guaranty Corporation, or any
federal agency or authority of the United States from time to time succeeding
to its function.
"Permitted Liens" means
(i) Liens on the assets of any Person for taxes or other
governmental charges or levies if the same are not delinquent or thereafter can
be paid without penalty, or are being contested in good faith and by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of such Person;
(ii) Liens that are imposed by law on the assets of any
Person and that arise in the ordinary course of business of such Person to
secure services rendered to or property acquired or owned by such Person, such
as landlords', carriers', warehousemen's, materialmen's and mechanics' liens;
(iii) Liens required by law on the assets of any Person and
arising in the ordinary course of business of such Person out of pledges or
deposits to secure obligations of such Person under workers' compensation laws,
unemployment insurance, old age pensions or other social security or retirement
benefits, or similar legislation;
(iv) Liens on the assets of any Person arising in the
ordinary course of business of such Person securing the performance by such
Person of bids, tenders, contracts (other than for the repayment of Debt),
leases (other than capital leases), statutory obligations and surety bonds, or
securing progress or partial payments made to such Person;
(v) Non-consensual Liens on the assets of any Person
being contested in good faith and by appropriate proceedings and with respect
to which reserves in conformity with GAAP have been provided on the books of
such Person, provided that the aggregate amount of obligations secured by Liens
permitted by this paragraph (v) on assets of the Borrower and Non-Excluded
Subsidiaries (excluding judgment Liens) shall not at any time exceed
$20,000,000;
(vi) Judgment Liens so long as no Event of Default exists
pursuant to Section 6.01(f);
(vii) Liens created (or deemed to be created) by (A) the
sale of production payments, royalties or other interests in minerals
(including any forward sale that is not a Financing Transaction), (B) any Swap
Transaction that is not a Financing Transaction, (C) any Receivables Purchase
Facility, or (D) any capital lease of the Borrower;
(viii) Liens encumbering margin stock (as defined in
Regulation U);
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<PAGE> 22
(ix) Easements, rights-of-way and similar charges not
interfering with the ordinary conduct of the business of the Borrower; and
(x) Other Liens securing obligations not exceeding
$20,000,000 in the aggregate at any time.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, firm or other entity, or a
government or any political subdivision or agency, department or
instrumentality thereof.
"Plan" means an employee benefit plan (other than a
Multiemployer Plan) which is (or, in the event that any such plan has been
terminated within five years after a transaction described in Section 4069 of
ERISA, was) maintained for employees of the Borrower or any ERISA Affiliate and
covered by Title IV of ERISA.
"Preferred Stock" means (i) as applied to any partnership,
partnership interests in such partnership which shall be entitled to preference
or priority over any other partnership interest in such partnership in respect
of any distribution of cash, property or other assets (other than following the
occurrence of a Liquidation Event), (ii) as applied to any corporation, shares
of such corporation which shall be entitled to preference or priority over any
other shares of such corporation in respect of either the payment of dividends
or the distribution of assets upon liquidation, and (iii) as applied to any
other entity, interests in such entity which shall be entitled to preference or
priority over any other interests in such entity in respect of any distribution
of cash, property or other assets.
"Prescribed Forms" shall mean such duly executed form(s) or
statement(s), and in such number of copies, which may, from time to time, be
prescribed by law and which, pursuant to applicable provisions of (a) an income
tax treaty between the United States and the country of residence of the Bank
providing the form(s) or statement(s), (b) the Code, or (c) any applicable rule
or regulation under the Code, permit the Borrower to make payments hereunder
for the account of such Bank free of deduction or withholding of income or
similar taxes (except for any deduction or withholding of income or similar
taxes as a result of any change in or in the interpretation of any such treaty,
the Code or any such rule or regulation).
"Primary Capital and Asset Coverage Ratio" means the ratio of
(i) Conforming Assets located in any of the countries listed on Schedule IV or
approved in writing by the Majority Banks (the "Primary Countries") plus
Unfunded Partners Capital to (ii) Funded Debt. An asset that is capital stock,
any partnership interest, any other ownership interest or any other security
of, or is a payment obligation of, any Person shall be deemed located in the
Primary Countries only if the majority of the tangible assets and (if
intangible assets constitute a material portion of the total assets of such
Person) the majority of the intangible assets of such Person are located in the
Primary Countries. In addition, an asset shall be deemed to be located in the
Primary Countries if (a) the investment in such asset is guaranteed or
otherwise supported by a Person that has the
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<PAGE> 23
majority of its tangible assets and (if intangible assets constitute a material
portion of the total assets of such Person) the majority of its intangible
assets located in the Primary Countries, and (b) such Person and the terms of
such guarantee or other support are approved in writing by the Majority Banks.
"Prime Commercial Lending Rate" shall mean that rate of
interest from time to time announced by the Agent (or, if no commercial bank is
the Agent, The Chase Manhattan Bank) at its principal office in the United
States as its prime commercial lending rate (or comparable rate, if such Bank
does not so designate a "prime commercial lending rate"), the Prime Commercial
Lending Rate to change when and as such prime commercial lending rate (or such
comparable rate, if such Bank does not so designate a "prime commercial lending
rate") changes. The Prime Commercial Lending Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer. The Agent may make commercial loans or other loans at rates of
interest at, above or below the Prime Commercial Lending Rate. For purposes
hereof, the principal office of the Agent, as of the date hereof, is its office
located at 1 Chase Manhattan Plaza, New York, New York 10081.
"Principal Subsidiary" shall have the meaning (i) set forth in
the Parent Credit Agreement, or (ii) if such term is not defined in the Parent
Credit Agreement, set forth in the most recent Parent Credit Agreement that had
a definition of "Principal Subsidiary".
"Qualified Investments" shall have the meaning set forth in
the Partnership Agreement.
"RCRA" means the Resource Conservation and Recovery Act of
1976, as amended from time to time, set forth at 42 U.S.C. Sections 6901 et
seq. (1988), state and local analogs and all rules and regulations promulgated
under the foregoing, in each case as now or hereafter in effect.
"Receivables Purchase Facility" means any agreement of a
Person providing for the transfer of accounts or other receivables purporting
to be a sale by such Person.
"Recomputation Event" occurs immediately upon the continuance
of any Suspension Event for 105 days (or 285 days in the case of a Suspension
Event under Section 10.03 of the Partnership Agreement that cannot result, at
any time prior to 12 months after such Suspension Event occurs, in a removal of
the general partner of the Borrower, termination of the Borrower or the
occurrence of a Suspension Termination Event (as defined in the Partnership
Agreement)).
"Reg U Limited Assets" means assets that are subject to any
arrangement (as contemplated by Regulation U) with any Bank, the Agent or the
Documentation Agent that restricts the right or ability of the Borrower or (to
the extent relevant to the compliance with Regulation U or Regulation X by any
of the Banks or the Borrower in connection with this Agreement or any of the
Advances) its Subsidiaries to sell, pledge or otherwise dispose of (within the
meaning of Regulation U) such assets.
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<PAGE> 24
"Regulation U" means Regulation U of the Federal Reserve
Board, as the same is from time to time in effect, and all rulings and
interpretations thereunder or thereof.
"Regulation X" means Regulation X of the Federal Reserve
Board, as the same is from time to time in effect, and all rulings and
interpretations thereunder or thereof.
"Restricted Preferred Stock" means any Preferred Stock that is
subject to required repayment (other than payment of dividends and
distributions), redemption, repurchase, retirement, exchange for Debt or
Restricted Preferred Stock or conversion into Debt or Restricted Preferred
Stock prior to June 30, 2002, at the option of the holder or any other Person
or at a fixed or determinable date or dates prior to June 30, 2002 (other than
pursuant to the exercise of an option to redeem by the issuer, if the failure
to exercise such option could not reasonably be expected to have a Material
Adverse Effect), whether by operation of a sinking fund or otherwise, or
otherwise upon the occurrence of a condition not within the control of the
issuer.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc. on the date hereof, and any successor thereto that is a
nationally-recognized rating agency.
"SARA" means the Superfund Amendments and Reauthorization Act
of 1986.
"Sale Leaseback Transaction" means any arrangement entered
into by any Person, directly or indirectly, whereby such Person or any
Subsidiary of such Person shall sell or transfer any property, whether now
owned or hereafter acquired, and whereby such Person or any Subsidiary of such
Person shall then or thereafter rent or lease as lessee such property or any
part thereof or other property that such Person or any Subsidiary of such
Person intends to use for substantially the same purpose or purposes as the
property sold or transferred.
"Section 3.03(e) or 4.02(f) Condition" exists if any
divestiture contemplated by Section 3.03(e)(i) of the Partnership Agreement is
required or if any law or regulation referred to in Section 4.02(f) of the
Partnership Agreement is enacted or adopted or any court decision referred to
in such Section 4.02(f) is rendered.
"Securities Repurchase Obligations" means obligations to
purchase securities which arise out of or in connection with the sale of the
same, or substantially the same, securities.
"Senior Debt" means Funded Debt minus Subordinated Debt.
"Solar" investment means any direct or indirect investment in
any asset or technology (including active, passive and photovoltaic
technologies) that may be used to produce electricity, hot water or steam using
radiant energy of the sun.
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<PAGE> 25
"Special Distribution" shall have the meaning set forth in the
Partnership Agreement.
"Subordinated Debt" means Funded Debt that (i) is on terms
(including subordination provisions and limits on voluntary prepayments)
acceptable to Majority Banks, (ii) is subordinated to the Advances and all
other Debt under this Agreement and (iii) does not have a maturity, a scheduled
repayment or a mandatory repayment (other than accrued interest) prior to June
30, 2002.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, trust, company or other entity (i) the majority of the
Intangible Interests of which is owned, directly or indirectly, by such Person
and (ii) which is controlled by such Person; provided that, except for purposes
of the definitions of "Excluded Subsidiary", "Non-Excluded Subsidiary" and "Reg
U Limited Assets" and Sections 4.01(n), 4.01(o), 4.01(s), 5.01(a)(xi),
5.01(a)(xii), 5.02(i), 5.02(k), 5.02(q), 5.02(r), 6.01(c)(iii), 7.03, 8.04(c)
and 8.09, only the Persons listed or referred to on Schedule III shall be
Subsidiaries of the Borrower. For purposes of this definition, a corporation,
partnership, joint venture, trust, company or other entity is "controlled by"
another Person if such other Person possesses, directly or indirectly, the
power to vote 50% or more of the securities having ordinary voting power for
the election of directors (or Persons performing similar functions) of such
corporation, partnership, joint venture, trust, company or other entity or to
direct or cause the direction of the day-to-day management and policies of such
corporation, partnership, joint venture, trust, company or other entity,
whether through voting rights, by contract or otherwise.
"Substitute Corporate Partner" has the meaning specified in
Section 8.14.
"Substitute ELM Corporate Partner" has the meaning specified
in Section 8.15.
"Suspension Event" shall occur if either a "Suspension Event"
or a "Trigger Event" as defined in the Partnership Agreement occurs (but such
"Suspension Event" under the Partnership Agreement shall cease to be a
Suspension Event hereunder if the period for declaring it effective under
Section 10.03(b) of the Partnership Agreement has expired without such
"Suspension Event" being declared effective or, if having been declared
effective, the suspension period and any extension thereof contemplated by such
Section 10.03(b) have terminated without the removal of the General Partner,
termination of the Borrower or a Suspension Termination Event (as defined in
the Partnership Agreement) having occurred) or any other event or occurrence
that results in the tolling or termination of the Commitment Period or results
in any Partner not being required to make further Capital Contributions to the
Borrower (other than as a result of (i) each Partner having contributed its
full capital commitment as set forth on Exhibit A to the Partnership Agreement
(plus any increase thereto pursuant to Section 3.04(a) of the Borrower
Partnership Agreement), or (ii) the termination of such Commitment Period on
December 30, 2000, as such date may be extended, as contemplated by the
Partnership Agreement).
"Swap Transaction" means any interest rate, currency or
commodity swap, collar or cap or other similar derivatives-related transaction.
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<PAGE> 26
"Taxes" has the meaning specified in Section 2.13(a).
"Termination Date" means June 30, 2001 or the earlier date of
termination in whole of the Commitments pursuant to Section 2.15, 6.01 or 6.02.
"Termination Event" means (i) the occurrence with respect to
any Plan or Multiemployer Plan of a "reportable event", as such term is
described in Section 4043 of ERISA (other than a "reportable event" not subject
to the provision for 30-day notice to the PBGC), or an event described in
Section 4062(e) of ERISA, or (ii) the withdrawal of the Borrower or any ERISA
Affiliate from a Multiple Employer Plan during a plan year in which it was a
"substantial employer", as such term is defined in Section 4001(a)(2) of ERISA,
or the incurrence of liability by the Borrower or any ERISA Affiliate under
Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or
(iii) the distribution of a notice of intent to terminate a Plan pursuant to
Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the institution of proceedings
to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Plan.
"Total Capital and Asset Coverage Ratio" means the ratio of
(i) Conforming Assets plus Unfunded Partners Capital to (ii) Funded Debt.
"Type" shall have the meaning set forth in the definition
herein of "Advance."
"Unfunded Partners Capital" means, at any time, the aggregate
amount of the legally enforceable commitments under the Partnership Agreement
of CalPERS, ECM II, the Enron Limited Partner and any other Limited Partner
consented to by the Majority Banks to contribute capital to the Borrower that
has not, at or prior to such time, been already contributed to the Borrower,
provided that Unfunded Partners Capital shall be zero at all times during which
a Parent Performance Agreement Default exists or any Parent Credit Agreement
Default exists. Notwithstanding the provisions of this definition to the
contrary, Unfunded Partners Capital (i) shall be reduced by any amount of
Unfunded Partners Capital committed in writing by any of the Partners to secure
or support Debt (other than Debt of the Borrower), (ii) shall be reduced by the
amount of such commitment of CalPERS to contribute capital if CalPERS has
failed to make any Capital Contribution required to be made by it under the
Partnership Agreement, (iii) unless consented to by the Majority Banks, shall
not include at any time (a) the portion of such commitment of CalPERS in excess
of $500,000,000 less the amount of capital already contributed to the Borrower
at or prior to such time by CalPERS, and (b) the portion of such commitment of
ECM II and the Enron Limited Partner in the aggregate in excess of $500,000,000
less the amount of capital already contributed to the Borrower at or prior to
such time by ECM II and the Enron Limited Partner in the aggregate, (iv) in the
event a Section 3.03(e) or 4.02(f) Condition exists, shall be reduced by the
amount by which such commitments will decrease as a result of such Section
3.03(e) or 4.02(f) Condition, (v) in the event the circumstances described in
Section 8.04 of the Partnership Agreement occur with respect to a Limited
Partner and a disposition under Section 3.03(a)(i)(A) of the
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<PAGE> 27
Partnership Agreement is proposed, shall not include such commitment of such
Limited Partner to the extent proposed to be so disposed, and (vi) if a
Recomputation Event has occurred, (a) shall be reduced by the amount of such
commitment of each Non-Enron Limited Partner to contribute capital and (b) if
such Recomputation Event results from any circumstance referred to in clause
(i), (iii), (iv) or (vi) of Section 10.03(a) of the Partnership Agreement,
shall be reduced by the amount of such commitments of ECM II and the Enron
Limited Partner to contribute capital.
"Upstream Limitation" means, as to any Person, any contractual
restriction on the ability of such Person or any Subsidiary of such Person to
pay dividends or make any other distributions on its respective capital stock,
partnership interests or other equity interests.
"Waste-to-Energy" investment means any direct or indirect
investment in any asset or technology that may be used to convert the chemical
energy stored in organic material (including wood, agricultural products,
agricultural residues, manure and municipal waste) into electricity, heat,
liquid fuel or gas.
"Wind" investment means any direct or indirect investment in
any asset or technology that may be used in the production of electricity from
wind.
"Withdrawal Liability" shall have the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this
Agreement in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding". Unless otherwise indicated,
all references to a particular time are references to New York City time.
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with, and
certificates of compliance with financial covenants shall be based on, GAAP.
SECTION 1.04. Miscellaneous. The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, Schedule and Exhibit references are to
Articles and Sections of and Schedules and Exhibits to this Agreement, unless
otherwise specified. The term "including" shall mean "including, without
limitation,". References herein to "assets" or "property" means any asset of
any kind, whether real, personal or mixed.
SECTION 1.05. Ratings. A rating, whether public or
private, by S&P or Moody's shall be deemed to be in effect on the date of
announcement or publication by S&P or Moody's, as the case
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<PAGE> 28
may be, of such rating or, in the absence of such announcement or publication,
on the effective date of such rating and will remain in effect until the date
when any change in such rating is deemed to be in effect. In the event any of
the rating categories used by Moody's or S&P is revised or designated
differently (such as by changing letter designations to different letter
designations or to numerical designations), then the references herein to such
rating shall be changed to the revised or redesignated rating for which the
standards are closest to, but not lower than, the standards at the date hereof
for the rating which has been revised or redesignated. Long-term debt
supported by a letter of credit, guaranty, insurance, collateral or other
similar credit enhancement mechanism shall not be considered as senior
unsecured long-term debt.
ARTICLE II
AMOUNT AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. Each Bank severally agrees, on
the terms and conditions hereinafter set forth, to make one or more Advances to
the Borrower (if such Advances are requested by the Borrower in one or more
Notices of Borrowing pursuant to Section 2.02(a)) from time to time on any
Business Day during the period from May 26, 1998 until the Termination Date in
an aggregate amount not to exceed at any time outstanding the amount set
opposite such Bank's name on the signature pages hereof (as such pages are
deemed modified pursuant to this Article II or Section 8.06) as such amount is
reduced from time to time pursuant to Section 2.15 (such amount, as so reduced,
being such Bank's "Commitment"). Each Borrowing shall be in an aggregate
amount not less than (x) in the case of a Borrowing comprised of LIBOR
Advances, $10,000,000 and (y) in the case of a Borrowing comprised of Base Rate
Advances, $5,000,000, and shall consist of Advances of the same Type having (in
the case of a Borrowing comprised of LIBOR Advances) the same Interest Period,
made on the same day by the Banks ratably according to their respective
Commitments. Within the limits of each Bank's Commitment, the Borrower may
borrow, prepay pursuant to Section 2.09 and reborrow under this Section 2.01.
SECTION 2.02. Making the Advances. (a) Each Borrowing
shall be made on notice, given not later than 11:00 A.M. (x) in the case of a
proposed Borrowing comprised of LIBOR Advances, at least three Business Days
prior to the date of the proposed Borrowing, and (y) in the case of a proposed
Borrowing comprised of Base Rate Advances, on the day of the proposed
Borrowing, by the Borrower to the Agent, which shall give to each Bank prompt
notice thereof. Each such notice of a Borrowing (a "Notice of Borrowing")
shall be by telecopy, confirmed immediately in writing, in substantially the
form of Exhibit D hereto, specifying therein (a) whether any portion of the
proposed Borrowing constitutes purpose credit under Regulation U, and (b) the
requested (i) date of such Borrowing, (ii) Type of Advances comprising such
Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a
Borrowing comprised of LIBOR Advances, initial Interest Period for each such
Advance, provided that the Borrower may not specify LIBOR Advances for any
Borrowing if, after giving effect to such Borrowing, LIBOR Advances having more
than five different Interest Periods shall be outstanding. Each Bank shall,
before 11:00 A.M. (2:00 P.M. in the case of a Borrowing comprised of Base Rate
Advances) on the date of such Borrowing, make available for the
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account of its Applicable Lending Office to the Agent at its Payment Office, in
same day funds, such Bank's ratable portion of such Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will make such funds available to the
Borrower at the Agent's aforesaid address. More than one Borrowing may be made
on the same day in accordance with the terms hereof. In the case of a
Borrowing that is requested in the relevant Notice of Borrowing to be comprised
of LIBOR Advances, if the Borrower shall fail to select in such Notice of
Borrowing the duration of the initial Interest Period for such LIBOR Advances
in accordance with the provisions contained in the definition of "Interest
Period" in Section 1.01, the Agent will forthwith notify the Borrower and the
Banks thereof and such Notice of Borrowing will be treated as a Notice of
Borrowing requesting a Borrowing comprised of Base Rate Advances.
(b) Each Notice of Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Borrowing which the related Notice
of Borrowing specifies is to be comprised of LIBOR Advances, the Borrower shall
indemnify each Bank against any loss (excluding loss of anticipated profits),
cost or expense incurred by such Bank as a result of any failure to fulfill on
or before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including any loss (excluding
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Bank to
fund the Advance to be made by such Bank as part of such Borrowing when such
Advance, as a result of such failure, is not made on such date.
(c) Unless the Agent shall have received notice from a
Bank prior to the date of any Borrowing that such Bank will not make available
to the Agent such Bank's ratable portion of such Borrowing, the Agent may
assume that such Bank has made such portion available to the Agent on the date
of such Borrowing in accordance with Section 2.02(a) and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such ratable portion available to the Agent, such Bank and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount
is made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at the
time to Advances comprising such Borrowing and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's
Advance as part of such Borrowing for purposes of this Agreement. Nothing in
this Section 2.02(c) shall be deemed to relieve any Bank from its obligations
hereunder or to prejudice any rights which the Borrower may have against any
Bank as a result of any default by such Bank hereunder.
(d) The failure of any Bank to make the Advance to be
made by it as part of any Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its Advance on the date of such
Borrowing, but no Bank shall be responsible for the failure of any other Bank
to make the Advance to be made by such other Bank on the date of any Borrowing.
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(e) The Borrower shall notify the Agent and the Banks at
least six Business Days in advance of any Borrowing of or Conversion to LIBOR
Advances with an Interest Period of nine or twelve months or an Interest Period
selected pursuant to clause (iv) of the definition herein of "Interest Period".
The Borrower will be entitled to select the nine or twelve month Interest
Period or an Interest Period pursuant to such clause (iv), as the case may be,
only if each Bank notifies the Agent (before 10:00 A.M. on the fourth Business
Day preceding the date of the proposed Borrowing or Conversion) that such Bank
approves such nine or twelve month Interest Period or such Interest Period
pursuant to clause (iv). Any such notice of approval shall apply only to the
specific Interest Period referred to therein.
SECTION 2.03. Fees.
(a) Commitment Fee. The Borrower agrees to pay to each
Bank a commitment fee on the average daily unused amount of such Bank's
Commitment from May 26, 1998 until the date such Bank's Commitment is
terminated at the Applicable Commitment Fee Rate, payable in arrears on the
last day of each March, June, September and December, commencing June 30, 1998,
and on the date such Bank's Commitment is terminated.
(b) Other Fees. The Borrower shall pay to the Agent and
the Co-Arrangers such other fees as may be separately agreed to in writing.
SECTION 2.04. Repayment. All outstanding principal of the
Advances shall be due and payable on the Maturity Date. At the time of each
payment, the Borrower will give the Agent notice of the specific Borrowing or
Borrowings to which such payment shall be applied, and in the absence of such
notice the Agent may specify the Borrowing or Borrowings to which such payment
shall apply.
SECTION 2.05. Interest. The Borrower shall pay interest
on the unpaid principal amount of each Advance from the date of such Advance
until such principal amount shall be paid in full, at the following rates per
annum:
(a) Base Rate Advances. During such periods as such
Advance is a Base Rate Advance, a rate per annum equal at all times to the sum
of (i) the Base Rate in effect from time to time plus (ii) the Base Rate Margin
in effect from time to time, payable quarterly on the last day of each March,
June, September and December during such periods and on the date such Base Rate
Advance shall be Converted or paid in full; provided that any amount of
principal, interest or fees hereunder (other than principal of LIBOR Advances
bearing interest pursuant to the proviso to Section 2.05(b)) which is not paid
when due (whether at stated maturity, by acceleration or otherwise) shall bear
interest, from the date on which such amount is due until such amount is paid
in full, payable on demand, at a rate per annum equal at all times to 2% per
annum above the sum of (i) the Base Rate in effect from time to time plus (ii)
the Base Rate Margin in effect from time to time.
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(b) LIBOR Advances. During such periods as such Advance
is a LIBOR Advance, a rate per annum equal at all times during each Interest
Period for such Advance to the sum of (i) the LIBO Rate for such Interest
Period for such Advance plus (ii) the Applicable LIBOR Margin per annum in
effect from time to time, payable on the last day of such Interest Period and,
if such Interest Period has a duration of more than three months, quarterly on
each day which occurs during such Interest Period at intervals of three months
after the first day of such Interest Period; provided that any amount of
principal of any LIBOR Advance which is not paid when due (whether at stated
maturity, by acceleration or otherwise) shall bear interest, from the date on
which such amount is due until such amount is paid in full, payable on demand,
at a rate per annum equal at all times to the greater of (x) 2% per annum above
the Base Rate in effect from time to time and (y) 2% per annum above the rate
per annum required to be paid on such Advance immediately prior to the date on
which such amount became due.
SECTION 2.06. Additional Interest on LIBOR Advances. If
any Bank is required under regulations of the Federal Reserve Board (or any
other governmental regulatory authority or central bank having similar powers
with respect to such Bank) to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities, and such Bank shall
determine (absent manifest error) that as a result thereof there is an increase
in the cost to such Bank of agreeing to make or making, funding or maintaining
LIBOR Advances, then the Borrower shall from time to time, upon demand by such
Bank (with a copy of such demand to the Agent), pay to the Agent for the
account of such Bank additional amounts, as additional interest hereunder,
sufficient to compensate such Bank for such increased cost. A certificate in
reasonable detail as to the basis for and the amount of such increased cost,
submitted to the Borrower and the Agent by such Bank, shall be prima facie
evidence of such amount.
SECTION 2.07. Automatic Conversions.
(a) If the Borrower shall fail to select the duration of
any Interest Period in order to continue any LIBOR Advances in accordance with
the provisions contained in the definition of "Interest Period" in Section
1.01, the Agent will forthwith so notify the Borrower and the Banks and such
Advances will automatically, on the last day of the then existing Interest
Period therefor, Convert into Base Rate Advances.
(b) If the aggregate unpaid principal amount of Advances
comprising any Borrowing of LIBOR Advances shall be reduced, by payment or
prepayment or otherwise, to less than $10,000,000, such Advances shall
automatically Convert, on the last day of the then existing Interest Period for
such Advances, into Base Rate Advances, unless the Borrower has elected to
continue such Advances as LIBOR Advances by selecting a new Interest Period
therefor in accordance with the provisions contained in the definition of
"Interest Period" in Section 1.01 commencing on such day and the sum of the
outstanding principal amount of such Advances plus the outstanding principal
amount of each other Borrowing that is being Converted into, or continued as,
LIBOR Advances on such day with the same Interest Period as such Advances is at
least $10,000,000.
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SECTION 2.08. Voluntary Conversion of Advances. The
Borrower may on any Business Day, upon notice given to the Agent not later than
11:00 A.M. (x) in the case of a proposed Conversion into LIBOR Advances, on the
third Business Day prior to the date of the proposed Conversion, and (y) in the
case of a proposed Conversion into Base Rate Advances, on the date of the
proposed Conversion and subject to the limitation in Section 2.02(a) as to the
number of permitted Interest Periods, and subject to the provisions of Section
2.11, Convert all Advances of one Type comprising the same Borrowing into
Advances of another Type; provided that (i) if any Conversion of any LIBOR
Advances occurs on a day other than the last day of an Interest Period for such
LIBOR Advances the Borrower shall compensate the Banks pursuant to Section
8.04(b), and (ii) Advances comprising a Borrowing may not be Converted into
LIBOR Advances if the sum of outstanding principal amount of such Advances plus
the outstanding principal amount of each other Borrowing that is being
Converted into, or continued as, LIBOR Advances on the same day with the same
Interest Period as such Advances is less than $10,000,000. Each such notice of
a Conversion shall, within the restrictions specified above, specify (i) the
date of such Conversion, (ii) the Advances to be Converted and the Type into
which they are to be Converted, and (iii) if such Conversion is into LIBOR
Advances, the duration of the Interest Period for each such Advance.
SECTION 2.09. Prepayments. The Borrower may (x) in respect
of LIBOR Advances, upon at least three Business Days' notice, and, (y) in
respect of Base Rate Advances, upon notice by 11:00 A.M. on the day of the
proposed prepayment, to the Agent stating the proposed date and aggregate
principal amount of the prepayment and the Types of Advances to be prepaid, and
in the case of LIBOR Advances, the specific Borrowing or Borrowings pursuant to
which made, and if such notice is given the Borrower shall, prepay the
outstanding principal amounts of the Advances comprising part of the same
Borrowing in whole or ratably in part, together with accrued interest to the
date of such prepayment on the principal amount prepaid without premium or
penalty; provided that each partial voluntary prepayment shall be in an
aggregate principal amount not less than $5,000,000, and provided further that
if the Borrower prepays any LIBOR Advance on any day other than the last day of
an Interest Period therefor, the Borrower shall compensate the Banks pursuant
to Section 8.04(b).
SECTION 2.10. Increased Costs; Capital Adequacy, Etc.
(a) If, due to either (i) the introduction of or any
change in or in the interpretation of any law or regulation by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof after the date hereof or (ii) the compliance with any
guideline or request from any governmental authority, central bank or comparable
agency (whether or not having the force of law) issued after the date hereof,
there shall be any increase in the cost to any Bank of agreeing to make or
making, funding or maintaining LIBOR Advances (other than increased costs
described in Section 2.06 or in clause (b) below), then the Borrower shall from
time to time, upon demand by such Bank (with a copy of such demand to the
Agent), pay to the Agent for the account of such Bank additional amounts
sufficient to compensate such Bank for such increased cost. A certificate in
reasonable detail as to the basis for and the
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amount of such increased cost, submitted to the Borrower and the Agent by such
Bank, shall be prima facie evidence of such amount. No Bank shall be permitted
to recover increased costs incurred or accrued more than 90 days prior to
notice to the Borrower thereof.
(b) If any Bank shall have determined that, after the
date hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Bank (or its lending office) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency (except to the extent such request
or directive arises as a result of the individual creditworthiness of such
Bank) has the effect of increasing the amount of capital required or expected
to be maintained by such Bank or any Person controlling such Bank as a result
of such Bank's Commitment hereunder, then upon demand by such Bank (with a copy
to the Agent), the Borrower shall immediately pay to the Agent for the account
of such Bank additional amounts sufficient to compensate such Bank or such
Person for the increased cost to such Bank or such Person as a result of such
increase in capital to the extent that such Bank reasonably determines such
increase in capital to be allocable to such Bank's Commitment. A certificate
as to such amounts submitted to the Borrower and the Agent by such Bank and
certifying that such costs are generally being charged by such Bank to other
similarly situated borrowers under similar credit facilities shall be prima
facie evidence of such amounts, although the failure to give any such demand
shall not release or diminish any of the Borrower's obligations to pay
additional amounts pursuant to this Section 2.10(b). No Bank shall be
permitted to recover additional amounts pursuant to this Section 2.10(b)
accrued more than 90 days prior to notice to the Borrower thereof.
(c) Each Bank shall use reasonable efforts (consistent
with its internal policies and legal and regulatory restrictions) to select a
jurisdiction for its Applicable Lending Office or change the jurisdiction of
its Applicable Lending Office, as the case may be, so as to avoid the
imposition of any increased costs under this Section 2.10 or to eliminate the
amount of any such increased cost which may thereafter accrue or to eliminate
any unlawful circumstance referred to in Section 2.11; provided that no such
selection or change of the jurisdiction for its Applicable Lending Office shall
be made if, in the reasonable judgment of such Bank, such selection or change
would be disadvantageous to such Bank.
SECTION 2.11. Illegality. Notwithstanding any other
provision of this Agreement, if the introduction of or any change in or in the
interpretation of any law or regulation shall make it unlawful, or any
governmental authority, central bank or comparable agency shall assert that it
is unlawful, for any Bank or its Eurodollar Lending Office to perform its
obligations hereunder to make LIBOR Advances or to continue to fund or maintain
LIBOR Advances hereunder, then, on notice thereof and demand therefor by such
Bank to the Borrower through the Agent, (i) the obligation of the Banks to make
LIBOR Advances and to Convert Advances into LIBOR Advances shall terminate and
(ii) the Borrower shall forthwith Convert all LIBOR Advances of all Banks then
outstanding into Advances of another Type in accordance with Section 2.08.
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SECTION 2.12. Payments and Computations.
(a) The Borrower shall make each payment under this
Agreement and each Note not later than 11:00 A.M. on the day when due in lawful
currency of the United States to the Agent at its Payment Office in same day
funds. The Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest or commitment fees ratably
(other than amounts payable pursuant to Section 2.06) to the Banks (decreased,
as to any Bank, for any taxes withheld in respect of such Bank as contemplated
by Section 2.13(b))for the account of their respective Applicable Lending
Offices, and like funds relating to the payment of any other amount payable to
any Bank to such Bank for the account of its Applicable Lending Office, in each
case to be applied in accordance with the terms of this Agreement.
(b) All computations of interest based on the Base Rate
(except during such times as the Base Rate is determined pursuant to clause
(ii) of the definition thereof) and of commitment fees shall be made by the
Agent on the basis of a year of 365 or 366 days, as the case may be, and all
computations of interest based on the LIBO Rate, the Federal Funds Rate or,
during such times as the Base Rate is determined pursuant to clause (ii) of the
definition thereof, the Base Rate shall be made by the Agent, and all
computations of interest pursuant to Section 2.06 shall be made by a Bank, on
the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such interest or commitment fees are payable. Each determination by
the Agent (or, in the case of Section 2.06, by a Bank) of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(c) Whenever any payment hereunder or under the Notes
shall be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of payment of interest or
commitment fees, as the case may be; provided that if such extension would
cause payment of interest on or principal of LIBOR Advances to be made in the
next following calendar month, such payment shall be made on the next preceding
Business Day.
(d) Unless the Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Banks hereunder
that the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such Bank. If and
to the extent the Borrower shall not have so made such payment in full to the
Agent, each Bank shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Agent, at the Federal Funds Rate.
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SECTION 2.13. Taxes.
(a) Any and all payments by the Borrower hereunder or
under the Notes shall be made, in accordance with Section 2.12, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges, fees, duties or withholdings, and all liabilities
with respect thereto, excluding, in the case of each Bank and the Agent, (1)
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank or Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Bank,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Bank's Applicable Lending Office or any political
subdivision thereof, (2) income taxes imposed by the United States of America
and (3) any taxes imposed by the United States of America by means of
withholding at the source if and to the extent that such taxes shall be in
effect and shall be applicable, on the date hereof, to payments to be made to
such Bank or the Agent (all such non-excluded taxes, levies, imposts,
deductions, charges, fees, duties, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under
any Note to any Bank or the Agent, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.13) such
Bank or the Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) Notwithstanding anything to the contrary contained in
this Agreement, each of the Borrower and the Agent shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or other
similar taxes imposed by the United States of America from interest, fees or
other amounts payable hereunder for the account of any Bank (without the
payment by the Borrower of increased amounts to such Bank pursuant to clause
(a) above) other than a Bank (i) which is a domestic corporation (as such term
is defined in Section 7701 of the Code) for federal income tax purposes or (ii)
which has the Prescribed Forms on file with the Borrower and the Agent for the
applicable year to the extent deduction or withholding of such taxes is not
required as a result of the filing of such Prescribed Forms, provided that if
the Borrower shall so deduct or withhold any such taxes, it shall provide a
statement to the Agent and such Bank, setting forth the amount of such taxes so
deducted or withheld, the applicable rate and any other information or
documentation which such Bank or the Agent may reasonably request for assisting
such Bank or the Agent to obtain any allowable credits or deductions for the
taxes so deducted or withheld in the jurisdiction or jurisdictions in which
such Bank is subject to tax.
(c) In addition, the Borrower agrees to pay any present
or future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made hereunder or under
the Notes or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or the Notes (hereinafter referred to as "Other
Taxes").
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<PAGE> 36
(d) The Borrower, to the fullest extent permitted by law,
will indemnify each Bank and the Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.13) paid by such Bank or the Agent (as the
case may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto except as a result of the gross
negligence or willful misconduct of such Bank or Agent, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This indemnification
shall be made within 30 days from the date such Bank or the Agent (as the case
may be) makes written demand therefor. No Bank nor the Agent shall be
indemnified for Taxes incurred or accrued more than 90 days prior to the date
that such Bank or the Agent notifies the Borrower thereof.
(e) Within 30 days after the date of any payment of Taxes
by or at the direction of the Borrower, the Borrower will furnish to the Agent,
at its address referred to in Section 8.02, the original or a certified copy of
a receipt evidencing payment thereof. Should any Bank or the Agent ever
receive any refund, credit or deduction from any taxing authority to which such
Bank or the Agent would not be entitled but for the payment by the Borrower of
Taxes as required by this Section 2.13 (it being understood that the decision
as to whether or not to claim, and if claimed, as to the amount of any such
refund, credit or deduction shall be made by such Bank or the Agent in its sole
discretion), such Bank or the Agent, as the case may be, thereupon shall repay
to the Borrower an amount with respect to such refund, credit or deduction
equal to any net reduction in taxes actually obtained by such Bank or the
Agent, as the case may be, and determined by such Bank or the Agent, as the
case may be, to be attributable to such refund, credit or deduction.
(f) Each Bank shall use reasonable efforts (consistent
with its internal policies and legal and regulatory restrictions) to select a
jurisdiction for its Applicable Lending Office or change the jurisdiction of
its Applicable Lending Office, as the case may be, so as to avoid the
imposition of any Taxes or Other Taxes or to eliminate the amount of any such
additional amounts which may thereafter accrue; provided that no such selection
or change of the jurisdiction for its Applicable Lending Office shall be made
if, in the reasonable judgment of such Bank, such selection or change would be
disadvantageous to such Bank.
SECTION 2.14. Sharing of Payments, Etc. If any Bank
shall obtain any payment (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) on account of principal of or interest
on the Advances owed to it (other than pursuant to Section 2.06, 2.18 or 8.06)
in excess of its ratable share of payments on account of principal of or
interest on the Advances obtained by all the Banks, such Bank shall forthwith
purchase from the other Banks such participations in the Advances owed to them
as shall be necessary to cause such purchasing Bank to share the excess payment
ratably with each of them, provided that if all or any portion of such excess
payment is thereafter recovered from such purchasing Bank, such purchase from
each Bank shall be rescinded and such Bank shall repay to the purchasing Bank
the purchase price to the extent of its ratable share (according to the
proportion of (i) the amount of the participation purchased from such Bank as a
result of such excess payment to (ii) the total amount of such excess payment)
of such recovery together with an amount equal to such Bank's ratable share
(according to the proportion of (i) the amount of such Bank's required
repayment to (ii) the total amount so recovered from the purchasing Bank) of
any interest
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<PAGE> 37
or other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Borrower agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section may, to the fullest
extent permitted by law, exercise all its rights of payment (including the
right of set-off) with respect to such participation as fully as if such Bank
were the direct creditor of the Borrower in the amount of such participation.
SECTION 2.15. Ratable Reduction or Termination of the
Commitments. The Borrower shall have the right, upon at least three Business
Days' notice to the Agent, to terminate in whole or reduce ratably in part the
unused portions of the respective Commitments of the Banks (with the signature
pages hereto deemed amended to reflect same), provided that each partial
reduction shall be in the aggregate amount of at least $5,000,000. Each
reduction or termination of the Commitments shall be permanent.
SECTION 2.16. Increase of Commitment. Prior to December
30, 2000, the Borrower shall have the right, with the consent of the Agent and
the Documentation Agent (which consent will not be unreasonably withheld), to
effectuate from time to time an increase in the total Commitments under this
Agreement by adding to this Agreement one or more Eligible Additional Lenders
(who shall, upon completion of the requirements stated in this Section 2.16,
constitute Banks hereunder), or by allowing one or more Banks to increase their
Commitments hereunder, provided that (a) no increase in Commitments pursuant to
this Section 2.16 shall result in the total Commitments exceeding an amount
equal to $1,000,000,000 minus the aggregate amount of all reductions and
terminations of Commitments pursuant hereto and (b) no Bank's Commitment shall
be increased without the consent of such Bank. The Borrower shall give the
Agent ten Business Days' notice of the Borrower's intention to increase the
total Commitments pursuant to this Section 2.16. Such notice shall specify
each Eligible Additional Lender, if any, that the Borrower is proposing to add
to this Agreement pursuant to this Section 2.16, the Banks whose Commitments
will be increased, the changes in amounts of Commitments that will result, the
date on which such addition or change is to occur (which shall be a Business
Day) and such other information as is reasonably requested by the Agent. Each
such Eligible Additional Lender, and each Bank agreeing to increase its
Commitment, shall execute and deliver to the Agent a document satisfactory to
the Agent pursuant to which it becomes a party hereto or increases its
Commitment, as the case may be, which document, in the case of each such
Eligible Additional Lender, shall (among other matters) specify the Domestic
Lending Office and Eurodollar Lending Office of such Eligible Additional
Lender. In addition, the Borrower shall execute and deliver a Note in the
principal amount of the Commitment of each such Eligible Additional Lender, or
a replacement Note in the principal amount of the increased Commitment of each
Bank agreeing to increase its Commitment, as the case may be. Such Notes,
together with a Federal Reserve Form U-1 (or Form G-3, if such Eligible
Additional Lender is a nonbank lender) for each such Eligible Additional Lender
(if a Federal Reserve Form U-1 or Form G-3 has previously been required to be
delivered pursuant to Section 3.02(a) or if any Advance is secured directly or
indirectly by margin stock) duly executed by the Borrower and other documents
of the nature referred to in Section 3.01 duly executed by the Borrower, shall
be furnished to the Agent in form and substance as may be reasonably required
by it. Following execution and delivery of such documents on or prior to the
date specified in such notice, each such Eligible Additional Lender shall
become a party hereto as a "Bank" with a Commitment as
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specified therein, or the Commitment of each such Bank that has agreed to
increase its Commitment shall increase as specified therein, as the case may
be, effective on such date (with the signature pages hereof being deemed
amended to reflect same). If the Borrower has requested any Borrowing to be
made on such date, it will cause each such Eligible Additional Lender or each
such Bank, as the case may be, to be notified of each such Borrowing as
contemplated herein so that each such Eligible Additional Lender or each such
Bank, as the case may be, will be required to make its Advance in accordance
with the terms hereof for each Borrowing to be made on such date. Furthermore,
if any Advance will be outstanding on such date, all aspects of the addition of
an Eligible Additional Lender pursuant to this Section 2.16 or increase of a
Bank's Commitment pursuant to this Section 2.16 shall be on terms acceptable to
the Agent (including, if required by the Agent, terms that will cause such
Eligible Additional Lender or such Bank, as the case may be, to be included
ratably in each then outstanding Borrowing).
SECTION 2.17. Termination of Commitment. In the event
that any Bank shall claim payment of any additional interest pursuant to
Section 2.06, any increased costs pursuant to Section 2.10 or any additional or
indemnity amounts pursuant to Section 2.13 or shall make any demand under
Section 2.11, the Borrower shall have the right, without the consent of any
Bank or the Agent, to terminate in whole the Commitment of such Bank within 90
days after such claim or demand, provided that on the effective date of any
such termination (a) no Event of Default, Event of Termination, Suspension
Event or event which would constitute an Event of Default or Event of
Termination or Suspension Event but for the requirement that notice be given or
time elapse or both shall have occurred and be continuing or would result from
such termination and (b) the Borrower shall pay to such Bank all amounts owed
by the Borrower to such Bank under the Loan Documents (including the principal
of and interest on all Advances owed to such Bank and accrued commitment fees
owed to such Bank). The Borrower shall give such Bank and the Agent three
Business Days notice of the Borrower's intention to terminate any Commitment
pursuant to this Section 2.17. Upon the effectiveness of such termination,
such Bank shall no longer constitute a "Bank" hereunder (with the signature
pages hereof being deemed amended to reflect same), except that the rights
under Sections 2.06, 2.10, 2.13 and 8.04 of such Bank shall continue with
respect to events and occurrences occurring before or concurrently with its
ceasing to be a "Bank" hereunder.
SECTION 2.18. Replacement of Bank. In the event that
any Bank shall claim payment of any additional interest pursuant to Section
2.06, any increased costs pursuant to Section 2.10 or any additional or
indemnity amounts pursuant to Section 2.13 or shall make any demand under
Section 2.11, the Borrower shall have the right, if no Event of Default,
Suspension Event, Event of Termination or event which would constitute an Event
of Default, Suspension Event or Event of Termination but for the requirement
that notice be given or time elapse or both shall have occurred and be
continuing or would result therefrom, to replace such Bank with an Eligible
Additional Lender within 90 days after such claim or demand; provided that such
Eligible Additional Lender (i) shall unconditionally offer in writing (with a
copy to the Agent) to purchase all of such Bank's rights hereunder and interest
in the Advances owing to such Bank and the Note held by such Bank without
recourse at the principal amount of such Note plus interest and fees accrued
thereon to the date of such purchase on a date therein specified (which shall
be a Business Day), and (ii) shall execute
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and deliver to the Agent an Assignment pursuant to which such Eligible
Additional Lender becomes a party hereto with a Commitment equal to that of the
Bank being replaced (plus, if such Eligible Additional Lender is already a
Bank, the amount of its Commitment immediately prior to such replacement),
which Assignment, if such Eligible Additional Lender is not already a Bank,
shall (among other matters) specify the Domestic Lending Office and Eurodollar
Lending Office of such Eligible Additional Lender; provided further that no
Bank shall be required, without its consent, to increase its Commitment or to
replace any other Bank. Upon satisfaction of the requirements set forth in the
first sentence of this Section 2.18, acceptance of such offer to purchase by
the Bank to be replaced, execution of such Assignment by such Bank, payment to
such Bank of the purchase price in immediately available funds, and the payment
by the Borrower of all requested costs accruing to the date of purchase which
the Borrower is obligated to pay under Section 8.04 and all other amounts owed
by the Borrower to such Bank (other than the principal of and interest on the
Advances of such Bank purchased by the such Eligible Additional Lender), such
Eligible Additional Lender shall become a party hereto as a "Bank" with a
Commitment as so specified and the Bank being so replaced shall no longer
constitute a "Bank" hereunder (with the signature pages hereof being deemed
amended to reflect same), except that the rights under Sections 2.06, 2.10,
2.13 and 8.04 of such Bank being so replaced shall continue with respect to
events and occurrences occurring before or concurrently with its ceasing to be
a "Bank" hereunder. If, however, (x) a Bank accepts such an offer and such
Eligible Additional Lender fails to purchase such rights and interest on such
specified date in accordance with the terms of such offer or the Borrower fails
to make the payment contemplated by the preceding sentence, the Borrower shall
continue to be obligated to pay the additional interest pursuant to Section
2.06, the increased costs to such Bank pursuant to Section 2.10 or the
additional or indemnity amounts pursuant to Section 2.13, as the case may be,
or (y) the Bank proposed to be replaced fails to accept such purchase offer,
the Borrower shall not be obligated to pay to such Bank such additional
interest, increased costs or additional or indemnity amounts, as the case may
be, incurred or accrued from and after the date of such purchase offer.
ARTICLE III
CONDITIONS TO ADVANCES
SECTION 3.01. Initial Conditions Precedent. The
obligation of each Bank to make its initial Advance pursuant to the terms and
conditions of this Agreement is subject to the conditions precedent that (i)
the commitments to lend under the Credit Agreement dated as of December 31,
1997 among the Borrower, The Chase Manhattan Bank, as administrative agent,
Barclays Bank PLC, as documentation agent, and various banks providing a
$500,000,000 revolving credit facility shall have been terminated and all
principal, interest and other amounts owed in connection therewith shall have
been, or shall be simultaneously with the initial Advance, paid in full (each
Bank that is a "Bank" under such Credit Agreement hereby waives the requirement
of notice of termination set forth in section 2.15 of such Credit Agreement and
the requirement of notice of prepayment set forth in Section 2.09 of such
Credit Agreement and agrees, upon such termination and such payment in full,
that the "General Partner Undertaking" dated December 31, 1997 and "Parent
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Performance Agreement" dated December 31, 1997, referred to in such Credit
Agreement, shall terminate (subject to continuation or reinstatement as
provided therein) and that such Bank will return to the Borrower such Bank's
promissory note under such Credit Agreement with reasonable promptness marked
"cancelled") and (ii) the Agent shall have received the following, each dated
on or before May 26, 1998 in form and substance satisfactory to the Agent:
(a) The Notes to the order of the respective Banks, duly
executed by the Borrower.
(b) The General Partner Undertaking, duly executed by ECM
II.
(c) The Parent Performance Agreement, duly executed by the
Parent.
(d) Certified copies of the resolutions of the Board of
Directors of Enron Capital II authorizing the General Partner Undertaking and
authorizing Enron Capital II, as general partner of ECM II, to enter into this
Agreement, each Note and each Notice of Borrowing on behalf of ECM II as
general partner of the Borrower, and of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
Enron Capital II and certified copies of the certificate of incorporation and
bylaws of Enron Capital II.
(e) A certificate of the Secretary or an Assistant
Secretary of Enron Capital II certifying the names and true signatures of the
officers of Enron Capital II authorized to sign the General Partner Undertaking
and to sign, on behalf of ECM II as general partner of the Borrower, each Loan
Document to which the Borrower is a party and the other documents to be
delivered by it hereunder.
(f) Certified copies of all documents evidencing necessary
corporate action and governmental approvals, if any, with respect to the Parent
Performance Agreement and certified copies of the restated certificate of
incorporation and bylaws of the Parent.
(g) A certificate of the Secretary or an Assistant
Secretary of the Parent certifying the names and true signatures of the officer
of the Parent authorized to sign the Parent Performance Agreement.
(h) A favorable opinion of James V. Derrick, Jr., Esq.,
Senior Vice President and General Counsel of the Parent, to be delivered at the
express instruction of the Parent to, and for the benefit of, the Banks, the
Documentation Agent and the Agent, substantially in the form of Exhibit E
hereto and as to such other matters as any Bank through the Agent may
reasonably request.
(i) A favorable opinion of Julia Heintz Murray, Esq., Vice
President and General Counsel-Finance of Enron Capital II, to be delivered at
the express instruction of Enron Capital II to, and for the benefit of, the
Banks, the Documentation Agent and the Agent, substantially in the form of
Exhibit F hereto and as to such other matters as any Bank through the Agent may
reasonably request.
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(j) A favorable opinion of Vinson & Elkins L.L.P., counsel
for the Borrower, ECM II, Enron Capital II, the Enron Limited Partner and the
Parent, to be delivered at the express instruction of the Borrower, ECM II,
Enron Capital II, the Enron Limited Partner and the Parent to, and for the
benefit of, the Banks, the Documentation Agent and the Agent, substantially in
the form of Exhibit G hereto and as to such other matters as any Bank through
the Agent may reasonably request.
(k) A favorable opinion of Bracewell & Patterson, L.L.P.,
counsel for the Agent, to be delivered at the express instruction of the Agent
to, and for the benefit of, the Banks, the Documentation Agent and the Agent,
substantially in the form of Exhibit H hereto.
(l) Copies of the ECM II Agreement and the Partnership
Agreement, as in effect on the date hereof, certified as being true and correct
copies by the Secretary or an Assistant Secretary of Enron Capital II.
(m) A certificate of an authorized financial officer of
Enron Capital II in the form of Exhibit J hereto.
(n) Certificates of appropriate state officials as to the
existence and good standing of the Borrower, Enron Capital II, the Enron
Limited Partner and ECM II.
(o) A copy of the Enron Limited Partner Agreement
certified as being a true and correct copy by the Secretary or an Assistant
Secretary of Enron Capital IV.
SECTION 3.02. Additional Conditions Precedent to Each
Advance. The obligation of each Bank to make any Advance shall be subject to the
additional conditions precedent that on the date of such Advance
(a) the following statements shall be true (and each of
the giving of the applicable Notice of Borrowing and the acceptance by the
Borrower of the proceeds of such Advance shall constitute a representation and
warranty by the Borrower that on the date of such Advance such statements are
true):
(i) The representations and warranties
contained in Section 4.01 of this Agreement, the representations and warranties
contained in the Parent Performance Agreement and the representations and
warranties contained in the General Partner Undertaking are correct on and as
of the date of such Advance, before and after giving effect to such Advance and
the Borrowing of which such Advance is a part and to the application of the
proceeds therefrom, as though made on and as of such date, and
(ii) No event has occurred and is continuing,
or would result from such Advance or the Borrowing of which such Advance is a
part or from the application of the proceeds therefrom, which constitutes an
Event of Termination, Suspension Event or an Event of Default or would
constitute an
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Event of Default, Suspension Event or Event of Termination but for the
requirement that notice be given or time elapse or both, and
(iii) Neither the Borrower nor ECM II nor Enron
Capital II nor the Enron Limited Partner has received (1) from any Partner a
notice of a termination of the Commitment Period or (2) from CalPERS a notice
of a required Disposition (as defined in the Partnership Agreement) pursuant to
Section 3.03(e) of the Partnership Agreement, and
(iv) No Additional Condition shall exist, and
(v) The Agent shall have received a Federal
Reserve Form U-1 for each Bank (or Form G-3 for any Bank that is a nonbank
lender), duly executed by the Borrower, to the extent required by Regulation U
in the reasonable judgment of any Bank on advice of its counsel, if such Bank
has notified the Borrower and the Agent requesting a Form U-1 (or Form G-3),
and
(vi) If such Advance or any other Advance is
secured directly or indirectly by margin stock (as defined in Regulation U),
the Agent shall have received a Federal Reserve Form U-1 for each Bank (or Form
G-3 for any Bank that is a nonbank lender), duly executed by the Borrower, and
a current list of the relevant assets of the Borrower (which must be adequate
to support in accordance with Regulation U all credit extended under this
Agreement) as contemplated by 12 CFR Section 221.3(c)(2)(iv); and
(b) the Agent shall have received such other approvals or
documents as any Bank through the Agent may reasonably request to verify the
accuracy of any of the matters referred to in paragraph (i) or paragraph (ii)
of Section 3.02(a).
SECTION 3.03. Additional Reg U Opinions. The obligation
of each Bank to make any Advance shall be subject to the additional condition
precedent that the Banks shall have received each Additional Reg U Opinion
requested from time to time by the Majority Banks. "Additional Reg U Opinion"
shall mean a favorable opinion of counsel for the Borrower, reasonably
acceptable to the Majority Banks, to the effect that the execution, delivery
and performance by the Borrower of the Loan Documents to which it is a party
(including the borrowing of any Advance then pending, if any) do not contravene
or result in a violation of Regulation X or Regulation U.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Borrower. The Borrower represents and warrants to the Agent and the Banks as
follows:
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(a) Each of ECM II, the Enron Limited Partner and the
Borrower is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each Subsidiary of the
Borrower is a Person duly formed, validly existing and in good standing under
the laws of its jurisdiction of organization or incorporation. Enron Capital
II is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Enron Capital II is the sole
general partner of ECM II and ECM II is the sole general partner of the
Borrower. Enron Capital IV is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Enron Capital IV
is the sole general partner of the Enron Limited Partner. Each of the Borrower
and the Subsidiaries of the Borrower has all power and authority and all
governmental licenses, authorizations, consents and approvals required in each
case to carry on its business, except to the extent that the failure to have
such power, authority, licenses, authorizations, consents and approvals could
not reasonably be expected to have a Material Adverse Effect. The Closing Date
(as defined in the Partnership Agreement) occurred on December 30, 1997. As of
the date hereof, the aggregate amount of the cash Capital Contributions made to
the capital of the Borrower (i) by CalPERS is $2,500,000 and (ii) by ECM II and
the Enron Limited Partner in the aggregate is $2,500,000. No Capital
Contribution is subject to return pursuant to Article IV of, or any other
provision of, the Partnership Agreement.
(b) The execution, delivery and performance by the
Borrower of each Loan Document to which it is a party are within the Borrower's
partnership powers, have been duly authorized by all necessary partnership
action of the Borrower, require, in respect of the Borrower, no action by or in
respect of, or filing with, any governmental body, agency or official (except,
with respect to the resale of Enron Stock, any filings as may be required under
the Securities Act of 1933, as amended, or any applicable blue sky or state
securities laws) and do not contravene, or constitute a default under, any
provision of law or regulation (including Regulation X) applicable to the
Borrower or Regulation U or the certificate of limited partnership of the
Borrower or the Partnership Agreement or any judgment, injunction, order,
decree or material agreement binding upon the Borrower or result in or require
the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries. Without limiting the foregoing, the making of each Advance
will not violate or result in a violation of any law or regulation (including
Regulation U).
(c) This Agreement and each Note have been duly executed
and delivered by the Borrower. This Agreement and each Note are, and each
other Loan Document to which the Borrower is a party, when executed and
delivered in accordance with this Agreement will be, legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms, except as the enforceability thereof may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and by general principles of equity.
(d) The execution, delivery and performance by ECM II of
the Partnership Agreement, the General Partner Undertaking and each other Loan
Document to which it is a party are within ECM II's partnership powers, have
been duly authorized by all necessary action of ECM II, require, in respect of
ECM II, no action by or in respect of, or filing with, any governmental body,
agency or official (except, with respect
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to the resale of Enron Stock, any filings as may be required under the
Securities Act of 1933, as amended, or any applicable blue sky or state
securities laws) and do not contravene, or constitute a default under, any
provision of law or regulation (including Regulation X) applicable to ECM II or
Regulation U or the ECM II Agreement or any judgment, injunction, order, decree
or material agreement (including, without limitation, the Partnership
Agreement) binding upon ECM II or result in or require the creation or
imposition of any Lien on any asset of ECM II or any of its Subsidiaries. The
execution, delivery and performance by Enron Capital II, as general partner of
ECM II, of the General Partner Undertaking and each other Loan Document to
which ECM II is a party are within Enron Capital II's corporate powers, have
been duly authorized by all necessary action of Enron Capital II, require, in
respect of Enron Capital II, no action by or in respect of, or filing with, any
governmental body, agency or official (except, with respect to the resale of
Enron Stock, any filings as may be required under the Securities Act of 1933,
as amended, or any applicable blue sky or state securities laws) and do not
contravene, or constitute a default under, any provision of law or regulation
(including Regulation X) applicable to Enron Capital II or Regulation U or the
certificate of incorporation or by-laws of Enron Capital II or any judgment,
injunction, order, decree or material agreement (including, without limitation,
the ECM II Agreement) binding upon Enron Capital II or result in or require the
creation or imposition of any Lien on any asset of Enron Capital II or any of
its Subsidiaries. The execution, delivery and performance by the Enron Limited
Partner of the Partnership Agreement are within the Enron Limited Partner's
partnership powers, have been duly authorized by all necessary action of the
Enron Limited Partner, require, in respect of the Enron Limited Partner, no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
law or regulation (including Regulation X) applicable to the Enron Limited
Partner or Regulation U or the Enron Limited Partner Agreement or any judgment,
injunction, order, decree or material agreement (including, without limitation,
the Partnership Agreement) binding upon the Enron Limited Partner or result in
or require the creation or imposition of any Lien on any asset of the Enron
Limited Partner or any of its Subsidiaries.
(e) The General Partner Undertaking has been duly
executed and delivered by ECM II. The General Partner Undertaking and each
other Loan Document to which ECM II is a party, are legal, valid and binding
obligations of ECM II enforceable against ECM II in accordance with their
respective terms, except as the enforceability thereof may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general principles of equity.
(f) The execution, delivery and performance by the Parent
of the Parent Performance Agreement and each other Loan Document to which it is
a party, are within the Parent's corporate powers, have been duly authorized by
all necessary corporate action of the Parent, require in respect of the Parent,
no action by or in respect of, or filing with, any governmental body, agency or
official (except, with respect to the resale of Enron Stock, any filings as may
be required under the Securities Act of 1933, as amended, or any applicable
blue sky or state securities laws) and do not contravene, or constitute a
default under, any provision of law or regulation (including Regulation X)
applicable to the Parent or Regulation U or the restated certificate of
incorporation or by-laws of the Parent or any judgment, injunction, order,
decree or material ("material" solely for the purposes of this representation
meaning creating a liability of $50,000,000 or more) agreement binding
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upon the Parent or result in or require the creation or imposition of any Lien
on any asset of the Parent or any of its Principal Subsidiaries.
(g) The Parent Performance Agreement has been duly
executed and delivered by the Parent. The Parent Performance Agreement and
each other Loan Document to which the Parent is a party are legal, valid and
binding obligations of the Parent enforceable against the Parent in accordance
with their respective terms, except as the enforceability thereof may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general principles of
equity.
(h) The Partnership Agreement is a legal, valid and
binding obligation of each Limited Partner and ECM II enforceable against each
Limited Partner and ECM II in accordance with its terms, except as the
enforceability thereof may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and by general principles of equity. The ECM II Agreement is a
legal, valid and binding obligation of Enron Capital II and the ECM II Limited
Partners enforceable against Enron Capital II and the ECM II Limited Partners
in accordance with its terms, except as the enforceability thereof may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and by general principles of
equity. The Enron Limited Partner Agreement is a legal, valid and binding
obligation of Enron Capital IV and the Enron L.P. Limited Partners enforceable
against such entities in accordance with its terms, except as the
enforceability thereof may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and by general principles of equity.
(i) The unaudited consolidated balance sheet and
statement of investments of the Borrower as of March 31, 1998 and the related
consolidated statements of income, cash flows and partners' capital for the
three months then ended, certified by a senior financial officer of Enron
Capital II, copies of which have been delivered to each of the Banks, fairly
present, in conformity with GAAP except as otherwise expressly noted therein,
the financial position and investments of the Borrower as of such date and its
results of operations, changes in partnership capital and cash flows for such
period, subject to changes resulting from normal year-end audit adjustments.
The Borrower has no Securities Repurchase Obligations and is not a party to any
Sale Leaseback Transaction or capital lease as lessee, except for capital
leases in which the aggregate obligations (for all capital leases) that, in
accordance with GAAP, have been or are required to be capitalized on the books
of the Borrower do not exceed $20,000,000 at any time.
(j) Since December 31, 1997, no event or circumstance has
occurred that has resulted in, or could reasonably be expected to have, a
Material Adverse Effect. Since December 31, 1997 there has been no material
adverse change in the financial condition of ECM II, Enron Capital II, the
Enron Limited Partner or, to the Borrower's knowledge, CalPERS which could
reasonably be expected to affect their respective ability to meet their
respective obligations under the Loan Documents, the ECM II Agreement, the
Enron Limited Partner Agreement or the Partnership Agreement. Since December
31, 1997 through the date
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hereof, there has been no material adverse change in the business, consolidated
financial position or consolidated results of operation of the Parent and its
Subsidiaries, considered as a whole.
(k) There is no action, suit or proceeding pending
against the Borrower or any of its Subsidiaries, or to the knowledge of the
Borrower threatened against the Borrower or any of its Subsidiaries, before any
court or arbitrator or any governmental body, agency or official in which there
is a reasonable possibility of an adverse decision which could reasonably be
expected to have a Material Adverse Effect or which in any manner draws into
question the legality, validity, binding effect or enforceability of this
Agreement, any other Loan Document, the ECM II Agreement, the Enron Limited
Partner Agreement or the Partnership Agreement.
(l) No Termination Event has occurred or is reasonably
expected to occur with respect to any Plan for which an Insufficiency in excess
of $10,000,000 exists. Neither the Borrower nor any ERISA Affiliate has
received any notification (or has knowledge of any reason to expect) that any
Multiemployer Plan is in reorganization or has been terminated, within the
meaning of Title IV of ERISA, for which a Withdrawal Liability in excess of
$10,000,000 exists.
(m) The Borrower and its Subsidiaries have filed or
caused to be filed all United States federal income tax returns and all other
material domestic tax returns which are required to be filed by them and have
paid or provided for the payment, before the same become delinquent, of all
taxes due from the Borrower or any of its Subsidiaries pursuant to such returns
or pursuant to any assessment received by the Borrower or any Subsidiary, other
than those taxes contested in good faith by appropriate proceedings which if
adversely adjudicated could not reasonably be expected to have a Material
Adverse Effect. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes are, in the opinion of the
Borrower, adequate to the extent required by GAAP.
(n) Neither the Borrower nor any of its Subsidiaries is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(o) Each of the Borrower and its Subsidiaries is not
subject to, or is exempt from, regulation as a "holding company" or a
"subsidiary company" of a "holding company", in each case as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
(p) No proceeds of any Advance have been used in
violation of Section 5.02(i).
(q) The Borrower is a partnership for federal income tax
purposes and is not an association taxable as a corporation.
(r) The Borrower and each Subsidiary of the Borrower have
been and are in compliance with all applicable Environmental Protection Laws,
except to the extent that failure to comply with such
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Environmental Protection Laws could not reasonably be expected to have a
Material Adverse Effect. There is (i) no presently outstanding allegation by
government officials or other third parties that the Borrower or any Subsidiary
of the Borrower or any of their respective assets is now or at any time prior
to the date hereof was in violation of, or liable or responsible for response
costs or damages under or pursuant to, any Environmental Protection Law, (ii)
no administrative or judicial proceeding presently pending or, to Borrower's
knowledge, threatened against the Borrower or any such Subsidiary or against
any of their respective past or present assets, businesses or operations under
or pursuant to any Environmental Protection Law or in connection with any
Environmental matter, and (iii) no claim presently outstanding against the
Borrower or any such Subsidiary or against any of their respective past or
present assets, businesses or operations which was asserted under or pursuant
to any Environmental Protection Law or in connection with any Environmental
matter, except for those allegations, proceedings and claims in which the
aggregate liability of the Borrower and its Subsidiaries for all such
allegations, proceedings and claims could not reasonably be expected to have a
Material Adverse Effect. There are no facts or conditions or circumstances
(including the presence, release, disposal or other disposition of or exposure
to Hazardous Materials) known to the Borrower after due inquiry that the
Borrower reasonably believes could form the basis for any liability under or
pursuant to any Environmental Protection Law or any action, suit, claim or
proceeding (regulatory or otherwise) involving the Borrower or any Subsidiary
of the Borrower or their respective past or present properties, businesses or
operations relating to Environmental matters, including any such liability,
action, suit, claim or proceeding arising from past or present Environmental or
other practices or operations asserted or imposed under or pursuant to CERCLA,
RCRA, or any other Environmental Protection Law, except for those liabilities,
actions, suits, claims and proceedings in which the aggregate liability of the
Borrower and its Subsidiaries for all such liabilities, actions, suits, claims
and proceedings could not reasonably be expected to have a Material Adverse
Effect.
(s) Until the Borrower notifies the Banks to the
contrary, no more than 25% of the value of the Reg U Limited Assets of the
Borrower consists of margin stock (as defined in Regulation U) and, to the
extent relevant to the compliance with Regulation U or Regulation X by any of
the Banks or the Borrower in connection with this Agreement or any of the
Advances, no more than 25% of the value of the Reg U Limited Assets of the
Borrower and its Subsidiaries consists of margin stock (as defined in
Regulation U).
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. The Borrower
covenants and agrees with the Agent and the Banks that so long as any Note
shall remain unpaid or any Bank shall have any Commitment hereunder, the
Borrower will, unless the Majority Banks shall otherwise consent in writing:
(a) Reporting Requirements. Furnish to each Bank or, in
the case of clauses (xiii) and (xv) of this Section 5.01(a), to the Agent:
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(i) Within 60 days after the close of each of
the first three quarters of each fiscal year of the Borrower, the unaudited
consolidated balance sheet and statement of investments of the Borrower as at
the end of such quarter and the related consolidated statements of income, cash
flows and partners' capital of the Borrower for such quarter and for the
elapsed portion of the fiscal year ended with the last day of such quarter, in
each case after 1998 setting forth comparative figures as of the end of, and
for the related periods in, the prior fiscal year, all in reasonable detail,
prepared in accordance with GAAP, all of which shall be certified by a senior
financial officer of Enron Capital II (which certificate shall state that such
financial statements fairly present the financial position and investments and
results of operations, cash flows and changes in partners' capital of the
Borrower at the dates and for the periods indicated therein), subject to normal
year-end audit adjustments;
(ii) Within 120 days after the close of each
fiscal year of the Borrower, the audited consolidated balance sheet and
statement of investments of the Borrower as at the end of such fiscal year and
the related audited consolidated statements of income, cash flows and partners'
capital of the Borrower as of the end of and for such fiscal year setting forth
comparative figures for the preceding fiscal year, together with the opinion of
Arthur Andersen & Co. or such other independent certified public accountants of
recognized national standing as are selected by the Borrower, stating that such
financial statements fairly present the financial position and investments of
the Borrower as of the date indicated and the results of its operations, cash
flows and changes in partners' capital for the period indicated in conformity
with GAAP, consistently applied (except for such inconsistencies which may be
disclosed in such report), and that the audit by such accountants in connection
with such financial statements has been made in accordance with generally
accepted auditing standards;
(iii) simultaneously with the delivery of each
of the annual or quarterly reports referred to in clause (i) or (ii) above, a
certificate of an authorized financial officer of Enron Capital II in a form
acceptable to the Agent (a) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Sections 5.02(b), 5.02(d), and 5.02(e) on the date of the
balance sheet contained in such report, (b) describing in reasonable detail all
outstanding Funded Debt (including specification of such Funded Debt as Senior
Debt or Subordinated Debt) and all Capital Contributions that have been made
since the inception of the Borrower, (c) listing each Non-Excluded Subsidiary
on the date of such certificate, and (d) stating whether, to the knowledge of
such officer after due inquiry, there exists on the date of such certificate
any Suspension Event, Event of Termination, Event of Default or event which,
with the giving of notice or lapse of time, or both, would constitute a
Suspension Event, Event of Termination or Event of Default, and, if so, setting
forth the details thereof and the action which the Borrower has taken and
proposes to take with respect thereto;
(iv) promptly after the filing thereof, copies
of all reports and registration statements which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission, or any
governmental authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange;
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<PAGE> 49
(v) as soon as possible and in any event
within five Business Days after an officer of Enron Capital II obtains
knowledge thereof, notice of the occurrence of any Section 3.03(e) or 4.02(f)
Condition, any Suspension Event, any Event of Termination, any Event of
Default, or any event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default, a Suspension Event or an Event of
Termination, continuing on the date of such notice, notice of any written claim
referred to in Section 6.02(d) (whether or not such claim is on a reasonable
basis), and a statement of a senior financial officer of Enron Capital II
setting forth details of such Section 3.03(e) or 4.02(f) Condition, such
Suspension Event, such Event of Termination, such Event of Default, such event
or such written claim and the action which the Borrower or ECM II has taken and
proposes to take with respect thereto;
(vi) as soon as possible and in any event (A)
within 30 Business Days after the Borrower or any ERISA Affiliate knows or has
reason to know that any Termination Event described in clause (i) of the
definition of Termination Event with respect to any Plan for which an
Insufficiency in excess of $10,000,000 exists, has occurred and (B) within 10
Business Days after the Borrower or any ERISA Affiliate knows or has reason to
know that any other Termination Event with respect to any Plan for which an
Insufficiency in excess of $10,000,000 exists, has occurred or is reasonably
expected to occur, a statement of a senior financial officer of Enron Capital
II describing such Termination Event and the action, if any, which the Borrower
or such ERISA Affiliate has taken and proposes to take with respect thereto;
(vii) promptly and in any event within five
Business Days after receipt thereof by the Borrower or any ERISA Affiliate,
copies of each notice received by the Borrower or any ERISA Affiliate from the
PBGC stating its intention to terminate any Plan for which an Insufficiency in
excess of $10,000,000 exists or to have a trustee appointed to administer any
Plan for which an Insufficiency in excess of $10,000,000 exists;
(viii) promptly and in any event within five
Business Days after receipt thereof by the Borrower or any ERISA Affiliate from
the sponsor of a Multiemployer Plan, a copy of each notice received by the
Borrower or any ERISA Affiliate indicating liability in excess of $10,000,000
incurred or expected to be incurred by the Borrower or any ERISA Affiliate in
connection with (A) the imposition of a Withdrawal Liability with respect to a
Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is
expected to be, in reorganization within the meaning of Title IV of ERISA, or
(C) the termination of a Multiemployer Plan within the meaning of Title IV of
ERISA;
(ix) on or before the dates contemplated in
Schedule II, all information referred to in Schedule II;
(x) as soon as possible and in any event
within five Business Days after an officer of Enron Capital II obtains or
receives any notice, opinion, communication or other information regarding any
of the circumstances contemplated by Section 3.03(e), 4.02(f) or 8.04 of the
Partnership Agreement, notice thereof and a statement of a senior financial
officer of Enron Capital II setting forth details
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<PAGE> 50
of such circumstance and the action which the Borrower or ECM II has taken and
proposes to take with respect thereto;
(xi) as soon as possible and in any event
within five Business Days after 25% or more of the value (as determined by any
reasonable method) of the Reg U Limited Assets of the Borrower (or, to the
extent relevant to the compliance with Regulation U or Regulation X by any of
the Banks or the Borrower in connection with this Agreement or any of the
Advances, of the Borrower and its Subsidiaries) consists of margin stock
("Margin Stock Event"), notice of such Margin Stock Event setting forth the
percentage of the Reg U Limited Assets of the Borrower that consist of margin
stock (as defined in Regulation U) and, to the extent relevant to the
compliance with Regulation U or Regulation X by any of the Banks or the
Borrower in connection with this Agreement or any of the Advances, the
percentage of the Reg U Limited Assets of the Borrower and its Subsidiaries
that consist of such margin stock;
(xii) as soon as possible and in any event
within five Business Days after each increase by 5% or more in the percentage
of the Reg U Limited Assets of the Borrower that consist of margin stock (as
defined in Regulation U) or, to the extent relevant to the compliance with
Regulation U or Regulation X by any of the Banks or the Borrower in connection
with this Agreement or any of the Advances, in the percentage of the Reg U
Limited Assets of the Borrower and its Subsidiaries that consist of such margin
stock, notice of the amount of such increase, but no notice under this clause
(xii) need be furnished by the Borrower if no Margin Stock Event has occurred;
(xiii) within five Business Days after any
amendment, waiver or other modification of the ECM II Agreement, the Enron
Limited Partner Agreement or the Partnership Agreement, a copy of such
amendment, waiver or other modification;
(xiv) as soon as possible and in any event
within five days after the occurrence of any Recomputation Event, a certificate
of an authorized financial officer of Enron Capital II in a form acceptable to
the Agent setting forth in reasonable detail the calculations required to
establish whether the Borrower is in compliance with the requirements of
Section 5.02(c) after giving effect to such Recomputation Event;
(xv) within five Business Days after the end of
each month, a written calculation from Enron Capital II setting forth the
Unfunded Partners Capital, Senior Debt and Applicable Monthly TCAC Ratio as of
the end of such month and specifying whether or not the Margin Increase
Condition exists as of the end of such month; and
(xvi) such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any of its
Subsidiaries as any Bank through the Agent may from time to time reasonably
request.
-46-
<PAGE> 51
(b) Compliance with Laws, Etc. Comply, and cause each of
its Subsidiaries to comply, with all applicable laws, rules, regulations and
orders to the extent noncompliance therewith could reasonably be expected to
have a Material Adverse Effect, such compliance to include, without limitation,
compliance with Environmental Protection Laws and the paying before the same
become delinquent of all taxes, assessments and governmental charges imposed
upon it or upon its property except to the extent contested in good faith.
(c) Maintenance of Insurance. Maintain, and cause each
of its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations or with the Parent (or its Subsidiaries),
in each case in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses, having a similar capital structure and
owning similar properties as the Borrower or such Subsidiary.
(d) Preservation of Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain, its
existence, rights arising by organizational document or statute, and
franchises; provided that this Section 5.01(d) shall not prevent any
transaction permitted by Section 5.02(g) and provided, further, that the
Borrower or any such Subsidiary shall not be required to preserve any right or
franchise if the Borrower or such Subsidiary shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Borrower or such Subsidiary, as the case may be, and if the loss thereof
could not reasonably be expected to have a Material Adverse Effect.
(e) Visitation Rights. At any reasonable time and from
time to time after reasonable notice, permit the Agent or any of the Banks or
any agents or representatives thereof to examine the records and books of
account of the Borrower and any of its Subsidiaries, and to discuss the
affairs, finances and accounts of the Borrower and any of its Subsidiaries with
any of the Borrower's representatives, officers or directors.
(f) Review and Notice. Use reasonable efforts to monitor
relevant court proceedings, the legislative and regulatory environment in
California and all other relevant matters with a view to determining whether
there is a reasonable likelihood that a Section 3.03(e) or 4.02(f) Condition or
any of the circumstances referred to in Section 8.04 of the Partnership
Agreement may occur and promptly notify the Agent and the Banks if any such
reasonable likelihood exists, and such notice shall be accompanied by a
reasonably detailed written report setting forth the basis therefor.
(g) Other Documents. Take all actions necessary to assure
compliance by the Borrower, ECM II, Enron Capital II, the Enron Limited Partner
and the Parent with the General Partner Undertaking, the Parent Performance
Agreement, the ECM II Agreement, the Enron Limited Partner Agreement and the
Partnership Agreement.
(h) Capital Contributions. Cause all Capital
Contributions to be made only in cash, except that any Capital Contribution by
the General Partner or the Enron Limited Partner may be made in
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<PAGE> 52
Enron Stock to the extent permitted by Section 4.02(b) of the Partnership
Agreement if (i) such Enron Stock is sold by the Borrower for cash as soon as
practicable after such Capital Contribution is made consistent with the
Partnership Agreement, and (ii) the Borrower exercises, consistent with the
Partnership Agreement, its registration rights under the Share Issuance and
Registration Rights Agreement entered into between the Borrower and the Parent
in substantially the form of Exhibit D to the Partnership Agreement.
SECTION 5.02. Negative Covenants. The Borrower
covenants and agrees with the Agent and the Banks that so long as any Note
shall remain unpaid or any Bank shall have any Commitment hereunder, the
Borrower will not at any time, without the written consent of the Majority
Banks (or all Banks in the case of Section 5.02(p)(ii)):
(a) Liens. Create, assume, incur or suffer to exist any
Lien on or in respect of any asset or other property, whether now owned or
hereafter acquired, of the Borrower, except that the Borrower may create,
incur, assume or suffer to exist Permitted Liens.
(b) Asset Coverage Ratios. Permit, as of the last day of
any fiscal quarter of the Borrower after December 31, 1997, the Primary Capital
and Asset Coverage Ratio or the Total Capital and Asset Coverage Ratio to be
less than the respective amounts set forth in the following table for the
amount of Unfunded Partners Capital as of the last day of such fiscal quarter:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Unfunded Partners
Capital
----------------------------------------------------------------------------
> $750 < or = to $750 million < or = to $500 million < or = to $250
million and > $500 million and >$250 million million
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Capital and 1.30 1.45 1.65 1.80
Asset Coverage
Ratio
- -------------------------------------------------------------------------------------------------------
Primary Capital 1.20 1.35 1.50 1.65
and Asset
Coverage Ratio
- -------------------------------------------------------------------------------------------------------
</TABLE>
(c) Recomputation of Asset Coverage Ratios. If any Recomputation
Event occurs, permit, as of the last day of the fiscal quarter most recently
ended prior to the occurrence of such Recomputation Event, the Primary Capital
and Asset Coverage Ratio or the Total Capital and Asset Coverage Ratio to be
less than the respective amounts set forth in the table set forth in Section
5.02(b) for the amount of Unfunded Partners Capital as of the last day of such
fiscal quarter (except that, for purposes of this Section 5.02(c), the Unfunded
Partners Capital shall be reduced by (i) the amount of the commitment of each
Non-Enron Limited Partner to contribute capital and (ii) if such Recomputation
Event results from any circumstance referred to in clause (i),
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<PAGE> 53
(iii), (iv) or (vi) of Section 10.03(a) of the Partnership Agreement, the
amount of the commitments of ECM II and the Enron Limited Partner to contribute
capital, such reductions to be applicable both to such table and to the
computation of the Primary Capital and Asset Coverage Ratio and the Total
Capital and Asset Coverage Ratio).
(d) Debt. Permit Funded Debt (other than advances under
the GP Advance Facility and other advances by ECM II to the Borrower not
exceeding $75,000,000) to exceed $1,000,000,000 at any time or permit Senior
Debt (other than Advances, advances under the GP Advance Facility and other
advances by ECM II to the Borrower not exceeding $75,000,000) to exceed
$100,000,000 at any time.
(e) Adjusted Cash Flow to Cash Interest Expense. Permit
the Adjusted Cash Flow to Interest Ratio for any Interest Ratio Period to be
less than 1.50 to 1.00.
(f) Disposition of Assets. Lease, sell, transfer or
otherwise dispose of, voluntarily or involuntarily, or permit any Subsidiary to
lease, sell, transfer or otherwise dispose of, voluntarily or involuntarily,
any of its assets, unless after giving effect thereto (i) all applicable laws
and regulations would be fully complied with and (ii) in the case of assets
other than margin stock (as defined in Regulation U), the Borrower would be in
compliance with this Agreement.
(g) Mergers, Etc. Merge or consolidate with or into any
Person, except that any Person may be merged into the Borrower (i) if the
surviving Person is the Borrower, and (ii) if immediately after giving effect
to such proposed transaction, no Event of Termination, Event of Default,
Suspension Event or event which, with the giving of notice or the lapse of
time, or both, would constitute an Event of Default would exist or result.
(h) Compliance with ERISA. (i) Terminate, or permit any
ERISA Affiliate to terminate, any Plan so as to result in any liability in
excess of $10,000,000 of the Borrower or any ERISA Affiliate to the PBGC, or
(ii) permit circumstances which give rise to a Termination Event described in
clause (ii), (iv) or (v) of the definition of Termination Event with respect to
a Plan so as to result in any liability in excess of $10,000,000 of the
Borrower or any ERISA Affiliate to the PBGC.
(i) Use of Proceeds. Use the proceeds of any Advance for
any purpose other than to make Qualified Investments or for working capital, or
use, or (in the case of clauses (i), (iii) and (iv) of this Section 5.02(i))
permit any Subsidiary to use, any such proceeds (i) in any manner that violates
or results in any violation of any law or regulation, (ii) to carry any margin
stock (as defined in Regulation U) in violation of any applicable law or
regulation or to purchase any such margin stock or to extend credit to others
for either such purpose, (iii) to directly or indirectly effect a disposition
of any interest in the Borrower, or (iv) to finance or refinance any direct or
indirect purchase, redemption or other acquisition or retirement of any
interest in the Borrower or any of the Partners.
-49-
<PAGE> 54
(j) Other Funded Debt. Permit
(a) any Debt of the Borrower (other than (1) the
Advances, (2) Debt described in clause (iii), (v), (vi), (viii) or (ix) of the
definition herein of "Debt", and (3) advances owed to ECM II by the Borrower in
an aggregate principal amount not to exceed $100,000,000 outstanding at any
time) (i) to have any principal payment scheduled to be due on or before June
30, 2002, (ii) to have any financial covenant that is more restrictive than the
corresponding financial covenant herein, (iii) to have any financial covenant
as to which there is not a corresponding financial covenant herein, (iv) to
have any other material covenant or default that is more restrictive in any
material respect than the corresponding covenant or default herein or (v) to
have any other material covenant or default as to which there is not a
corresponding covenant or default herein, provided that a more restrictive or
additional covenant may be included in such Debt if such more restrictive or
additional covenant is approved by the Majority Banks (which approval will not
be unreasonably withheld by any Bank) and is added to this Agreement, or
(b) any Guaranty that constitutes Debt of the
Borrower pursuant to clause (ix) of the definition herein of "Debt" (other than
(A) any Guaranty of Debt of another Person described in clause (iii), (v), (vi)
or (viii) of the definition herein of "Debt" and (B) any Guaranty by way of a
letter of credit) (i) to require any payment (other than payment by the
Borrower of interest and fees) on or before June 30, 2002, (ii) to have any
financial covenant of the Borrower that is more restrictive than the
corresponding financial covenant herein, (iii) to have any financial covenant
of the Borrower as to which there is not a corresponding financial covenant
herein, (iv) to have any other material covenant or default applicable to the
Borrower that is more restrictive in any material respect than the
corresponding covenant or default herein or (v) to have any other material
covenant or default applicable to the Borrower as to which there is not a
corresponding covenant or default herein, provided that a more restrictive or
additional covenant may be included in such Guaranty if such more restrictive
or additional covenant is approved by the Majority Banks (which approval will
not be unreasonably withheld by any Bank) and is added to this Agreement.
(k) Restricted Payments. Directly or indirectly, (i)
declare or pay any dividend, or make any distribution or other return of
capital, of any kind or character (whether in cash, property or securities) in
respect of any partnership interest in the Borrower or to any Partner in its
capacity as a partner, except that the Borrower may make the Special
Distribution contemplated by Section 3.04(a)(iv)(B) of the Partnership
Agreement if (1) the Special Distribution is made promptly after admission of
the Investor Limited Partner to the Borrower and (2) immediately after giving
effect to the Special Distribution, no Event of Termination, Event of Default,
Suspension Event or event which, with the giving of notice or the lapse of
time, or both, would constitute an Event of Default would exist or result, or
(ii) purchase, redeem or otherwise acquire or retire for value, or permit any
Subsidiary of the Borrower to purchase, redeem or otherwise acquire or retire
for value, directly or indirectly, (a) any Intangible Interest in the Borrower,
(b) any Intangible Interest in ECM II, the Enron Limited Partner, Enron Capital
IV or Enron Capital II or (c) any options, warrants or rights to purchase or
acquire any Intangible Interest referred to in clause (a) or (b) of this
sentence; it being agreed that "dividend" or "distribution" as used herein does
not include payment of fees or the reimbursement of costs and expenses pursuant
to the Partnership Agreement.
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<PAGE> 55
(l) Payments on Funded Debt. Make or agree to make any
payment or other distribution in connection with, or purchase, redeem or
otherwise acquire or retire for value or agree to do so, or convert or agree to
convert, in whole or in part, any Funded Debt (other than the Advances) prior
to the stated maturity thereof if any Event of Default or event that, with the
giving of notice or lapse of time or both, would constitute an Event of Default
exists or would result therefrom, or permit any Non-Excluded Subsidiary to do
any of the foregoing, in whole or in part.
(m) Preferred Stock. Issue or permit to be outstanding
any Restricted Preferred Stock of the Borrower.
(n) Secured Obligations. Have any Securities Repurchase
Obligations or enter into any Sale Leaseback Transaction or capital lease as
lessee, provided that the Borrower may enter into capital leases if the
aggregate obligations (for all such capital leases) that, in accordance with
GAAP, have been or are required to be capitalized on the books of the Borrower
do not exceed $20,000,000 at any time.
(o) Swap Transaction. Enter into, or permit any
Subsidiary to enter into, any Swap Transaction that at the time entered into
could reasonably be expected to have a Material Adverse Effect.
(p) Investments. Make or permit any Subsidiary to make,
(i) any investment that, at the date of this Agreement, is not in the normal
course of business of the Parent, its Subsidiaries or its affiliates, or (ii)
any investment in a Person if the board of directors, general partner or other
governing body of such Person has disapproved such investment and such
disapproval has not been revoked prior to such investment.
(q) Certain Assets. (i) Make any direct investment in
any Nuclear Asset or any Majority Nuclear Entity or (ii) own, directly, any
investment in (a) any Nuclear Asset or (b) any Majority Nuclear Entity;
provided that if the Borrower would otherwise violate clause (ii)(b) of this
Section 5.02(q) as a result of a change in the assets of a Person (other than
the Borrower or a Subsidiary of the Borrower) that results in a direct
investment of the Borrower becoming a Majority Nuclear Entity, such change
shall not cause a violation of such clause (ii)(b), if within six months of the
first date on which such direct investment becomes a Majority Nuclear Entity,
the Borrower disposes of its interest in such Majority Nuclear Entity or
disposes of the interest in the Person that causes the Borrower to own such
Majority Nuclear Entity.
(r) Investment Company. Be, or permit any of its
Subsidiaries to be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
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<PAGE> 56
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the
following events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay (i) any principal of
any Note when due and payable or (ii) any interest on any Note within five
Business Days after such interest becomes due and payable or (iii) any fee set
forth in Section 2.03 within 15 Business Days after such fee becomes due and
payable; or
(b) Any representation or warranty made by the Borrower,
ECM II, Enron Capital II or the Parent (or any of their respective officers or
representatives) (including representations and warranties deemed made pursuant
to Section 3.02) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made or deemed made and such
materiality is continuing; or
(c) The Borrower (i) shall fail to perform or observe any
term, covenant or agreement contained herein (other than those covered by
Section 6.01(a) or clause (ii) or (iii) of this Section 6.01(c)) if such
failure shall remain unremedied for 30 days after the earlier of the date
notice thereof shall have been given to the Borrower by the Agent at the
request of any Bank or the earliest date any officer of Enron Capital II has
knowledge of such failure, or (ii) shall fail to perform or observe any term,
covenant or agreement contained in Section 5.01(a)(xiv) if such failure shall
remain unremedied for ten days after the earlier of the date notice thereof
shall have been given to the Borrower by the Agent at the request of any Bank
or the earliest date any officer of Enron Capital II has knowledge of such
failure, or (iii) shall fail to perform or observe any term, covenant or
agreement contained in Section 5.01(a)(v) or Section 5.02 (other than Section
5.02(a) and Section 5.02(q)(ii)(b) to the extent the failure to perform or
observe such Section 5.02(q)(ii)(b) results from actions by a Subsidiary of the
Borrower); or
(d) The Borrower shall fail to pay any principal of or
premium or interest on any Funded Debt which is outstanding in the principal
amount of at least $20,000,000 in the aggregate, when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), and such failure shall continue after the applicable
grace or cure period, if any, specified in the agreement or instrument relating
to such Funded Debt; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Funded Debt and shall
continue after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such event or condition is to accelerate, or
permit (assuming the giving of notice or lapse of time or both) the
acceleration of, the maturity of such Funded Debt; or any such Funded Debt
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment or as a result of the giving of
notice of a voluntary prepayment), prior to the stated maturity thereof; or
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<PAGE> 57
(e) The Borrower shall generally not pay its debts as
such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Borrower seeking to
adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee or other similar official for
it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), shall remain
undismissed or unstayed for a period of 60 days; or the Borrower shall take any
action to authorize any of the actions set forth above in this subsection (e);
or
(f) Any judgment, decree or order for the payment of
money in excess of $20,000,000 shall be rendered against the Borrower or any of
its Subsidiaries and remains unsatisfied and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment, decree or order
or (ii) there shall be any period of 60 consecutive days during which a stay of
enforcement of such judgment, decree or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(g) Any Termination Event as defined in clause (ii), (iv)
or (v) of the definition thereof with respect to a Plan shall have occurred
and, 30 days after notice thereof shall have been given to the Borrower by the
Agent, (i) such Termination Event shall still exist and (ii) the sum
(determined as of the date of occurrence of such Termination Event) of the
liabilities to the PBGC resulting from all such Termination Events is equal to
or greater than $10,000,000; or
(h) The Borrower or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount which, when aggregated with
all other amounts required to be paid to Multiemployer Plans in connection with
Withdrawal Liabilities (determined as of the date of such notification),
exceeds $10,000,000; or
(i) The Borrower or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
in reorganization or is being terminated, within the meaning of Title IV of
ERISA, if as a result of such reorganization or termination the aggregate
annual contributions of the Borrower and its ERISA Affiliates to all
Multiemployer Plans which are then in reorganization or being terminated have
been or will be increased over the amounts contributed to such Multiemployer
Plans for the respective plan years which include December 31, 1997 by an
amount exceeding $10,000,000 in the aggregate; or
(j) ECT, ECM II, the Enron Limited Partner, Enron Capital
IV or Enron Capital II ceases to be a Subsidiary of the Parent; or
(k) For any reason ECM II ceases to be the sole general
partner of the Borrower or Enron Capital II ceases to be the sole general
partner of ECM II or Enron Capital IV ceases to be the sole general
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<PAGE> 58
partner of the Enron Limited Partner or the Enron Limited Partner ceases to be
the "Enron Limited Partner" as defined in the Partnership Agreement; or
(l) Any Parent Performance Agreement Default occurs; or
(m) Any General Partner Undertaking Default occurs; or
(n) Any amendment, waiver or other modification of, or
unenforceability of, the ECM II Agreement, the Enron Limited Partner Agreement
or the Partnership Agreement (1) that has an adverse effect on the timely
performance of the obligations to the Banks under any of the Loan Documents or
(2) that could reasonably be expected to have a Material Adverse Effect;
then, and in any such event, the Agent (i) shall at the request, or may with
the consent, of the Majority Banks, by notice to the Borrower, declare the
obligation of each Bank to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Majority Banks, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest, notice of intent to accelerate or further notice of any kind,
all of which are hereby expressly waived by the Borrower; provided that in the
event of an actual or deemed entry of an order for relief with respect to the
Borrower under the Bankruptcy Code (A) the obligation of each Bank to make its
Advances shall automatically be terminated and (B) the Notes, all such interest
and all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
SECTION 6.02. Termination. If any of the following
events ("Events of Termination") shall occur and be continuing:
(a) Any Parent Credit Agreement Default occurs; or
(b) Any Liquidation Event occurs; or
(c) Any dissolution of the Borrower occurs by operation
of law or otherwise, provided that such dissolution shall cease to be an Event
of Termination if the Borrower is reconstituted within 60 days of such
dissolution; or
(d) Any party to the ECM II Agreement, the Enron Limited
Partner Agreement or the Partnership Agreement shall make a written claim, on a
reasonable basis, that any such document to which it is a party is not
enforceable against it, or the ECM II Agreement, the Enron Limited Partner
Agreement or the Partnership Agreement is not in full force and effect; or
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(e) (i) Any notice or other communication from any
Partner regarding a potential disposition of an interest in the Borrower is
given or sent pursuant to the Partnership Agreement (other than notices and
communications regarding the admission of the Investor Limited Partner to the
Borrower in accordance with Section 3.04 of the Partnership Agreement) or (ii)
any notice or communication regarding any of the circumstances referred to in
Section 3.03(e), 4.02(f) or 8.04 of the Partnership Agreement is given or sent;
or
(f) Any "Suspension Event" as defined in the Partnership
Agreement continues for four months or longer;
then, and in any such event, the Agent shall at the request, or may with the
consent, of the Majority Banks, by notice to the Borrower, declare the
obligation of each Bank to make Advances to be terminated, whereupon the same
shall forthwith terminate.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Bank
hereby appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Loan Documents as are delegated to
the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
the Loan Documents (including enforcement or collection of the Notes), the
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Majority Banks, and such instructions shall be binding upon all Banks and all
holders of Notes; provided that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to
any Loan Document or applicable law and shall not be required to initiate or
conduct any litigation or other proceedings. The Agent agrees to give to each
Bank (i) prompt notice of each notice given to it by the Borrower pursuant to
the terms of this Agreement and (ii) a copy of each item received by the Agent
pursuant to clause (xiii) or (xv) of Section 5.01(a).
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent
nor any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
any Loan Document or any other document or writing, except for its or their own
gross negligence or willful misconduct. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have, by reason of
any Loan Document or any other document or writing, a fiduciary relationship in
respect of any Bank or the holder of any Note; and nothing in any Loan Document
or any other document or writing, expressed or implied, is intended or shall be
so construed as to impose upon the Agent any obligations in respect of any Loan
Document or any other document or writing except as expressly set forth herein.
Without limitation of the generality of the foregoing, the Agent: (i) may treat
the payee of any Note
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as the holder thereof until the Agent receives, and acknowledges receipt of,
written notice of the assignment or transfer thereof signed by such payee and
in form satisfactory to the Agent; (ii) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with any Loan Document or any other
document or writing; (iv) shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions
of any Loan Document or any other document or writing or to inspect the
property (including the books and records) of the Borrower or any other Person;
(v) shall not be responsible to any Bank for the due execution, legality,
validity, binding effect, enforceability, genuineness, effectiveness,
collectibility, priority, sufficiency or value of any Loan Document or any
other document or writing; and (vi) shall incur no liability under or in
respect of any Loan Document or any other document or writing by acting upon
any notice, consent, certificate or other instrument or writing (which may be
by telecopier, telegram, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties.
SECTION 7.03. Agent and Its Affiliates. With respect to
its Commitment, the Advances made by it and the Note issued to it, each Bank
which is also the Agent shall have the same rights and powers under the Loan
Documents as any other Bank and may exercise the same as though it were not the
Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly
indicated, include any Bank serving as the Agent in its individual capacity.
Any Person serving as the Agent and its affiliates may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage in any
kind of business with, the Parent, any Partner, the Borrower, any of their
respective Subsidiaries and any Person who may do business with or own
securities of the Parent, any Partner, the Borrower or any such Subsidiary, all
as if the Person serving as the Agent were not the Agent and without any duty
to account therefor to the Banks.
SECTION 7.04. Bank Credit Decision. Each Bank
acknowledges that it has, independently and without reliance upon the Agent or
any other Bank and based on the financial statements referred to in Section
4.01(i) and such other documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without reliance upon
the Agent or any other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement and the other Loan
Documents. The Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to provide any Bank or the holder of any
Note with any credit or other information with respect thereto, whether coming
into its possession before the making of the Advances or at any time or times
thereafter. The Agent shall not be responsible to any Bank or the holder of
any Note for any recitals, statements, information, representations or
warranties herein or in any other document or other writing or the financial
condition of the Borrower or any other Person or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, any other Loan Document or any
other document or writing, or the financial condition of the Borrower or any
other Person or the existence or possible existence of any Event of
Termination, Suspension Event, Event of Default
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or event of which would constitute an Event of Termination, Suspension Event or
Event of Default but for the requirement that notice be given or time elapse or
both.
SECTION 7.05. Certain Rights of the Agent. If the Agent
shall request instructions from the Majority Banks with respect to any act or
action (including failure to act) in connection with this Agreement or any
other Loan Document or any other document or writing, the Agent shall be
entitled to refrain from such act or action unless and until the Agent shall
have received instructions from Majority Banks; and it shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, no Bank or the holder of any Note shall have any right of action
whatsoever against the Agent as a result of its acting or refraining from
acting hereunder or under any other Loan Document or any other document or
writing in accordance with the instructions of the Majority Banks or all of the
Banks, as the case may be. Furthermore, except for action expressly required
of the Agent hereunder, the Agent shall in all cases be fully justified in
failing or refusing to act hereunder unless it shall be specifically
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action.
SECTION 7.06. Holders. Any request, authority or
consent of any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee, assignee or indorsee, as the case may be,
of such Note or of any Note or Notes issued in exchange therefor.
SECTION 7.07. Indemnification. THE BANKS AGREE TO
INDEMNIFY THE AGENT AND THE DOCUMENTATION AGENT (TO THE EXTENT NOT REIMBURSED
BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE
NOTES THEN HELD BY EACH OF THEM (OR IF NO PRINCIPAL OF THE NOTES IS AT THE TIME
OUTSTANDING OR IF ANY PRINCIPAL OF THE NOTES IS HELD BY ANY PERSON THAT IS NOT
A BANK, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS THEN
EXISTING, OR, IF NO SUCH PRINCIPAL AMOUNTS ARE THEN OUTSTANDING (OR IF ANY
PRINCIPAL OF THE NOTES IS HELD BY ANY PERSON THAT IS NOT A BANK) AND NO
COMMITMENTS ARE THEN EXISTING, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF
THE COMMITMENTS EXISTING IMMEDIATELY PRIOR TO THE TERMINATION THEREOF), FROM
AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR
NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE
AGENT OR THE DOCUMENTATION AGENT IN ANY WAY RELATING TO OR ARISING OUT OF ANY
OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY THE AGENT OR THE
DOCUMENTATION AGENT (IN THEIR RESPECTIVE CAPACITY AS AGENT OR DOCUMENTATION
AGENT, AS THE CASE MAY BE) UNDER ANY OF THE LOAN DOCUMENTS (INCLUDING ANY SUCH
LIABILITY, OBLIGATION, LOSS, DAMAGE, PENALTY, ACTION, JUDGMENT, SUIT, COST,
EXPENSE OR DISBURSEMENT RESULTING FROM THE NEGLIGENCE (OTHER THAN GROSS
NEGLIGENCE) OF THE AGENT OR THE DOCUMENTATION AGENT, AS THE CASE MAY BE),
PROVIDED THAT NO BANK SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
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JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT OR THE DOCUMENTATION AGENT, AS
THE CASE MAY BE, SEEKING INDEMNITY UNDER THIS SECTION 7.07. Without limitation
of the foregoing, each Bank agrees to reimburse the Agent and the Documentation
Agent promptly upon demand for such Bank's ratable share of any reasonable
out-of-pocket expenses (including reasonable counsel fees) incurred by the
Agent or the Documentation Agent, as the case may be, in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, the Loan
Documents or any related document or writing, or any of them, to the extent
that the Agent or the Documentation Agent, as the case may be, is not
reimbursed for such expenses by the Borrower.
SECTION 7.08. Resignation by the Agent. (a) The Agent
may resign from the performance of all its functions and duties hereunder and
under the other Loan Documents at any time by giving 15 Business Days' prior
written notice to the Borrower and the Banks. Such resignation shall take
effect upon the appointment of a successor Agent pursuant to clauses (b) and
(c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Majority
Banks shall have the right to appoint a successor Agent which shall be a
commercial bank or trust company reasonably acceptable to the Borrower.
(c) If a successor to a resigning Agent shall not have
been so appointed within such 15 Business Day period, the resigning Agent shall
have the right to then appoint a successor Agent reasonably acceptable to the
Borrower who shall serve as Agent until such time, if any, as the Majority
Banks appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to
clause (b) or (c) above and shall have accepted such appointment by the 20th
Business Day after the date such notice of resignation was given by the
resigning Agent, the resigning Agent's resignation shall become effective and
the Banks shall thereafter perform all the duties of the resigning Agent
hereunder and under any other Loan Document until such time, if any, as the
Majority Banks appoint a successor Agent as provided above.
SECTION 7.09. Liability of Co-Arrangers, Co-Agents and
Documentation Agent. Neither of the Co- Arrangers nor any of the Co-Agents nor
the Documentation Agent, in its respective capacity as Co-Arranger, Co-Agent or
the Documentation Agent hereunder, shall have any duty or liability hereunder.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver
of any provision of any Loan Document (other than the General Partner
Undertaking and the Parent Performance Agreement), nor consent to any departure
by the Borrower therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Majority Banks, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided that no amendment, waiver or consent shall,
unless in writing and signed by all the Banks, do any of the following: (a)
waive any of the conditions specified in Section 3.01, (b) increase the
Commitment of any Bank or subject any Bank to any additional obligation, except
as permitted in Section 2.16, 2.18 or 8.06, or forgive or reduce the principal
of, or interest on, the Notes or any fees or other amounts payable hereunder,
(c) postpone any date fixed for any payment of principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, (d) take any action
which requires the signing of all the Banks pursuant to the terms of any Loan
Document, (e) change the percentage of the Commitments or the percentage of the
aggregate unpaid principal amount of the Notes which shall be required for the
Banks or any of them to take any action under any Loan Document, (f) amend this
Section 8.01 or (g) amend Section 6.01(n) or clause (ii) of Section 5.02(p);
and provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Banks required above to take
such action, affect the rights or duties of the Agent (in such capacity, but
not as a Bank) under any Loan Document; and provided, further, that no
amendment, waiver or consent shall, unless in writing and signed by the
Co-Arrangers in addition to the Banks required above to take such action,
affect the rights or duties, if any, of either Co-Arranger under any Loan
Document; and provided, further, that no amendment, waiver or consent shall,
unless in writing and signed by the Documentation Agent in addition to the
Banks required above to take such action, affect the rights or duties, if any,
of the Documentation Agent (in such capacity, but not as a Bank) under any Loan
Document. Any amendment or waiver of, or consent to departure from, the
General Partner Undertaking or the Parent Performance Agreement shall be
effected only in accordance with the respective terms thereof.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier
communication) and mailed, telecopied or delivered, if to the Borrower, to ECM
II at its address or telecopier number set forth below:
Enron Capital Management II Limited Partnership
c/o Enron Capital II Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Shirley Hudler
Telecopier No.: (713) 646-8008
and
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Donna Lowry
Telecopier No.: (713) 646-4039
if to any Bank, at its Domestic Lending Office; if to the Agent, at its address
or telecopier number set forth below:
The Chase Manhattan Bank
Loan & Agency Services
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Telecopier No.: (212) 552-5777
Attention: Lisa Pucciarelli
with a copy to:
The Chase Manhattan Bank
707 Travis, 5th Floor North
Houston, Texas 77002
Telecopier No.: (713) 216-4117
Attention: Sandra Aultman
Vice President
or, as to the Borrower or the Agent, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Agent. All such notices and
communications shall be effective upon receipt by the addressee; provided that
telecopied notices received by any party after its normal business hours (or on
a day other than a Business Day) shall be effective on the next Business Day.
SECTION 8.03. No Waiver; Remedies. No failure on the
part of any Bank or the Agent to exercise, and no delay in exercising, any
right under any Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
the Loan Documents are cumulative and not exclusive of any remedies provided by
law.
SECTION 8.04. Costs, Expenses and Taxes.
(a) The Borrower agrees to pay on demand, (i) all
reasonable costs and expenses of each of the Agent, the Documentation Agent and
the Co-Arrangers incurred in connection with the transactions contemplated
hereby or incurred prior to the date hereof in connection with the syndication
of the Commitments, including (1) the review, preparation, execution, delivery,
modification and amendment of the Loan Documents and the other documents to be
delivered under the Loan Documents, (2) the travel expenses
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of each of the Agent and the Documentation Agent prior to the date hereof, (3)
the reasonable fees and out-of-pocket expenses of one law firm as counsel for
the Agent with respect to preparation, execution and delivery of the Loan
Documents and the satisfaction of the matters referred to in Section 3.01, and
(4) the reasonable fees and out-of-pocket expenses of one law firm as counsel
for the Agent that are reasonably and directly related to the syndication of
the Commitments prior to the date hereof, and (ii) all reasonable legal and
other out-of-pocket costs and expenses, if any, of each of the Agent, the
Co-Arrangers, the Documentation Agent and each Bank incurred in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of the Loan Documents and the other documents to be delivered under the Loan
Documents or incurred in connection with any workout, restructuring or
bankruptcy.
(b) If for any reason any payment or purchase of
principal of, or Conversion of, any LIBOR Advance is made other than on the
last day of an Interest Period relating to such Advance, the Borrower shall,
upon demand by any Bank (with a copy of such demand to the Agent), pay to the
Agent for the account of such Bank any amounts required to compensate such Bank
for any additional losses (excluding loss of anticipated profits), costs or
expenses which it may reasonably incur as a result of such payment, purchase or
Conversion, including any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Bank to fund or maintain such Advance.
(c) THE BORROWER AGREES, TO THE FULLEST EXTENT PERMITTED
BY LAW, TO INDEMNIFY AND HOLD HARMLESS THE AGENT, THE DOCUMENTATION AGENT, EACH
CO-ARRANGER AND EACH BANK AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES (BUT
EXCLUDING LOSS OF ANTICIPATED PROFITS), LIABILITIES AND EXPENSES (INCLUDING
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL) FOR WHICH ANY OF THEM MAY BECOME
LIABLE OR WHICH MAY BE INCURRED BY OR ASSERTED AGAINST THE AGENT, THE
DOCUMENTATION AGENT, SUCH CO-ARRANGER OR SUCH BANK OR ANY SUCH DIRECTOR,
OFFICER, EMPLOYEE OR AGENT (OTHER THAN THOSE ASSERTED BY THE AGENT, THE
DOCUMENTATION AGENT, A CO-ARRANGER OR ANOTHER BANK OR ANY OF THEIR RESPECTIVE
SUCCESSORS OR ASSIGNS), IN EACH CASE IN CONNECTION WITH OR ARISING OUT OF OR BY
REASON OF (I) BREACH OF ANY LOAN DOCUMENT, (II) VIOLATION BY THE BORROWER OR
ANY SUBSIDIARY OF THE BORROWER OF ANY ENVIRONMENTAL PROTECTION LAW OR ANY OTHER
LAW, RULE, REGULATION OR ORDER, (III) SUCH BANK'S, SUCH CO-ARRANGER'S, THE
DOCUMENTATION AGENT'S, OR THE AGENT'S BEING DEEMED AN OPERATOR OF ANY ASSET OF
THE BORROWER OR ANY SUCH SUBSIDIARY BY A COURT OR OTHER PERSON, TO THE EXTENT
SUCH LOSSES (EXCLUDING LOSS OF ANTICIPATED PROFITS), LIABILITIES, CLAIMS,
EXPENSES OR DAMAGES ARISE OUT OF OR RESULT FROM ANY HAZARDOUS MATERIALS LOCATED
IN, ON OR UNDER SUCH ASSET, OR (IV) ANY INVESTIGATION, LITIGATION, OR
PROCEEDING, WHETHER OR NOT THE AGENT, THE DOCUMENTATION AGENT, SUCH CO-ARRANGER
OR SUCH BANK IS A PARTY THERETO, RELATED TO OR ARISING OUT OF OR IN CONNECTION
WITH THE BORROWER, ECT, ECM II, ENRON CAPITAL II, THE PARENT, THE ENRON LIMITED
PARTNER OR ANY TRANSACTION IN WHICH ANY PROCEEDS OF ANY ADVANCE
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ARE APPLIED, INCLUDING, IN EACH OF THE FOREGOING CASES, ANY SUCH CLAIM, DAMAGE,
LOSS (EXCLUDING LOSS OF ANTICIPATED PROFITS), LIABILITY OR EXPENSE RESULTING
FROM THE NEGLIGENCE OF THE AGENT, THE DOCUMENTATION AGENT, SUCH CO-ARRANGER OR
SUCH BANK, UNLESS SUCH CLAIM, DAMAGE, LOSS, LIABILITY OR EXPENSE IS FOUND TO
HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNIFIED PARTY.
(d) Without prejudice to the survival of any other
agreement of the Borrower or the Banks hereunder, all obligations of the
Borrower under Article II or this Section 8.04 shall survive the termination of
the Commitments and this Agreement and the payment in full of all amounts
hereunder and under the Notes.
SECTION 8.05. Right of Set-Off. Upon (i) the occurrence
and during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Agent to declare the Notes due and payable pursuant to the provisions of
Section 6.01, each Bank is hereby authorized at any time and from time to time,
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Bank to or for the credit
or the account of the Borrower against any and all of the obligations of the
Borrower now or hereafter existing under this Agreement and the Note held by
such Bank, irrespective of whether or not such Bank shall have made any demand
under this Agreement or such Note and although such obligations may be
unmatured. Each Bank agrees promptly to notify the Borrower after any such
set-off and application made by such Bank, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Bank under this Section are in addition to other rights and
remedies (including other rights of set-off) which such Bank may have.
SECTION 8.06. Binding Effect; Assignments;
Participations.
(a) This Agreement shall become effective when it shall
have been executed by the Borrower and the Agent and when the Agent shall have,
as to each Bank, either received a copy of a signature page hereof executed by
such Bank or been notified by such Bank that such Bank has executed it and
thereafter shall be binding upon and inure to the benefit of and be enforceable
by the Borrower, the Agent, the Documentation Agent and each Bank and their
respective successors and permitted assigns, except that the Borrower shall not
have the right to assign its rights hereunder or any interest herein without
the prior written consent of the Banks. Each Bank may assign to one or more
banks or other entities all or any part of, or may grant participations to one
or more banks or other entities in accordance with applicable law in or to all
or any part of, the Advances owing to such Bank and the Note held by such Bank
and any such Bank's continuing obligations with respect thereto, and to the
extent of any such assignment or participation (unless otherwise stated
therein) the assignee or purchaser of such assignment or participation shall,
to the fullest extent permitted by law, have the same rights to payment
hereunder and under such Note as it would have if it were such Bank hereunder,
provided that, except as to assignments made pursuant to Section 8.06(b), (x)
such Bank's obligations under this Agreement, including its Commitment to the
Borrower hereunder, shall remain
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unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note for all purposes
under this Agreement, and the Borrower, the other Banks and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement; (y) no assignee or
participant pursuant to this Section 8.06(a) shall be entitled to receive any
greater payment pursuant to Sections 2.06, 2.10 and 2.13 than such Bank would
have been entitled to receive with respect to the rights assigned except as a
result of circumstances arising after the date of such assignment or
participation to the extent that such circumstances affect other Banks and
participants generally; and (z) no Bank shall assign or grant a participation
that conveys to the assignee or participant the right to vote or consent under
this Agreement, other than the right to vote upon or consent to (i) any
increase in the amount of such Bank's Commitment; (ii) any reduction of the
principal amount of, or interest to be paid on, such Bank's Advance or Advances
or Note; (iii) any reduction of the commitment fee; or (iv) any postponement of
the due date in respect of any amounts owed to such Bank under any Loan
Document.
(b) Notwithstanding anything to the contrary in Section
8.06(a), in accordance with applicable law (x) any Bank may assign all or a
portion of its Commitment and its rights and obligations hereunder to one or
more Banks party to this Agreement immediately prior to such assignment
(provided such assignment does not result in the remaining Commitment of the
assigning Bank being less than $10,000,000, unless all of the Commitment of the
assigning Bank is being assigned), and (y) any Bank may assign all or a
portion, in an amount of at least $5,000,000, of its Commitment and its rights
and obligations hereunder to an Eligible Additional Lender other than a Bank
party to this Agreement immediately prior to such assignment (provided such
assignment does not result in the remaining Commitment of the assigning Bank
being less than $10,000,000, unless all of the Commitment of the assigning Bank
is being assigned). Each of the assignees pursuant to clause (y) above shall
become a party to this Agreement (as a Bank) by executing and delivering to the
Agent an Assignment executed by the assigning Bank and specifying the Domestic
Lending Office and the Eurodollar Lending Office of such Eligible Additional
Lender. In the case of each such assignment pursuant to this Section 8.06(b),
(i) at such time the signature pages to this Agreement shall be deemed to be
modified to reflect the Commitments of such assignee and of the assigning Bank,
(ii) the Borrower shall issue new Notes to such assignee and to the assigning
Bank to reflect the revised Commitments and to any such assignee pursuant to
clause (y) above a Federal Reserve Form U-1 (or Form G-3, if such assignee is a
nonbank lender) for such assignee (if a Federal Reserve Form U-1 or Form G-3
has previously been required to be delivered pursuant to Section 3.02(a) or if
any Advance is secured directly or indirectly by margin stock), in each case
duly executed by the Borrower, and (iii) the Agent shall receive at the time of
such assignment, from the assigning Bank or assignee, a non-refundable
assignment fee of $2,500. Any assignment pursuant to this Section 8.06(b)
shall be made only pursuant to an Assignment executed by the assignee and the
assigning Bank and shall not be effective until the Agent receives, and
acknowledges receipt of, such Assignment. To the extent of any assignment
pursuant to this Section 8.06(b), the assigning Bank shall be relieved of its
obligations hereunder with respect to its assigned Commitment.
(c) In addition to the assignments and participations
permitted under subsections (a) and (b) of this Section 8.06, any Bank may
assign, as collateral or otherwise, any of its rights (including rights to
payments of principal of and/or interest on the Notes) under any Loan Document
to any Federal Reserve Bank
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without notice to or consent of the Borrower or the Agent; provided that no
such assignment under this subsection (c) shall release the assigning Bank from
its obligations hereunder.
SECTION 8.07. Governing Law; Entire Agreement. This
Agreement and the Notes shall be governed by, and construed in accordance with,
the laws of the State of New York. This Agreement, the Notes and the other
Loan Documents constitute the entire understanding among the parties hereto
with respect to the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto.
SECTION 8.08. Interest. It is the intention of the
parties hereto that the Agent and each Bank shall conform strictly to usury
laws applicable to it, if any. Accordingly, if the transactions with the Agent
or any Bank contemplated hereby would be usurious under applicable law, if any,
then, in that event, notwithstanding anything to the contrary in the Notes,
this Agreement or any other agreement entered into in connection with this
Agreement or the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under applicable law that is
contracted for, taken, reserved, charged or received by the Agent or such Bank,
as the case may be, under the Notes, this Agreement or under any other
agreement entered into in connection with this Agreement or the Notes shall
under no circumstances exceed the maximum amount allowed by such applicable law
and any excess shall be canceled automatically and, if theretofore paid, shall
at the option of the Agent or such Bank, as the case may be, be applied on the
principal amount of the obligations owed to the Agent or such Bank, as the case
may be, by the Borrower or refunded by the Agent or such Bank, as the case may
be, to the Borrower, and (ii) in the event that the maturity of any Note or
other obligation payable to the Agent or such Bank, as the case may be, is
accelerated or in the event of any permitted prepayment, then such
consideration that constitutes interest under law applicable to the Agent or
such Bank, as the case may be, may never include more than the maximum amount
allowed by such applicable law and excess interest, if any, to the Agent or
such Bank, as the case may be, provided for in this Agreement or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall, at the option of the Agent or such
Bank,
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as the case may be, be credited by the Agent or such Bank, as the case may be,
on the principal amount of the obligations owed to the Agent or such Bank, as
the case may be, by the Borrower or refunded by the Agent or such Bank, as the
case may be, to the Borrower.
SECTION 8.09. Confidentiality. Each Bank agrees that it
will use reasonable efforts not to disclose without the prior consent of the
Borrower (other than to its affiliates in the ordinary course of business in
connection with any Loan Document, the administration thereof or any
transaction contemplated by any Loan Document, employees, auditors or counsel
or to another Bank if the disclosing Bank or the disclosing Bank's holding or
parent company in its sole discretion determines that any such party should
have access to such information) (i) copies of the Partnership Agreement, this
Agreement or any other Loan Document, or any portion thereof, or (ii) any
information with respect to the Parent, ECM II, the Borrower or their
Subsidiaries which is furnished pursuant to this Agreement or any other Loan
Document, provided that any Bank may disclose any such information, document or
portion thereof (a) as has become generally available to the public, (b) as may
be required or appropriate in any report, statement or testimony submitted to
any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Bank or to the Federal Reserve Board or the FDIC or
similar organizations (whether in the United States or elsewhere), (c) as may
be required or appropriate in response to any summons or subpoena or in
connection with any litigation, (d) in order to comply with any law, order,
regulation or ruling applicable to such Bank, and (e) to the prospective
transferee in connection with any contemplated transfer of any of the Notes or
any interest therein by such Bank, provided that such prospective transferee
agrees in advance of the disclosure to comply with this Section.
SECTION 8.10. Execution in Counterparts. This Agreement
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
SECTION 8.11. Domicile of Loans. Subject to Sections
2.10(c) and 2.13(f), each Bank may transfer and carry its Advances at, to or
for the account of any office, subsidiary or affiliate of such Bank provided
that no Bank shall be relieved of its Commitment as a result thereof.
SECTION 8.12. Non-Recourse Nature of Liability.
(a) Subject to Section 8.12(b), (1) the obligations of
the Borrower hereunder and under the other Loan Documents to which the Borrower
is a party shall not constitute a debt or obligation of any Non-Recourse
Person; (2) none of the Non-Recourse Persons shall be liable for (i) any
obligation of the Borrower or amounts owed by the Borrower under the Loan
Documents or (ii) any certificate, instrument or other document delivered to
the Banks and the Agent pursuant to this Agreement, except as otherwise
provided in the General Partner Undertaking and the Parent Performance
Agreement; and (3) the Banks shall not seek a deficiency or personal judgment
against any Non-Recourse Person for payment of the indebtedness or other
obligations of the Borrower evidenced by the Loan Documents or performance of
the obligations of the
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<PAGE> 70
Borrower under the Loan Documents, and no property or assets of the
Non-Recourse Persons shall be sold, levied upon by the Banks or the Agent or
otherwise used by the Banks or the Agent to satisfy any judgment rendered
against the Borrower with respect to the Loan Documents.
(b) Notwithstanding the provisions of Section 8.12(a) to
the contrary, nothing contained in this Agreement shall be construed to (i)
impair or limit the rights of the Agent or the Banks (or the obligations of ECM
II or the Parent) arising under the General Partner Undertaking or the Parent
Performance Agreement; (ii) impair or limit any of the obligations of the
Borrower under the Loan Documents to which it is a party; (iii) impair or limit
the validity of the indebtedness or other obligations evidenced by this
Agreement or the other Loan Documents or prevent the taking of any action
permitted by law against the Borrower or the assets of the Borrower or the
proceeds of such assets; (iv) prevent the commencement of any action, suit or
proceeding against any Person (or prevent the service of papers upon any
Person) for the purposes of obtaining jurisdiction over the Borrower; (v) be
deemed to release any Person from liability for its fraudulent actions, gross
negligence or willful misconduct; (vi) be deemed to release ECM II or the
Parent from their respective liabilities and obligations under the General
Partner Undertaking and the Parent Performance Agreement; or (vii) be deemed to
release any Person from its respective liabilities and obligations under the
Partnership Agreement.
(c) "Non-Recourse Persons" shall mean, collectively, all
Persons other than the Borrower.
SECTION 8.13. SUBMISSION TO JURISDICTION. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER
LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN
NEW YORK CITY OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER
IRREVOCABLY SUBMITS ITSELF TO THE NONEXCLUSIVE JURISDICTION OF SUCH NEW YORK
STATE OR FEDERAL COURTS TO THE EXTENT PERMITTED BY LAW. THE BORROWER HEREBY
IRREVOCABLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE IN SUCH COURTS BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
SECTION 8.14. Successor to ECM II. In the event that
the Borrower, CalPERS and ECM II elect to replace ECM II as the sole general
partner of the Borrower with another Subsidiary of the Parent that is a
partnership organized under the laws of the United States or a state thereof
("New GP") and that has as its sole general partner a corporation organized
under the laws of the United States or a state thereof ("Substitute Corporate
Partner"), then (i) the Borrower shall, at least 20 days prior to such
replacement, deliver to the Agent (A) notice thereof specifying the date of
such replacement and (B) certified copies of the partnership agreement of the
New GP and of the charter and bylaws of the Substitute Corporate Partner,
evidence of existence, good standing, authority and incumbency satisfactory to
the Agent and a favorable opinion from counsel reasonably satisfactory to the
Agent as to the legality, validity, binding effect and enforceability of the
documents referred to in clauses (ii) and (iii) of this sentence and such other
matters as
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<PAGE> 71
may be requested by the Agent, (ii) on such specified replacement date, the New
GP shall succeed to and be substituted for ECM II with the same effect as if it
had been named herein and in the other Loan Documents as ECM II and shall
become liable and be bound for, and shall expressly assume, by a document in
form and substance satisfactory to the Agent executed and delivered to the
Agent by the New GP, the due and punctual performance and observance of each
and every covenant and condition of the Loan Documents on the part of ECM II to
be performed or observed, and (iii) on such specified replacement date, the
Substitute Corporate Partner shall succeed to and be substituted for Enron
Capital II with the same effect as if it had been named herein and in the other
Loan Documents as Enron Capital II and shall become liable and be bound for,
and shall expressly assume, by a document in form and substance satisfactory to
the Agent executed and delivered to the Agent by the Substitute Corporate
Partner, the due and punctual performance and observance of each and every
covenant and condition of the Loan Documents on the part of Enron Capital II to
be performed or observed. In the event that the Borrower, CalPERS and ECM II
elect to replace ECM II as the sole general partner of the Borrower with
another Subsidiary of the Parent that (a) is organized under the laws of the
United States or a state thereof but is not a partnership or (b) is a
partnership that has as its sole general partner an entity organized under the
laws of the United States or a state thereof that is not a corporation, the
Agent and the Banks will make reasonable efforts to cooperate with the Borrower
to allow such replacement on terms substantially similar to those set forth in
the preceding sentence hereof, but with such changes therein and in other
provisions of the Loan Documents as may be requested by the Agent or any Bank
with a view to preserving all of the benefits of the Loan Documents for the
Agent and the Banks and to assuring that such replacement is not otherwise
detrimental to the Agent or any Bank. Any replacement, substitution and
succession will be permitted under this Section 8.14 only if both (a) no Event
of Default then exists or would result therefrom and no event which with notice
or lapse of time or both would constitute an Event of Default then exists or
would result, and (b) the Parent has duly consented to such replacement,
substitution and succession and confirmed that the Parent Performance Agreement
remains in full force and effect in respect of the New GP (or other
replacement), that the Agent and the Banks retain the benefits thereof and that
the Parent's liability thereunder continues, such consent and confirmation to
be in a document satisfactory to the Agent.
SECTION 8.15. Successor to the Enron Limited Partner.
In the event that ECM II and the Enron Limited Partner elect to replace the
Enron Limited Partner as the "Enron Limited Partner" under the Partnership
Agreement with another Subsidiary of the Parent that is a partnership organized
under the laws of the United States or a state thereof ("New ELP") and that has
as its sole general partner a corporation organized under the laws of the
United States or a state thereof ("Substitute ELP Corporate Partner"), then (i)
the Borrower shall, at least 20 days prior to such replacement, deliver to the
Agent (A) notice thereof specifying the date of such replacement and (B)
certified copies of the partnership agreement of the New ELP and of the charter
and bylaws of the Substitute ELP Corporate Partner, evidence of existence,
good standing, authority and incumbency satisfactory to the Agent and a
favorable opinion from counsel reasonably satisfactory to the Agent as to the
legality, validity, binding effect and enforceability of the documents referred
to in clauses (ii) and (iii) of this sentence and such other matters as may be
requested by the Agent, (ii) on such specified replacement date, the New ELP
shall succeed to and be substituted for the Enron Limited Partner with the same
effect as if it had been named herein and in the other Loan Documents as the
Enron Limited
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<PAGE> 72
Partner and shall become liable and be bound for, and shall expressly assume,
by a document in form and substance satisfactory to the Agent executed and
delivered to the Agent by the New ELP, the due and punctual performance and
observance of each and every covenant and condition of the Loan Documents on
the part of the Enron Limited Partner to be performed or observed, and (iii) on
such specified replacement date, the Substitute ELP Corporate Partner shall
succeed to and be substituted for Enron Capital IV with the same effect as if
it had been named herein and in the other Loan Documents as Enron Capital IV
and shall become liable and be bound for, and shall expressly assume, by a
document in form and substance satisfactory to the Agent executed and delivered
to the Agent by the Substitute ELP Corporate Partner, the due and punctual
performance and observance of each and every covenant and condition of the Loan
Documents on the part of Enron Capital IV to be performed or observed. In the
event that ECM II and the Enron Limited Partner elect to replace the Enron
Limited Partner as the "Enron Limited Partner" under the Partnership Agreement
with another Subsidiary of the Parent that (a) is organized under the laws of
the United States or a state thereof but is not a partnership or (b) is a
partnership that has as its sole general partner an entity organized under the
laws of the United States or a state thereof that is not a corporation, the
Agent and the Banks will make reasonable efforts to cooperate with the Borrower
to allow such replacement on terms substantially similar to those set forth in
the preceding sentence hereof, but with such changes therein and in other
provisions of the Loan Documents as may be requested by the Agent or any Bank
with a view to preserving all of the benefits of the Loan Documents for the
Agent and the Banks and to assuring that such replacement is not otherwise
detrimental to the Agent or any Bank. Any replacement, substitution and
succession will be permitted under this Section 8.15 only if both (a) no Event
of Default then exists or would result therefrom and no event which with notice
or lapse of time or both would constitute an Event of Default then exists or
would result, and (b) the Parent has duly consented to such replacement,
substitution and succession and confirmed that the Parent Performance Agreement
remains in full force and effect in respect of the New ELP (or other
replacement), that the Agent and the Banks retain the benefits thereof and that
the Parent's liability thereunder continues, such consent and confirmation to
be in a document satisfactory to the Agent.
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<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective representatives thereunto duly
authorized, as of the date first above written.
BORROWER:
JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP
By: ENRON CAPITAL MANAGEMENT II LIMITED
PARTNERSHIP, its sole general partner
By: ENRON CAPITAL II CORP., its sole
general partner
By:
------------------------------------------
Jeremy M. Blachman, Vice President
AGENT:
THE CHASE MANHATTAN BANK,
as Agent
By:
-----------------------------------------------
Authorized Officer
DOCUMENTATION AGENT:
BARCLAYS BANK PLC, as Documentation Agent
By:
-----------------------------------------------
Authorized Officer
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<PAGE> 74
Commitment BANKS:
$28,500,000 CHASE BANK OF TEXAS, N.A.
By:
-----------------------------------
Authorized Officer
$28,500,000 BARCLAYS BANK PLC
By:
-----------------------------------
Authorized Officer
$26,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By:
-----------------------------------
Authorized Officer
$26,000,000 CREDIT SUISSE FIRST BOSTON
By:
-----------------------------------
Authorized Officer
$26,000,000 DRESDNER BANK, NEW YORK BRANCH
By:
-----------------------------------
Authorized Officer
By:
-----------------------------------
Authorized Officer
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<PAGE> 75
$26,000,000 THE FUJI BANK, LTD. HOUSTON AGENCY
By:
---------------------------------
Authorized Officer
$26,000,000 NATIONAL WESTMINSTER BANK PLC, NEW YORK
BRANCH
By:
---------------------------------
Authorized Officer
NATIONAL WESTMINSTER BANK PLC, NASSAU BRANCH
By:
---------------------------------
Authorized Officer
$26,000,000 NATIONSBANK, N.A.
By:
---------------------------------
Authorized Officer
$26,000,000 PARIBAS
By:
---------------------------------
Authorized Officer
By:
---------------------------------
Authorized Officer
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<PAGE> 76
$26,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
By:
---------------------------------
Authorized Officer
$22,000,000 BANKBOSTON, N.A.
By:
---------------------------------
Authorized Officer
$22,000,000 FLEET NATIONAL BANK
By:
---------------------------------
Authorized Officer
$22,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
NEW YORK BRANCH
By:
---------------------------------
Authorized Officer
$15,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
---------------------------------
Authorized Officer
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<PAGE> 77
$15,000,000 BBL INTERNATIONAL (U.K.) LIMITED
By:
-------------------------------
Authorized Officer
$15,000,000 CIBC INC.
By:
-------------------------------
Authorized Officer
$15,000,000 FIRST UNION NATIONAL BANK
By:
-------------------------------
Authorized Officer
$15,000,000 KREDIETBANK N.V., GRAND CAYMAN BRANCH
By:
-------------------------------
Authorized Officer
$12,000,000 NATEXIS BANQUE
By:
-------------------------------
Authorized Officer
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<PAGE> 78
$12,000,000 NORDDEUTSCHE LANDESBANK GIROZENTRALE
NEW YORK BRANCH AND/OR CAYMAN
ISLANDS BRANCH
By:
------------------------------------
Authorized Officer
By:
------------------------------------
Authorized Officer
$10,000,000 THE BANK OF NEW YORK
By:
------------------------------------
Authorized Officer
$10,000,000 CITIBANK, N.A.
By:
------------------------------------
Authorized Officer
$10,000,000 REPUBLIC NATIONAL BANK OF NEW YORK
By:
------------------------------------
Authorized Officer
By:
------------------------------------
Authorized Officer
$10,000,000 SOCIETE GENERALE SOUTHWEST AGENCY
By:
------------------------------------
Authorized Officer
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<PAGE> 79
$10,000,000 THE SUMITOMO BANK, LIMITED
By:
------------------------------
Authorized Officer
$10,000,000 UNION BANK OF CALIFORNIA, N.A.
By:
------------------------------
Authorized Officer
$10,000,000 UNION BANK OF SWITZERLAND, HOUSTON AGENCY
By:
------------------------------
Authorized Officer
============
$500,000,000
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<PAGE> 1
Exhibit 5
JOINT FILING AGREEMENT
The undersigned each agree that (i) the Statement on Schedule 13D relating
to the Common Stock, $0.10 par value, of Costilla Energy, Inc. is adopted and
filed on behalf on each of them, (ii) all future amendments to such Statement
on Schedule 13D will, unless written notice to the contrary is delivered as
described below, be jointly filed on behalf of each of them, and (iii) the
provisions of Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as
amended, apply to each of them. This agreement may be terminated with respect
to the obligation to jointly file future amendments to such Statement on
Schedule 13D as to any of the undersigned upon such person giving written
notice thereof to each of the other persons signatory hereto, at the principal
office thereof.
EXECUTED as of June 12, 1998.
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ PEGGY B. MENCHACA
-----------------------------------
Name: Peggy B. Menchaca
Title: Vice President and Secretary
ENRON CORP.
By: /s/ PEGGY B. MENCHACA
-----------------------------------
Name: Peggy B. Menchaca
Title: Vice President and Secretary
JOINT ENERGY DEVELOPMENT
INVESTMENTS II LIMITED PARTNERSHIP
By: Enron Capital Management II
Limited Partnership, its
general partner
By: Enron Capital II Corp.,
its general partner
By: /s/ PEGGY B. MENCHACA
-----------------------------------
Name: Peggy B. Menchaca
Title: Vice President and Secretary
