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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
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Commission File No. 1-12905
ENSERCH EXPLORATION, INC.
(Exact name of Registrant as specified in its charter)
Texas
(State or other jurisdiction of incorporation or organization)
75-2421863
(I.R.S. Employer Identification No.)
2500 CityWest Blvd., Suite 1400, Houston, Texas 77042
(Address of principal executive office) (Zip Code)
(713) 243-3100
(Registrant's telephone number, including Area Code)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Act of 1934 during the preceding twelve months (or for
such shorter period that the Registrant was required to file such
reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
Number of shares of Common Stock of Registrant outstanding
as of November 10, 1997: 126,911,927
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ENSERCH EXPLORATION, INC.
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------------------
1997 1996 1997 1996
--------------- ------- --------
(Restated) (Restated)
---------- ---------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Revenues
Natural gas $ 51,175 $ 51,373 $154,826 $161,772
Oil and condensate 21,866 26,852 71,230 70,583
Natural gas liquids 2,177 2,800 4,968 6,444
Cogeneration operations 2,912 2,771 8,387 8,055
Other 100 743 883 1,626
---------- ------- ------- --------
Total 78,230 84,539 240,294 248,480
---------- ------- ------- --------
Costs and Expenses
Production and operating 12,267 18,412 37,317 55,340
Exploration 25,192 28,481 65,213 68,335
Depreciation and amortization 38,604 43,299 112,353 121,028
Impairment of producing oil
and gas properties 210,202 210,202
Loss (gain) on sales of property,
plant & equipment 1,635 (21,777) 1,635 (24,383)
Unusual charges 24,229 26,412
Cogeneration operations 2,584 2,589 7,742 7,553
General, administrative and other 7,710 7,487 22,181 23,999
Taxes, other than income 4,670 5,245 13,624 16,218
---------- -------- -------- --------
Total 327,093 83,736 496,679 268,090
---------- -------- -------- --------
Operating Income (Loss) (248,863) 803 (256,385) (19,610)
Other Income (Expense) - Net (79) (42) (150) 42
Interest Income 383 469
Interest and Other Financing Costs (8,804) (6,918) (25,502) (21,015)
---------- -------- -------- ---------
Loss Before Income Taxes (257,363) (6,157) (281,568) (40,583)
Income Taxes (Benefit) (75,828) (2,214) (84,303) (14,309)
Minority Interest (73) (73)
---------- -------- -------- ---------
Net Loss $(181,608) $(3,943)$(197,338) $(26,274)
========== ======== ========= =========
Net Loss Per Share $ (1.44) $ (0.03) $ (1.56) $ (0.21)
========== ======== ========= =========
Weighted Average Shares Outstanding 126,666 126,571 126,666 126,565
========= ======== ========= =========
See accompanying Notes.
</TABLE>
2
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<TABLE>
<CAPTION>
ENSERCH EXPLORATION, Inc.
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30
---------------------------
1997 1996
-------- ----------
(Restated)
----------
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(197,338) $ (26,274)
Impairment of producing oil and gas properties 210,202
Impairment of undeveloped leasehold 40,866 25,500
Dry hole cost 7,409 18,834
Depreciation and amortization 112,353 121,028
Deferred income tax expense (benefit) (79,172) (12,861)
Other 23,709 (10,464)
Changes in current operating
assets and liabilities
Accounts receivable 17,068 16,509
Other current assets (2,477) 64
Accounts payable 17,915 (17,951)
Other current liabilities 355 3,672
--------- ---------
Net cash flows from operating activities 150,890 118,057
--------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment (128,522) (150,512)
Retirements of property, plant and equipment 53,237 82,136
Changes in property, plant
and equipment accruals (3,386) (554)
--------- ---------
Net cash flows used in
investing activities (78,671) (68,930)
--------- ---------
FINANCING ACTIVITIES
Borrowings under bank revolving
credit agreement 60,000 125,000
Repayment of borrowings under bank
revolving credit agreement (140,000) (155,000)
Borrowings under short term
financing agreement 130,900
Repayments under short term
financing agreement (127,900)
Repayment of Company-Obligated
Mandatorily Redeemable Preferred
Securities of Subsidiary (150,000)
Issuance of Minority Interests in
Preferred Securities of Subsidiaries 150,000
Change in temporary advances with
affiliated companies 13,328 (19,957)
Change in deferred payable to
affiliated company (1,887)
Change in advances under leasing arrangements (5,457) 5,930
Payments of capital lease obligations (2,899) (3,413)
Issuance of common stock 2 120
--------- ---------
Net cash flows used in financing activities (72,026) (49,207)
--------- ---------
Net Increase in Cash 193 (80)
Cash at Beginning of Period 1,358 1,565
--------- ---------
Cash at End of Period $ 1,551 $ 1,485
========= =========
See accompanying Notes.
</TABLE>
3
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<TABLE>
<CAPTION>
ENSERCH EXPLORATION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30 December 31
1997 1996
------------ -----------
(Restated)
-----------
(In thousands)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 1,551 $ 1,358
Accounts receivable - trade 65,407 65,926
Accounts receivable - affiliated companies 16,549
Temporary advances - affiliated companies 13,328
Other 20,743 18,266
------------ ----------
Total current assets 87,701 115,427
------------ ----------
Property, Plant and Equipment (at cost)
Oil and gas properties
(successful efforts method) 1,969,135 1,984,341
Other 18,617 22,084
------------- ---------
Total 1,987,752 2,006,425
Less accumulated depreciation
and amortization 1,221,234 941,052
-------------- ---------
Net property, plant and equipment 766,518 1,065,373
-------------- ---------
Deferred Income Tax Benefit 30,961
-------------- ---------
Other Assets 10,098 14,654
-------------- --------
Total $ 895,278 $1,195,454
============== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable - trade $ 112,611 $ 91,026
Accounts payable - affiliated companies 8,924
Short term borrowings 3,000
Advances under leasing arrangements 5,457
Current portion of capital lease obligations 8,392 3,250
Other 12,198 11,843
------------- ---------
Total current liabilities 136,201 120,500
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Bank Revolving Credit Agreement 35,000 115,000
------------- ---------
Capital Lease Obligations 233,694 241,735
------------- ---------
Deferred Income Taxes 35,330
------------- ---------
Other Liabilities 47,031 42,483
------------- ---------
Company-Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary 150,000
------------- ---------
Minority Interests in Preferred
Securities of Subsidiaries 150,000
------------ ----------
Common Shareholders' Equity
Common stock (400,000 shares authorized;
126,920 and 126,736 shares outstanding) 1,269 126,736
Paid in capital 569,173 442,246
Accumulated deficit (275,007) (77,669)
Unamortized restricted stock compensation (1,550) (677)
Treasury stock (57 and 25 shares) (533) (230)
------------- ---------
Common shareholders' equity 293,352 490,406
------------- ---------
Total $ 895,278 $1,195,454
============= =========
See accompanying Notes.
</TABLE>
4
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ENSERCH EXPLORATION, INC.
Notes to Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION - On August 5, 1997, the merger of
ENSERCH Corporation ("ENSERCH") and Texas Utilities Company and
the related merger of Enserch Exploration, Inc. ("Old EEX") and
Lone Star Energy Plant Operations, Inc. ("LSEPO") were completed.
In the EEX/LSEPO merger, LSEPO changed its name to "Enserch
Exploration, Inc." ("EEX"), shares of Old EEX were automatically
converted into shares of New EEX on a one-for-one basis in a tax-
free transaction, New EEX issued 691,631 shares of common stock
to ENSERCH in exchange for outstanding LSEPO common stock and
ENSERCH distributed to its shareholders, on a pro rata basis, all
of the shares of New EEX common stock it owned. In addition, the
merger fixed LSEPO's working capital at $3.5 million. For
financial reporting purposes, the EEX/LSEPO merger was treated as
a combination of entities under common control. Accordingly, the
operations and assets and liabilities of EEX and LSEPO have been
recorded at their historical amounts in the accompanying
Condensed Statements of Consolidated Operations and Cash Flows
for the three months and nine months ended September 30, 1997 and
1996 and the Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996. The number of common
shares outstanding for all periods has been increased to reflect
the 691,631 additional shares issued in the merger. The Restated
Articles of Incorporation of EEX authorized 400 million shares of
common stock with a par value of $.01. This change has been
reflected in the accompanying condensed consolidated financial
statements.
2.In the third quarter 1997, EEX adopted the successful efforts
method of accounting for its oil and gas operations and prior
period financial statements have been restated. Under the
successful efforts method of accounting, lease acquisition
costs are capitalized when incurred. Significant unproved
properties are reviewed periodically on a property-by-property
basis to determine if there has been an impairment in value,
with such impairment charged to expense. All other unproved
properties are aggregated and a portion of the costs estimated
to be non-productive, based on historical experience, is
amortized over the average life of the leases. Geological and
geophysical costs and the costs of carrying and retaining
undeveloped properties are expensed as incurred. Exploratory
drilling costs are initially capitalized but charged to
current expense if the well is commercially unsuccessful.
Leasehold costs of producing properties are depleted using the
unit of production method based on estimated proved oil and
gas reserves quantified on the basis of their equivalent
energy content. Amortization of drilling and equipment costs
is based on the unit of production method using estimated
proved developed oil and gas reserves quantified on the basis
of their equivalent energy content. Depreciation of other
property, plant and equipment is provided principally by the
straight line method over the estimated service lives of the
related assets. The current undiscounted cost of estimated
future site restoration, dismantlement and abandonment, net of
salvage, is included in the cost of productive oil and gas
properties and a corresponding liability recorded. The
recorded cost is amortized on the unit of production method.
Actual costs incurred for these activities are charged to the
recorded liability.
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5
The effect of the adoption of the successful efforts method
of accounting on net income (loss) for the quarters ended
September 30, 1997 and 1996 is as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
1997 1996
---------------------
Increase (Decrease)
<S> <C> <C>
Net (loss) $ (173,331) $ (6,135)
=========== =========
Net (loss) per share $ (1.37) $ (0.05)
=========== =========
</TABLE>
The effect on previously reported net income (loss) for the
first two quarters of 1997 and 1996 is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
===========================
June 30 March 31
========== ===========
<S> <C> <C>
1997
Net income (loss) as previously reported $ 6,044 $ (234,595)
Adjustment for effect of change to
successful efforts (19,573) 232,392
---------- -----------
Net (loss) as adjusted $ (13,529) $ (2,201)
=========== ==========
Per share amounts:
Net income (loss) as previously reported $ .05 $ (1.85)
Adjustment for effect of change to
successful efforts (.16) 1.83
---------- -----------
Net (loss) as adjusted $ (.11) $ (.02)
=========== ==========
1996
Net income as previously reported $ 5,334 $ 205
Adjustment for effect of change to
successful efforts (18,473) (9,398)
----------- ----------
Net (loss) as adjusted $ (13,139) $ (9,192)
=========== ==========
Per share amounts:
Net income as previously reported $ .04 $ .00
Adjustment for effect of change to
successful efforts (.14) (.07)
---------- ------------
Net (loss) as adjusted $ (.10) $ (.07)
=========== ==========
</TABLE>
The effect on retained earnings (deficit) and paid in capital is
as follows (in thousands):
<TABLE>
<CAPTION>
Retained
Earnings Paid In
(Deficit) Capital
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<S> <C> <C>
Balance at December 31, 1996,
as previously reported $ 2,292 $ 819,393
Adjustment for cumulative effect for
restatement to successful efforts
accounting for the following periods:
Through December 31, 1994 (377,147)
Two years ended December 31, 1996 (79,961)
---------- ----------
Balance at December 31, 1996, as restated (77,669) $ 442,246
==========
Restated net (loss) for quarters ended
March 31 and June 30, 1997 (15,730)
----------
Balance at beginning of quarter
ended September 30, 1997, as restated (93,399)
Net (loss) for quarter ended September 30, 1997 (181,608)
----------
Balance September 30, 1997 $ (275,007)
==========
</TABLE>
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6
3. Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of", (SFAS 121) provides for the
recognition of losses when events or changes in circumstances
indicate that the carrying value of long-lived assets may not be
realized. When there is evidence that the cost of such assets may
not be realized based upon periodic evaluation, SFAS 121 requires
the carrying values of long-lived assets be written down to fair
values. The Company estimates fair values using the present value
of expected future cash flows for each significant oil and gas
field.
Early in 1997, EEX began a review and evaluation of the
commercial feasibility of its non-producing oil and gas
reserves. The Company has announced, based upon a preliminary
evaluation, that it expects a material downward revision of
its oil and natural gas reserves, primarily in its behind pipe
and proved undeveloped reserves in East Texas and its proved
undeveloped reserves in the deep-water Gulf of Mexico. While
additional analysis is required and is currently in progress,
EEX management believes that the study progressed sufficiently
during the third quarter of 1997 that the amount of the year-
end 1997 downward revision could be reasonably estimated to
approximate 670 billion cubic feet of gas equivalent.
As a result of the estimated downward revision of reserves,
the Company reexamined the carrying value of its properties as
a part of the overall process. In order to determine whether
its assets had been impaired, EEX grouped its producing
properties by fields, which it believes is the lowest level
for which cash flows are reasonably and separately
identifiable, and determined that anticipated future cash
flows based on the revised reserve estimations and development
plans were insufficient to recover the carrying value of
certain fields. Accordingly, the carrying value of such fields
were reduced to fair value, and EEX recorded a $137 million
after-tax, ($210 million pre-tax) charge for impairment at the
end of the third quarter 1997.
4. The deferred tax effect of the difference in financial
accounting basis and the income tax basis of EEX's assets and
liabilities at September 30, 1997, and December 31, 1996, were as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(In thousands)
<S> <C> <C>
Deferred tax assets (liabilities):
Property, plant and equipment $ 50,896 $ (44,399)
Losses of controlled foreign corporations 8,044 8,079
All other 3,018 2,088
---------- ----------
Total 61,958 (34,232)
Valuation allowance (30,000)
---------- ----------
Net deferred tax asset (liability) $ 31,958 $ (34,232)
========== ==========
Current amount $ 997 $ 1,098
Non-current amount 30,961 (35,330)
---------- ----------
Total $ 31,958 $ (34,232)
========== ==========
</TABLE>
7
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The Company established a $30 million valuation allowance to
reduce the calculated deferred tax asset to net realizable
value in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109). Although the Company has
incurred net taxable losses for book purposes in recent years,
management believes it is more likely than not that the
Company will generate taxable income sufficient to realize a
portion of the tax benefits associated with assets which have
a tax basis in excess of net cost recorded under the
successful efforts method of accounting used for financial
reporting purposes. Such assets are primarily represented by
seismic costs capitalized for tax purposes but expensed under
successful efforts accounting and assets impaired under the
provisions of SFAS 121 for which no tax deduction was
immediately available. This belief is based primarily on
available tax planning strategies which include anticipated
sales of assets with fair market values in excess of book and
tax cost bases within the next year. While management is
optimistic that future earnings will be significantly enhanced
as a result of its ongoing restructuring program, the
anticipated earnings benefit which could be realized from
further realization of the additional tax basis in selected
assets has not been recognized in the valuation of the
Company's deferred tax asset.
5. On September 29, 1997, EEX concluded a transaction in which
all of the outstanding mandatorily redeemable preferred
securities of a subsidiary were redeemed at the stated value of
$150 million. The redemption was funded by a private sale of new
issues of preferred stock of EEX Capital, Inc. (EEXC), wholly
owned by EEX, and Preferred Interests of MIStS Issuer L.L.C.
(Issuer), whose common equity interests are wholly owned by EEXC.
On October 27, 1997, EEXC sold an additional $75 million of
preferred stock and used the proceeds to satisfy a $75 million
demand note with Issuer. Issuer used the proceeds from the
demand note to redeem all the preferred interests sold by Issuer
on September 29, 1997. The dividend rate for EEXC's new
securities is based on LIBOR (reset quarterly) plus a spread
beginning at 3.0% for the period ending December 31, 1997, and
increasing by 1.0% quarterly through December 31, 1998. The new
securities are redeemable, in whole or in part, at the option of
EEXC on the quarterly dividend payment dates. Interest payable
on a $150 million demand note from EEX to EEXC will fund the
dividends.
6. In early 1997, EEX management committed to restructure the
Company and undertook a program to refocus the scope of its
future operations and reduce the number of personnel. Costs and
expenses associated with this program include unusual charges
incurred in connection with restructuring and relocating
administrative functions as well as terminating a number of
employees. In the third quarter 1997, as an integral part of its
restructure plan, EEX relocated its Corporate headquarters to
Houston, Texas, committed to the severance of approximately 375
Dallas-based employees and authorized the closure of its Dallas,
Texas administrative offices by year-end 1998. Accordingly, EEX
accrued $19 million for severance of employees not relocating to
Houston under the benefits outlined in its severance program and
$1.6 million for cancellation of office leases during the
quarter. Amounts paid and charged against these accruals during
the quarter were employee severance of $5.8 million (72
employees) and lease cancellation costs of $.4 million. Other
amounts associated with these changes which are expected to
benefit future operations are expensed as incurred; during the
third quarter they included professional services of $1.3
million and office and employee
8
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relocation of $1 million. Also during the third quarter 1997,
non oil and gas assets were written down $2.3 million to net
realizable value. Second quarter 1997 charges included
employee severance of $1.6 million (45 employees),
professional services of $.3 million and office and employee
relocation of $.3 million.
7. EEX has filed suit in the 11th District Court of Harris
County, Texas alleging, among other claims, anticipatory breach
of a drilling rig contract which provides EEX with daily rig
rates substantially less than current market rates. EEX is
seeking a declaratory judgment that the contract includes a three
year Option Term. Unfavorable settlement of this matter could
materially impact future offshore deep water drilling costs.
8. Earnings per share applicable to common stock are based on
the weighted average number of common shares outstanding during
the period, including common equivalent shares when dilutive.
9. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) necessary for a fair
presentation of the financial position, results of operations and
cash flows for the interim periods included herein have been
made. Certain items in prior periods have been reclassified to
be consistent with the current presentation.
9
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
On August 5, 1997, the merger of ENSERCH and Texas Utilities
Company and the related merger of Enserch Exploration, Inc.
("EEX") and Lone Star Energy Plant Operations, Inc. ("LSEPO")
were completed. Under the terms of the EEX/LSEPO merger, LSEPO
changed its name to "Enserch Exploration, Inc." ("New EEX"),
shares of EEX were automatically converted into shares of New
EEX on a one-for-one basis in a tax-free transaction, New EEX
issued 691,631 shares of common stock to ENSERCH in exchange for
outstanding LSEPO common stock and ENSERCH distributed to its
shareholders, on a pro rata basis, all shares of New EEX common
stock it owned. In addition, the merger fixed LSEPO's working
capital at $3.5 million. For financial reporting purposes, the
EEX/LSEPO merger was treated as a combination of entities under
common control. Accordingly, the operations and assets and
liabilities of EEX and LSEPO have been recorded at their
historical amounts in the accompanying financial statements.
The number of common shares outstanding has been increased to
reflect the 691,631 additional shares issued in the merger and
the adjustment of LSEPO's working capital to $3.5 million is
reflected in the accompanying Condensed Consolidated Balance
Sheets.
RESULTS OF OPERATIONS
EEX changed from the full cost method to the successful efforts
method to account for its oil and gas operations in the third
quarter of 1997 and all prior period financial statements have
been restated. See Note 2 of Notes to Condensed Consolidated
Financial Statements for additional information. The following
discussions of operating results are based on those restated
amounts.
EEX reported a third quarter 1997 net loss of $182 million
($1.44 per share), versus a net loss of $3.9 million ($.03 per
share) in 1996. The third quarter 1997 operating loss was $249
million, compared to operating income of $1 million for 1996.
For the first nine months of 1997, EEX had a net loss of $197
million ($1.56 per share) compared to a net loss of $26 million
($.21 per share) for 1996.
Results of operations for the third quarter and year-to-date
1997 were impacted by the following unusual items:
A third quarter $137 million after-tax ($210 million pre-
tax) charge for impairment of producing oil and gas properties
required by Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of." This impairment will reduce
future depreciation and amortization expense.
10
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An unusual charge, primarily severance, of $16 million after-
tax ($24 million pre-tax) for the third quarter and $17 million
after-tax ($26 million pre-tax) year-to-date related to the
reorganization and restructuring of operations and the relocation
of corporate headquarters to Houston, Texas.
In the following comparisons of results of operations, 1997
results have been adjusted to exclude the unusual items
described above.
QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996 - Revenues for 1997
were $78 million, $6 million (7%) lower than 1996. Natural gas
revenues, unchanged from 1996, were impacted by a 16% increase
in average prices, offset by a 14% decrease in production due to
sales of the Rocky Mountain properties in late 1996. The average
natural gas sales price per thousand cubic feet (Mcf) was $2.32
in 1997 compared with $2.01 in 1996. Natural gas production for
1997 was 22 billion cubic feet (Bcf), compared with 25.6 Bcf in
1996. Oil revenues decreased $5 million (19%) due to sales of
the Rocky Mountain properties in late 1996 and a decrease in the
average crude oil sales price per barrel to $17.88 in 1997 from
$19.86 in 1996. Crude oil production was 1,223 thousand barrels
(MBbls),compared with 1,352 MBbls in 1996.
Costs and expenses, excluding loss (gain) on sales of property,
plant and equipment, were down 14% in the third quarter of 1997
compared to 1996. Production and operating expenses decreased
33% from 1996 as a result of properties sold in late 1996 and
capitalization of the Cooper Project operating lease in December
1996. Exploration expenses decreased 12% due primarily to a
change in focus to offshore and international and the
curtailment of the onshore exploration program during the first
nine months of 1997. Exploration expenses are expected to be at
lower levels in the future due to reduction of exploration staff
levels, major curtailment of onshore exploration and reduction
of exposure to deep water Gulf of Mexico dry hole cost resulting
from the offshore exploration joint venture (See Offshore
Exploration Joint Venture). Taxes, other than income decreased
11% from 1996 primarily due to the 1996 property sales.
Properties sold in the third quarter of 1997 resulted in a loss
of $1.6 million compared to a gain of $22 million for third
quarter 1996. EEX is divesting non-core properties and
anticipates closing several major sales in the fourth quarter of
1997.
Interest and other financing costs for 1997 were $8.8 million, a
$.5 million (6%) reduction from 1996 after an adjustment of $2.4
million for the impact of capitalization of the Cooper Project
operating lease. The decrease in 1997 is due primarily to the
reduction in debt from proceeds from property sales.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 - Revenues for
1997 were $240 million, $8 million (3%) decreased from 1996.
Natural gas revenues decreased $7 million (4%), resulting from a
16% decrease in production volumes partially offset by a 14%
increase in the average sales price. The average natural gas
sales price per Mcf was $2.41 in 1997 compared with $2.11 in
1996. Natural gas production for 1997 was 64.2 Bcf, down from
76.5 Bcf in
11
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1996 due primarily to the aforementioned property sales. Higher
oil revenues in 1997 reflect a 3% improvement in the average sales
price to $19.50 per barrel in 1997 from $18.94 in 1996, offset by
a 2% decline in production volumes. Crude oil production was 3,652
MBbls in 1997 compared to 3,726 MBbls in 1996. Overall, oil and
gas production in the first nine months of 1997 was reduced
somewhat because the Cooper facility was shut-in for several
weeks to allow for maintenance, repair and completion
activities.
Costs and expenses, excluding loss (gain) on sales of property,
plant and equipment, were down 12% in 1997 compared to 1996.
Production and operating expenses decreased 33% from 1996 for
the reasons described above. Exploration expenses were down 5%
due to the refocusing of the exploration programs described
above and are expected to be at lower levels in the future.
General and administrative expenses were $22 million, 8% less
than 1996 due to restructuring and ongoing cost reduction
initiatives. Taxes, other than income were $14 million, down
16% from 1996 primarily due to lower ad valorem tax accruals and
1996 property sales. Property sales in the first nine months of
1997 resulted in a loss of $1.6 million compared to a gain of
$24 million for 1996.
Interest and other financing costs for 1997 were $26 million, a
$3 million (10%) reduction from 1996 after an adjustment of $7.2
million for the impact of capitalization of the Cooper Project
operating lease. The decrease in 1997 is due to the reduction in
debt from proceeds from property sales.
HEDGING ACTIVITIES
A portion of the risk associated with fluctuations in the price
of oil and natural gas is managed through the use of hedging
techniques such as oil and gas swaps, collars and futures
agreements. EEX fixed the price on third quarter 1997
production volumes of 19 Bcf of natural gas (82% of production)
at an average price of $2.33 per Mcf and 828 MBbls of oil (68%
of production) at an average price of $20.38 per Bbl. For the
first nine months of 1997, EEX fixed the price on 48 Bcf of
natural gas (71% of production) at an average price of $2.60 per
Mcf and 1,759 MBbls of oil (48% of production) at an average
price of $21.24 per Bbl. In total oil and gas price hedging
activities decreased third quarter 1997 revenues by $.8 million,
compared to a decrease of $3.3 million for the third quarter of
1996. For the first nine months of 1997, oil and gas hedging
activities increased revenues by $.8
million, but decreased revenues for the first nine months of
1996 by $11
million. At September 30, 1997, EEX had outstanding swaps,
collars and futures agreements that were entered into as hedges
extending through December 31, 1998, to exchange payments on 39
Bcf of natural gas and 1,548 MBbls of oil. At September 30,
1997, there were $7.5 million of net unrealized and unrecognized
hedging losses based on the difference between the strike price
and the New York Mercantile Exchange futures price for the
applicable trading months of 1997 and 1998. In addition, there
were $6.4 million of realized losses on hedging activities which
were deferred and will be applied as a decrease in revenues in
October 1997, the applicable month of physical sale of
production.
12
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<PAGE>
RESERVE REVISION AND IMPAIRMENT OF PRODUCING OIL AND GAS
PROPERTIES
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of", (SFAS 121) provides for the recognition of
losses when events or changes in circumstances indicate that the
carrying value of long-lived assets may not be realized. When
there is evidence that the cost of such assets may not be
realized based upon periodic evaluation, SFAS 121 requires the
carrying values of long-lived assets be written down to fair
values. The Company estimates fair values using the present value
of expected future cash flows for each significant oil and gas
field.
Early in 1997, EEX began a review and evaluation of the
commercial feasibility of its non-producing oil and gas
reserves. The Company has announced, based upon a preliminary
evaluation, that it expects a material downward revision of its
oil and natural gas reserves, primarily in its behind pipe and
proved undeveloped reserves in East Texas and its proved
undeveloped reserves in the deep-water Gulf of Mexico. While
additional analysis is required and is currently in progress, EEX
management believes that the study progressed sufficiently during
the third quarter of 1997 that the amount of the year-end 1997
downward revision could be reasonably estimated to approximate
670 billion cubic feet of gas equivalent.
As a result of the estimated downward revision of reserves, the
Company reexamined the carrying value of its properties as a part
of the overall process. In order to determine whether its assets
had been impaired, EEX grouped its producing properties by
fields, which it believes is the lowest level for which cash
flows are reasonably and separately identifiable, and determined
that anticipated future cash flows based on the revised reserve
estimations and development plans were insufficient to recover
the carrying value of certain fields. Accordingly, the carrying
value of such fields were reduced to fair value, and EEX recorded
a $137 million after-tax, ($210 million pre-tax) charge for
impairment at the end of the third quarter 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
EEX generated sufficient cash flows from operations and property
sales to fund its capital requirements and reduce financings by
$80 million. Net cash flows from operating activities were
$151 million, an increase of $33 million over 1996 largely due
to higher commodity prices during the first quarter of 1997 and
changes in current operating assets and liabilities. Net cash
flows used for investing activities in 1997 were $79 million, a
$10 million increase from 1996.
EEX intends to utilize substantially all of its internally
generated cash flows for growth of the business and expects to
have sufficient cash flow from operations and the continuous
monetization of non-core assets to fund its business plans.
Borrowings under EEX's credit facilities may be used to
supplement temporary cash flow needs. EEX does not anticipate
paying cash dividends in the foreseeable future.
13
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<PAGE>
Capital Structure
In the third quarter 1997, EEX redeemed, at the stated value of
$150 million, all the outstanding mandatorily redeemable
preferred securities of a subsidiary. The redemption was funded
by private sales of new issues of preferred securities by EEX
subsidiaries. The new preferred securities are redeemable at the
option of the subsidiaries and are reflected on the condensed
consolidated balance sheet as "Minority Interests in Preferred
Securities of Subsidiaries". After the redemption, debt at
September 30, 1997 represented 49% of total capitalization of
$573 million, compared to 51%, including the mandatorily
redeemable preferred securities of a subsidiary, of total
capitalization of $1 billion at December 31, 1996. The
reduction in total capitalization at September 30, 1997 was due
to the reduction in shareholders' equity from the third quarter
1997 non-cash impairment of producing oil and gas properties and
the reduction in debt resulting from redemption of the
mandatorily redeemable preferred securities.
OFFSHORE EXPLORATION JOINT VENTURE
On July 1, 1997 EEX announced agreement with Enterprise Oil Plc
("Enterprise") to participate in an exploration venture to
evaluate EEX's portfolio of offshore blocks in the deep water of
the Gulf of Mexico.
The agreement, covering approximately 78 blocks primarily in the
areas of Garden Banks, Green Canyon and Mississippi Canyon, was
closed on September 15, 1997 and all required governmental
approvals have been obtained. Excluded from the agreement are
reserves at Green Canyon 254 (Allegheny Project) and reserves
and production facilities at Mississippi Canyon and Garden Banks
388 (Cooper Project).
Under the agreement, approved by the Boards of each company,
Enterprise will pay $65 million, which will be used to fund
EEX's exploration drilling costs and in return receive an
immediate assignment of 50% of EEX's deep water portfolio.
A further $35 million to be funded by Enterprise is contingent
on drilling successes and the announcement of at least two
commercial developments. Enterprise will immediately become a
full partner in the relevant Joint Operating Agreements.
The companies intend to conduct a 10 to 12 well drilling program
over the next two and one-half years utilizing two rigs capable
of drilling in 3,300 feet of water. The rigs are under long-term
contract to EEX at below market day rates. EEX has filed suit in
the 11th District Court of Harris County, Texas alleging, among
other claims, anticipatory breach of one of the rig contracts
which provides EEX with daily rig rates substantially less than
current market rates. EEX is seeking a declaratory judgment that
the contract includes a three year Option Term. Unfavorable
settlement of this matter could materially impact future offshore
deep water drilling costs. The first well has been spudded on
the Llano prospect in Garden Banks 386 and is currently drilling
below 18,000 feet towards a proposed depth of 25,000 feet.
Results are expected to be known by the end of the fourth
quarter. The second well in this program is expected to be
spudded in the fourth quarter.
14
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<PAGE>
FORWARD LOOKING STATEMENTS - UNCERTAINTIES AND RISKS
Written statements throughout this report on Form 10-Q relating
to EEX management's intentions, hopes, beliefs, expectations or
predictions of the future are forward-looking statements. It is
important to note that EEX's actual results could differ
materially from those projected in such forward-looking
statements. Information concerning some of the factors that could
cause actual results to differ materially from those in the
forward-looking statements are described below.
Estimating Reserves and Future Net Cash Flows. Uncertainties are
inherent in estimating quantities and values of reserves and in
projecting rates of production, net revenues and the timing of
development expenditures. The reserve data represent estimates
only of the recovery of hydrocarbons from underground
accumulations and are often different from the quantities
ultimately recovered. Any downward adjustment in reserve
estimates could adversely affect EEX.
Operational Risks and Hazards. EEX's operations are subject to
the risks and uncertainties associated with finding, acquiring
and developing gas and oil properties, and producing,
transporting and selling gas and oil. Operations may be
materially curtailed, delayed or canceled as a result of numerous
factors, such as accidents, weather conditions, compliance with
governmental requirements and shortages or delays in the delivery
of equipment. Drilling may involve unprofitable efforts, not
only with respect to dry wells, but also with respect to wells
that are productive but do not produce sufficient net revenues to
return a profit after drilling, operating and other costs.
Various field operating hazards such as fires, explosions,
blow-outs, equipment failures, abnormally pressured formations
and environmental accidents may adversely affect production from
successful wells. EEX's ability to sell its gas and oil
production is dependent on the availability and capacity of
gathering systems, pipelines and other forms of transportation.
Offshore Risks. EEX's offshore Gulf of Mexico gas and oil
reserves include properties located in water depths of 20 to
3,400 feet where operations are by their nature more difficult
than drilling operations conducted on land. Deep water drilling
and operations require the application of more advanced
technologies, involving a higher risk of mechanical failure and
inevitably resulting in significantly higher drilling and
operating costs. Furthermore, offshore operations require a
significant amount of time between the time of discovery and the
time the gas or oil is actually marketed, increasing the market
risk involved with such operations.
Volatility of Gas and Oil Markets. EEX's operations are highly
dependent upon the prices of, and demand for, gas and oil. These
prices have been, and are likely to continue to be, volatile.
Prices are subject to fluctuations in response to a variety of
factors that are beyond the control of EEX, such as worldwide
economic and political conditions as they affect actions of OPEC
and Middle East and other producing countries, and the price and
availability of alternative fuels. EEX's hedging activities
with respect to some of its
15
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<PAGE>
projected oil and gas production, which are designed to protect
against price declines, may prevent EEX from realizing the
benefits of price increases above the levels of the hedges and
protect it from incurring the detriments of price decreases below
the level of hedges. Because EEX's reserve base is approximately
80% natural gas on an energy equivalent basis, it is more
sensitive to fluctuations in the price of natural gas.
Government Regulation. EEX's business is subject to certain
federal, state and local laws and regulations relating to the
drilling for the production of gas and oil, as well as
environmental and safety matters.
16
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<PAGE>
<TABLE>
<CAPTION>
ENSERCH EXPLORATION, INC.
SUMMARY OF SELECTED OPERATING DATA (UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
------------------- -----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales Volumes
Natural gas (MMcf) 22,022 25,561 64,173 76,501
Oil and condensate (MBbls) 1,223 1,352 3,652 3,726
Natural gas liquids (MBbls) 179 209 365 572
Total volumes (MMcfe) (a) 30,434 34,957 88,275 102,289
Average Sales Price
Natural gas (per Mcf) $ 2.32 $ 2.01 $ 2.41 $ 2.11
Oil and condensate (per Bbl) 17.88 19.86 19.50 18.94
Natural gas liquids (per Bbl) 12.16 13.39 13.61 11.26
Total product revenue
(per Mcfe) (a) 2.47 2.32 2.62 2.33
Cost and Expenses (per Mcfe) (a) (b)
Production and operating (c) $ .40 $ .53 $ .42 $ .54
Exploration .83 .81 .74 .67
Depreciation and amortization 1.27 1.24 1.27 1.18
General, administration and other .25 .21 .25 .23
Taxes, other than income .15 .15 .15 .16
Net Wells
Drilled 16 30 45 84
Productive 9 22 33 64
(a) Oil and natural gas liquids have been converted to Mcf
equivalents (Mcfe) on the basis of one barrel equals 6.0 Mcfe.
(b) Excludes unusual and non-recurring expenses.
(c) Excludes related production, severance and ad valorem taxes.
</TABLE>
17
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a)
EXHIBIT
NNUMBER
3.1 Restated Articles of
Incorporation of the Registrant (included as
Annex C to the Joint Proxy Statement/Prospectus
filed as Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (No. 333-
13241).(1)
3.2 Bylaws of the Registrant.(2)
4.1 Form of Common Stock Certificate included as
Exhibit 4.1 to the Registration Statement of
Old EEX on Form S-4 (No. 33-56792).(1)
4.2 Rights Agreement dated as of September 10,
1996, between the Company (formerly Lone Star
Gas Company) and Harris Trust Company of New
York as Rights Agent, filed as Exhibit 10.21 to
the Company's Registration Statement on Form S-
4 (No. 333-13241).(1)
4.3 Subscription Agreement among EEX Capital Inc.
and UBS Securities LLC, as Placement Agent for
the Holders from time to time of the Preferred
Stock and Enserch Exploration, Inc. (not an
issuer), effective as of September 29, 1997.(2)
4.4 Amended and Restated Certificate of
Designations, Preferences and Relative,
Participating, Optional and Other Special
Rights -- Class A Cumulative Perpetual
Increasing Dividend Preferred Stock of EEX
Capital Inc.(2)
4.5 $150,000,000 Subordinated Note made by Enserch
Exploration, Inc. in favor of EEX Capital,
Inc.(2)
10.1 Lease Agreement for Garden Banks 388-1 between
Old EEX and Enserch Exploration Holdings, Inc.
(formerly Enserch Exploration, Inc.") included
as Exhibit 10.3 to the Registration Statement
of Old EEX on Form S-4 (No. 33-56792).(1)
10.2 Lease Agreement for Garden Banks 388-2 between
Old EEX and Enserch Exploration Holdings, Inc.
(formerly "Enserch Exploration, Inc.") included
as Exhibit 10.4 to the Registration Statement
of Old EEX on Form S-4 (No. 33-56792).(1)
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<PAGE>
10.3 Lease Agreement for Mississippi Canyon 441
between Old EEX and Enserch Exploration
Holdings, Inc. (formerly "Enserch Exploration,
Inc.") included as Exhibit 10.5 to the
Registration Statement of Old EEX on Form S-4
(No. 33-56792).(1)
10.4 Participation Agreement between EP Operating
Limited Partnership and Mobil Producing Texas
and New Mexico Inc. included as Exhibit 10.6
to the Registration Statement of Old EEX on
Form S-4 (No. 33-56792).(1)
10.5 Stock Purchase Agreement dated as of April 12,
1995, By and Between PG&E Enterprises, as
Seller and Old EEX, as Buyer, filed as Exhibit
10.7 to the Registration Statement of Old EEX
on Form S-2 (No. 33-60461) .(1)
10.6 Credit Agreement among Enserch Exploration,
Inc. as Borrower, Texas Commerce Bank National
Association, as Administrative Agent, The Chase
Manhattan Bank, N.A., as Syndication Agent,
Chemical Bank, as Auction Agent and The Lenders
now or hereafter Parties hereto dated as of May
1, 1995, and First Amendment dated September
16, 1996, Second Amendment dated June 27, 1997
and Third Amendment, dated September 25,
1997.(2)
10.7 Tax Sharing Agreement between ENSERCH
Corporation and Old EEX, filed as Exhibit 10.21
to the Registration Statement of Old EEX on
Form S-2 (No. 33-60461) .(1)
10.8 Form of Tax Allocation Agreement among ENSERCH,
the Company and Texas Utilities Company and
attached Tax Sharing Agreement dated as of
January 1, 1995 between ENSERCH and EEX
(included as Annex A-3 to the Agreement and
Plan of Merger filed as Exhibit 2 to the
Company's Registration Statement on Form S-4
(No. 333-13241).(1)
10.9 Form of Tax Assurance Agreement between ENSERCH
and the Company (included as Annex A-4 to the
Agreement and Plan of Merger filed as Exhibit 2
to the Company's Registration Statement on Form
S-4 (No. 333-13241).(1)
Executive Compensation Plan and Arrangements
(Exhibits 10.10 through 10.15):
10.10 Enserch Exploration, Inc. Revised and Amended
1996 Stock Incentive Plan, included as Annex A-
2 to the Agreement and Plan of Merger filed as
Exhibit 2 to the Company's Registration
Statement on Form S-4 (No. 333-13241).(1)
10.11 Performance Incentive Plan - Calendar Year 1997
filed as Exhibit 10.15 to the Form 10-K for the
year ended December 31, 1996, of Old EEX.(1)
10.12 The Company's Deferred Compensation Plan
effective as of July 1, 1997.(2)
10.13 Deferred Compensation Trust effective as of
July 1, 1997.(2)
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<PAGE>
10.14 Form of Change of Control Agreement executed by
certain executive officers of the Company,
filed as Exhibit 10.20 to the Annual Report on
Form 10-K for the year ended December 31, 1996
of Old EEX.(1)
10.15 Form of Employment Agreement executed by
certain executive officers of the Company,
filed as Exhibit 10.20 to the Annual Report on
Form 10-K for the year ended December 31, 1996
of Old EEX.(1)
27 Financial Data Schedule(2)
(1) Incorporated by reference.
(2) Filed herewith.
(b) Reports on Form 8-K
Current Report on Form 8-K dated August 4, 1997.
(News Release dated August 4, 1997: Enserch
Exploration announced it expects a material downward
revision of its oil and gas reserves.)
Current Report on Form 8-K dated August 5, 1997.
1. Item 2 -- Merger with Enserch Exploration, Inc.
2. Item 5 -- Pro Forma Financial Information.
Current Report on Form 8-K dated August 6, 1997.
(Consummation of merger of Enserch Exploration, Inc.
and Lone Star Energy Plant Operations.)
Current Report on Form 8-K dated September 25, 1997.
(Change in EEX's certifying accountant.)
20
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ENSERCH EXPLORATION, INC.
(Registrant)
Dated November 12, 1997 By /s/R. S. Langdon
-------------------------------
R. S. Langdon
Executive Vice President,
Finance and Administration,
and Chief Financial Officer
Dated November 12, 1997 By /s/R. E. Schmitz
-------------------------------
R. E. Schmitz
Vice President
and Controller
21
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<PAGE>
EXHIBIT 3.2
BYLAWS OF ENSERCH EXPLORATION, INC.,
A CORPORATION INCORPORATED UNDER
THE LAWS OF THE STATE OF TEXAS
PURPOSE AND SCOPE OF BYLAWS
These Bylaws shall constitute the private laws of ENSERCH
EXPLORATION, INC., a corporation duly incorporated under the laws of the
State of Texas (herein called the "Company"), for the administration and
regulation of the affairs of the Company.
In the event any provision of these Bylaws is or may be in conflict
with any applicable law of the United States or the State of Texas, or of
any order, rule, regulation, decree or judgment of any governmental body
or power or court having jurisdiction over the Company, or over the
subject matter to which such provision of these Bylaws applies or may
apply, such provision of these Bylaws shall be inoperative to the extent
only that the operation thereof unavoidably conflicts with such law or
order, rule, regulation, decree or judgment, and shall in all other
respects be in full force and effect.
ARTICLE I
Offices
Section 1. The registered office of the Company shall be at 4849
Greenville Avenue, in the City of Dallas, County of Dallas, State of
Texas, and the registered agent of the Company at such address shall be
C. Clint Adams or such other person as the Board of Directors may from
time to time designate.
Section 2. The Company may also have offices at such other places
both within and without the State of Texas as the Board of Directors may
from time to time determine or the business of the Company may require.
ARTICLE II
Meetings of Shareholders
Section 1. All meetings of the shareholders shall be held at the
registered office of the Company or at such other place either within or
without the State of Texas as shall be designated from time to time by the
Board of Directors.
Section 2. The annual meeting of shareholders shall be held on May
12, 1998, and thereafter on the second Tuesday of May in each year, at
10:00 A.M., for the election of a Board of Directors and the transaction
of such other business as may properly be brought before the meeting.
Section 3. Special meetings of the shareholders may only be called
by the Chairman of the Board or the President, at the request in writing
or by vote of not less than a majority of the Continuing Directors (as
defined in Article Ten of the Restated Articles of Incorporation of the
Company) of the Board of Directors, or the holders of not less than 50%
of all the outstanding shares entitled to vote at the meetings, and not
by any other persons. Business transacted at all special meetings shall
be confined to the subjects stated in the notice of meeting.
Section 4. Written or printed notice stating the place, day and hour
of the meeting, and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten (10)
nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman, the
Corporate Secretary, or the officer or person calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail addressed to the shareholder at his address as it appears on the
stock transfer books of the Company, with postage thereon prepaid.
Section 5. The officer or agent having charge of the stock transfer
books for shares of the Company shall make, at least ten (10) days before
each meeting of shareholders, a complete list of the shareholders entitled
to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by
each, which list, for a period of ten (10) days prior to such meeting,
shall be kept on file at the registered office of the Company and shall
be subject to inspection by any shareholder at any time during usual
business hours. Such list shall also be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original stock
transfer books shall be prima-facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote
at any meeting of shareholders.
Section 6. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat, present in person or represented
by written proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business. If, however, such quorum
shall not be present or represented at any meeting of the shareholders,
the shareholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which
a quorum shall be present or represented any business may be transacted
which might have been transacted at the meeting as originally notified.
Section 7. Each outstanding share, of any class, shall be entitled
to as many votes per share as the Articles of Incorporation shall provide,
on each matter submitted to a vote at a meeting of shareholders, except
to the extent that the voting rights of the shares of any class or classes
are limited or denied by the Articles of Incorporation or these Bylaws.
The vote for the election of Directors and, upon demand by any
shareholder, the vote upon any question before the meeting shall be by
ballot. Cumulative voting is expressly prohibited.
Section 8. At any meeting of the holders, every shareholder having
the right to vote shall be entitled to vote in person or by proxy executed
in writing by such shareholder or by his duly authorized attorney-in-fact.
No proxy shall be valid after eleven (11) months from the date of its
execution unless otherwise provided in the proxy. All proxies shall be
revocable unless expressly provided therein to be irrevocable and are
coupled with an interest and shall be filed with the Corporate Secretary
of the Company prior to or at the time of the meeting at which they are
to be voted.
Section 9. When a quorum is present at any meeting, matters brought
before the meeting shall be determined by the shareholders in the
following manner: (a) with respect to any matter, other than the election
of Directors or a matter for which the affirmative vote of a specified
portion of the shares entitled to vote is required by the statutes or the
Articles of Incorporation, the act of the shareholders shall be the
affirmative vote of the holders of a majority of the shares entitled to
vote on, and voted for or against, that matter at a meeting of
shareholders at which a quorum is present and (b) with respect to the
election of Directors, the act of the shareholders electing the Directors
shall be a majority of all outstanding shares entitled to vote in the
election of Directors, unless in each case the question is one upon which,
by express provision of the statutes or of the Articles of Incorporation
or of these Bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Section 10. The Chairman shall preside at all meetings of the
shareholders. In his absence, the President or an officer of the Company
designated by the Board of Directors shall preside and perform the duties
of the Chairman at such meeting. He shall appoint two inspectors of voting
to serve at each such meeting. Before acting at any meeting, the
inspectors shall be sworn faithfully to execute their duties with strict
impartiality and according to the best of their ability. The inspectors
shall determine the number of shares outstanding, the voting power of
each, the shares represented at the meeting, the existence of a quorum,
the qualification of the voters, the authenticity, validity and effect of
proxies, receive votes and ballots, hear and determine all challenges and
questions in any way arising in connection with the vote, count and
tabulate all votes and determine and announce the result of the voting.
Section 11. At an annual meeting of the shareholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must
be specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board, otherwise properly brought before the
meeting by or at the direction of the Board, or otherwise properly brought
before the meeting by a shareholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting
by a shareholder, the shareholder must have given timely notice thereof
in writing to the Corporate Secretary. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal
executive offices of the Company, not less than fifty (50) days nor more
than seventy-five (75) days prior to the meeting; provided, however, that
in the event that less than sixty-five (65) days' notice or prior public
disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than
the close of business on the 15th day following the day on which such
notice of the date of the annual meeting was mailed or such public
disclosure was made. A shareholder's notice to the Corporate Secretary
shall set forth as to each matter the shareholder proposes to bring before
the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of the
shareholder proposing such business, (iii) the class and number of shares
of the Company which are beneficially owned by the shareholder, and (iv)
any material interest of the shareholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance
with the procedures set forth in this Section 11; provided, however, that
nothing in this Section 11 shall be deemed to preclude discussion by any
shareholder of any business properly brought before the annual meeting in
accordance with said procedure.
The chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this
Section 11, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting
shall not be transacted.
Section 12. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the
Company may be made at a meeting of shareholders by or at the direction
of the Board of Directors by any nominating committee or person appointed
by the Board or by any shareholder of the Company entitled to vote for the
election of Directors at the meeting who complies with the notice
procedures set forth in this Section 12. Such nominations, other than
those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Corporate Secretary. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Company not less than fifty (50) days
nor more than seventy-five (75) days prior to the meeting; provided,
however, that in the event that less than sixty-five (65) days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received
not later than the close of business on the 15th day following the date
on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice to the Corporate Secretary
shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a Director, (i) the name, age,
business address and residence address of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of
shares of capital stock of the Company which are beneficially owned by the
person, and (iv) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of
Directors pursuant to Regulation 14A under the Securities Exchange Act of
1934 as amended; and (b) as to the shareholder giving the notice (i) the
name and record address of shareholder and (ii) the class and number of
shares of capital stock of the Company which are beneficially owned by the
shareholder. The Company may require any proposed nominee to furnish such
other information as may reasonably be required by the Company to
determine the eligibility of such proposed nominee to serve as Director
of the Company. No person shall be eligible for election as a Director of
the Company unless nominated in accordance with the procedures set forth
herein.
The chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance
with the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
ARTICLE III
Directors
Section 1. The powers of the Company shall be exercised under the
authority of, and the business and affairs of the Company shall be managed
under the direction of, its Board of Directors who may do all such lawful
acts and things as are not by statute or by the Articles of Incorporation
or by these Bylaws directed or required to be exercised or done by the
shareholders.
Section 2. The number of Directors constituting the Board of
Directors of the Company shall be fixed from time to time by the Board of
Directors by the affirmative vote of not less than a majority of the
Continuing Directors (as defined in Article Ten of the Restated Articles
of Incorporation of the Company), but shall not be less than three (3),
subject to such rights to elect additional Directors under such specified
circumstances as may be granted to holders of Preferred Stock. Directors
need not be shareholders or residents of the State of Texas. A person
shall be ineligible to be a Director of the Company after the date of the
annual meeting of shareholders of the Company in the year in which such
person's seventieth birthday occurs. Unless he shall resign or become
ineligible, each Director shall hold office until his successor shall be
elected and shall qualify.
Section 3. Any Director may resign at any time either by oral tender
of resignation at any meeting of the Board of Directors or by giving
written notice thereof to the Corporate Secretary. Resignations shall take
effect when tendered or at the time specified in the tender and, unless
otherwise specified, the acceptance of a resignation shall not be
necessary to make it effective.
Section 4. Any Director may be removed, either with or without
cause, at any special meeting of the shareholders by the affirmative vote
of the holders of record of not less than 66 of the shares then entitled
to vote at an election of Directors, if notice of the intention to act
upon such matter shall have been given in the notice calling for such
meeting. Any vacancy occurring in the Board of Directors may be filled
by the affirmative vote of a majority of the remaining Directors even
though such remaining Directors shall be less than a quorum of the Board
of Directors. A Director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office. Any directorship to be
filled by reason of an increase in the number of Directors as provided in
Section 2 hereof shall be filled solely by the affirmative vote of not
less than a majority of the Continuing Directors for a term of office
continuing until the next annual meeting of shareholders; provided that
the Board of Directors may not fill more than two such directorships
between any two successive annual meetings of shareholders.
Section 5. The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its
members one or more committees, each of which shall be comprised of one
or more of its members, and may designate one or more of its members as
alternate members of any committee, who may, subject to any limitations
imposed by the Board of Directors, replace absent or disqualified members
at any meeting of that committee. Any such committee, to the extent
provided in such resolutions or in the Articles of Incorporation or the
Bylaws, shall have and may exercise all of the authority of the Board of
Directors, provided that no committee of the Board of Directors shall have
the authority of the Board of Directors in reference to: (1) amending the
Articles of Incorporation, except that a committee may, to the extent
provided in the resolution designating that committee or in the Articles
of Incorporation or the Bylaws, exercise the authority of the Board of
Directors vested in it in accordance with Article 2.13 of the Texas
Business Corporation Act ("Act"); (2) proposing a reduction of the stated
capital of the Company in the manner permitted by Article 4.12 of the Act;
(3) approving a plan of merger or share exchange of the Company; (4)
recommending to the shareholders the sale, lease, or exchange of all or
substantially all of the property and assets of the Company otherwise than
in the usual and regular course of its business; (5) recommending to the
shareholders a voluntary dissolution of the Company or a revocation
thereof, (6) amending, altering, or repealing the Bylaws of the Company
or adopting new Bylaws of the Company; (7) filling vacancies in the Board
of Directors; (8) filling vacancies in or designating alternate members
of any such committee; (9) filling any directorship to be filled by reason
of an increase in the number of Directors; (10) electing or removing
officers of the Company or members or alternate members of any such
committee; (11) fixing the compensation of any member o alternate members
of such committee; or (12) altering or repealing any resolution of the
Board of Directors that by its terms provides that it shall not be so
amendable or repealable; and, unless such resolution designating a
particular committee, the Articles of Incorporation, or the Bylaws
expressly so provide, no committee of the Board of Directors shall have
the authority to authorize a distribution or to authorize the issuance of
shares of the Company.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. The Directors of the Company may hold their meetings, both
regular and special, either within or without the State of Texas.
Section 7. The first meeting of each newly elected Board of Directors
shall be held without further notice immediately following the annual
meeting of shareholders, and at the same place, unless by unanimous
consent of the Directors then elected and serving such time or place shall
be changed.
Section 8. Regular meetings of the Board of Directors may be held
with or without notice at such time and place as shall from time to time
be determined by the Board of Directors.
Section 9. Special meetings of the Board of Directors may be called
on twenty-four (24) hours' notice to each Director, or such shorter period
of time as the person calling the meeting deems appropriate in the
circumstances, either personally, or by mail, or by telegram; special
meetings shall be called by the Chairman or, in the event of the inability
of the Chairman to act, the President or the Corporate Secretary in like
manner and on like notice on the written request of two Directors. Neither
the business to be transacted at, nor the purpose of, any special meeting
need be specified in a notice or waiver of notice.
Section 10. At all meetings of the Board of Directors, the presence
of a majority of the number of Directors constituting the Board of
Directors shall constitute a quorum for the transaction of business and
the act of a majority of the Directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors. Any action
required or permitted to be taken at a meeting of the Board of Directors
may be taken without a meeting if a consent in writing, setting forth the
action so taken, is signed by all members of the Board of Directors. If
a quorum shall not be present at any meeting of the Directors, the
Directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
Section 11. The Board of Directors shall have authority to establish,
from time to time, the amount of compensation which shall be paid to its
members for their services as Directors.
ARTICLE IV
Notices
Section 1. Whenever under the provisions of the statutes or of the
Articles of Incorporation or of these Bylaws, notice is required to be
given to any Director or shareholder, and no provision is made as to how
such notice shall be given, it shall not be construed to mean notice, but
any such notice may be given in writing, by mail, postage prepaid,
addressed to such Director or shareholder at such address as appears on
the books of the Company. Any notice required or permitted to be given by
mail shall be deemed to be given at the time when the same shall be thus
deposited in the United States mails as aforesaid.
Section 2. Whenever any notice is required to be given to any
shareholder or Director of the Company under the provisions of the
statutes or of the Articles of Incorporation, or of these Bylaws, a waiver
thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated in such notice, shall be
equivalent to the giving of such notice. Attendance of a Director at a
meeting shall constitute a waiver of notice of such meeting, except when
a Director attends a meeting for the express purpose, in writing filed at
the meeting, of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called or held.
ARTICLE V
Officers
Section 1. The officers of the Company shall be a Chairman, a
President, one or more Executive Vice Presidents, Senior Vice Presidents
or Vice Presidents, a General Counsel, a Controller, a Corporate Secretary
and a Treasurer, all of whom shall be elected by the Board of Directors.
Any two or more offices may be held by the same person. Each such officer
shall have such authority and perform such duties in the management of the
Company as may be determined by resolution of the Board of Directors.
Section 2. The Board of Directors may elect or appoint such other
officers and agents as it shall deem necessary, who shall hold their
offices for such term and who shall have such authority and perform such
duties as may be prescribed by the Board of Directors or the Chairman. The
power to appoint such other officers and agents may be delegated by the
Board of Directors to the Chairman to the extent the Board may delineate
by resolution.
Section 3. Each officer of the Company shall hold office until his
successor is chosen and qualified in his stead or until his death or until
his resignation, retirement or removal from office. Any officer or agent
elected or appointed by the Board of Directors may be removed by the Board
of Directors whenever in its judgment the best interests of the Company
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment
of an officer or agent shall not of itself create contract rights.
Section 4. The Chairman shall be the chief executive officer of the
Company. He shall, subject to the direction and control of the Board of
Directors, be their representative and medium of communication. He shall
see that all orders, resolutions and policies adopted by the Board of
Directors are carried into effect. He shall preside at all meetings of
shareholders and at all meetings of the Board of Directors. He shall be
in complete charge with attendant responsibility and accountability of the
entire Company and its affairs.
Section 5. The President shall be the chief operating officer of the
Company. He shall, subject to the direction of the Chairman, have
responsibility for such operations and functions assigned to him; and in
the absence of the Chairman, shall preside at all meetings of the
shareholders and at all meetings of the Board of Directors.
Section 6. Each Executive Vice President shall have such powers and
responsibilities, and shall perform such duties, as delineated by the
Board or by the Chairman. They shall be directly responsible to such
officer as the Chairman may from time to time prescribe.
Section 7. The Senior Vice President, Chief Financial Officer, shall
have such powers and responsibilities and shall perform such duties, as
delineated by the Board of Directors or by the Chairman. He shall be
responsible to the Chairman in said performance.
Section 8. Other Senior Vice Presidents shall have such powers and
responsibilities, and shall perform such duties, as delineated by the
Board or by the Chairman. They shall be directly responsible to such
officer as the Chairman may from time to time prescribe.
Section 9. The General Counsel shall have general control over all
matters of a legal nature concerning the Company and shall perform such
duties as delineated by the Board or by the Chairman. He shall be directly
responsible to the Chairman in said performance.
Section 10. Each Vice President shall have such powers and
responsibilities, and shall perform such duties, as may be delineated by
the Board or the Chairman. They shall be directly responsible to such
officer as the Chairman may from time to time prescribe.
Section 11. The Controller shall be in general control of the
accounts of the Company, shall be responsible for the making of adequate
audits, shall prepare and interpret required accounting, financial and
statistical statements, and shall be directly responsible to such officer
and perform such other duties as the Board or Chairman may from time to
time prescribe.
Section 12. The Corporate Secretary shall attend all meetings of the
Board of Directors and shareholders and act as secretary thereof and shall
record all votes and the minutes of all proceedings of the Board of
Directors and shareholders in a book for that purpose maintained and kept
in his custody. He shall keep in his custody the seal of the Company and
shall in general perform all the duties incident to the office of
Secretary of a Company. He shall act as Transfer Agent of the Company
and/or Registrar of its capital stock and other securities; provided that
the Board of Directors may by resolution appoint one or more other persons
or corporations as Transfer Agents and/or Registrars or as Co-Transfer
Agents and/or Co-Registrars. He shall be directly responsible to such
officer and shall perform such other duties as the Board or Chairman may
from time to time prescribe.
Section 13. The Treasurer shall have custody of all the funds and
securities of the Company and shall keep full and accurate accounts of
receipts and disbursements. He may endorse checks, notes and other
obligations on behalf of the Company for collection and shall deposit the
same, together with all monies and other valuable effects, to the credit
of the Company in banks or depositories as the Board of Directors may
designate by resolution or as may be established in accordance with
Article VIII of these Bylaws. He shall be directly responsible to such
officer as the Chairman may from time to time designate and shall perform
all duties incident to the office of Treasurer of a Company or as the
Board or Chairman shall designate.
Section 14. The Board of Directors may appoint one or more Assistant
Corporate Secretaries, Assistant Treasurers and Assistant Controllers and
such other appointive officers as may be appropriate and required. They
shall be directly responsible to such officer and shall perform such
duties as the Board or Chairman may from time to time designate.
ARTICLE VI
Certificates Representing Shares
Section 1. The shares of stock of the Company shall be deemed
personal estate, and shall be transferable only on the books of the
Company in such manner as these Bylaws prescribe.
Section 2. Every shareholder in the Company shall be entitled to
have a certificate or certificates representing the number of shares owned
by him. The certificates of shares of stock of the Company shall be
numbered and shall be entered in the books of the Company as they are
issued. They shall exhibit the holder's name and number of shares, and
shall be signed by the Chairman, the President or a Vice President, and
the Treasurer or an Assistant Treasurer and bear the corporate seal; but
the signatures of such officers and the seal of the Company upon such
certificates may be facsimiles, engraved or printed where such certificate
is signed by a duly authorized Transfer Agent or Co-Transfer Agent and a
Registrar or Co-Registrar.
Section 3. The Board of Directors may make such rules and
regulations as it may deem expedient concerning the issue, transfer,
conversion, and registration of certificates for shares of the capital
stock of the Company.
Section 4. The Board of Directors may direct a new certificate
representing shares to be issued in place of any certificate theretofore
issued by the Company alleged to have been lost or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate
to be lost or destroyed. When authorizing such issue of a new certificate,
the Board of Directors, in its discretion and as a condition precedent to
the issuance thereof, may require the owner of such lost or destroyed
certificate, or his legal representative, to advertise the same in such
manner as it shall require and/or give the Company a bond in such form,
in such sum, and with such surety or sureties as it may direct as
indemnity against any claim that may be made against the Company and its
Transfer Agents and Registrars and its Co-Transfer Agents and
Co-Registrars with respect to the certificate alleged to have been lost or
destroyed.
Section 5. Transfers of shares of stock shall be made on the books
of the Company only by the person named in the certificate or by attorney,
lawfully constituted in writing, and upon surrender of the certificate
therefor.
Section 6. The Board of Directors may close the stock transfer books
of the Company for a period not to exceed sixty (60) days for the purpose
of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any distribution and share dividend, or in order to make a
determination of shareholders for any purpose, provided that if such books
shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a shareholders' meeting, such books shall be
closed for at least ten (10) days immediately preceding such meeting. In
lieu of so closing the stock transfer books, the Board of Directors may
fix a date in advance, not exceeding sixty (60) days preceding the date
of any meeting of shareholders, or the date for the payment of any
distribution and share dividend or the date for the allotment of rights,
or the date when any change or conversion or exchange of capital stock
shall go into effect, as a record date for the respective determination
of the shareholders entitled to notice of, and to vote at, any such
meeting, or entitled to receive payment of any such distribution and share
dividend, or to any such allotment of rights, or to exercise rights in
respect of any such change, conversion or exchange of capital stock and
in such case such shareholders and only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting, or to receive payment of such
distribution and share dividend, or to receive such allotment of rights,
or to exercise such rights, as the case may be, notwithstanding any
transfer of any shares of stock on the books of the Company after any such
record date fixed as aforesaid. In the absence of any designation with
respect thereto by the Board of Directors, the date upon which the notice
of a meeting is mailed or resolutions declaring a distribution and share
dividend are adopted shall be the record date for such determination in
regard to meetings of shareholders or declarations of distributions and
share dividends.
Section 7. The Company shall be entitled to treat the holder of
record of any share or of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly
provided by the laws of Texas.
Section 8. Bonds, debentures and other evidence of indebtedness of
the Company shall be signed by the Chairman, the President or any Vice
President and the Treasurer or an Assistant Treasurer and shall bear the
corporate seal and when so executed shall be binding upon the Company, but
not otherwise. The seal of the Company thereon may be facsimile, engraved
or printed, and where any such bond, debenture or other evidence of
indebtedness is authenticated with the manual signature of an authorized
officer of the Company or trustee appointed or named by an indenture of
trust or other agreement under which such security is issued, the
signature of any of the Company's officers authorized to execute such
security may be facsimile.
Section 9. In case any officer who signed, or whose facsimile
signature has been placed on any certificate representing shares of stock,
bond, debenture or evidence of indebtedness of this Company shall cease
to be an officer of the Company for any reason before the same has been
issued or delivered by the Company, such certificate, bond, debenture or
evidence of indebtedness may nevertheless be issued and delivered as
though the person who signed it or whose facsimile signature had been
placed thereon had not ceased to be such officer.
ARTICLE VII
Deeds and Other Instruments of Conveyance
Section 1. Deeds and other instruments of the Company conveying land
or any interest in land shall be signed by the Chairman, the President or
a Vice President or attorney-in-fact of the Company when authorized by
appropriate resolution of the Board of Directors or shareholders, and when
required by law, shall be attested by the Corporate Secretary or an
Assistant Corporate Secretary and shall bear the corporate seal, and when
so executed shall be binding upon the Company, but not otherwise.
ARTICLE VIII
Checks, Drafts and Bills of Exchange
Section 1. The Chairman or the President of the Company may
from time to time establish General Bank Accounts, Depository Bank
Accounts, and such Special Bank Accounts as in the judgment of either of
them may be needed in carrying on and dispatching the business of the
Company. All checks, drafts and bills of exchange issued in the name of
the Company and calling for the payment of money out of said General
Accounts, Depository Accounts, or Special Accounts of the Company shall
be signed by the Controller or Assistant Controller, or such agents and
employees as the Chairman or the President may from time to time designate
and authorize to sign for the Controller, and countersigned by the
Treasurer or any Assistant Treasurer, or such agents and employees as the
Chairman or the President may from time to time designate and authorize
to sign for the Treasurer; and when so designated by the Chairman or the
President, the signature of the Treasurer or an Assistant Treasurer may
be affixed by the use of a check-signing machine; provided that for the
purpose of transferring funds from any bank or depository at which the
Company has funds on deposit to any other bank or depository of the
Company for credit to the Company's account, a form of check having
plainly printed upon its face "DEPOSITORY TRANSFER CHECK," and being by
its wording payable to a bank or depository for credit to the account of
the Company, is hereby authorized, and such checks shall require no
signature other than the name of the Company printed at the lower right
corner; and further provided that checks, drafts and bills of exchange
issued in the name of the Company in the amount of $25,000.00 or less need
bear only one signature and that being the signature of the Treasurer or
an Assistant Treasurer, affixed either manually or by the use of a
check-signing machine, or the manual signature of such agents and employees as
the Chairman or the President may from time to time designate and
authorize to sign for the Treasurer; and provided further that checks and
drafts issued in the name of the Company and calling for the payment of
production revenue or royalties need bear only one signature and that
being the signature of the Treasurer or an Assistant Treasurer, affixed
either manually or by the use of a check-signing machine, or the manual
signature of such agents and employees as the Chairman or the President
may from time to time designate and authorize to sign for the Treasurer;
and provided further that checks and drafts issued in the name of the
Company and calling for payment of money out of Special Bank Accounts
established for the payment of dividends need bear only one signature and
that being the signature of the Treasurer or an Assistant Treasurer,
affixed either manually or by the use of a check-signing machine, or the
manual signature of such agents and employees as the Chairman or the
President may from time to time designate and authorize to sign for the
Treasurer; and further provided that no person authorized to sign checks
or drafts may sign a check or draft payable to himself. When in such
applicable manner, but not otherwise, every check, draft or bill of
exchange issued in the name of the Company and calling for the payment of
money out of the General Bank Accounts, Depository Bank Accounts, and
Special Bank Accounts of the Company shall be valid and enforceable
according to its wording, tenor and effect, but not otherwise. Provided,
however, that for the purpose of transferring funds between accounts of
the Company, from accounts of the Company to accounts of subsidiaries and
affiliates, from accounts of the Company for the purpose of investment of
corporate funds, and from accounts of the Company for the payment of
dividends, the Treasurer or an Assistant Treasurer, or such agents and
employees as the Chairman or the President may from time to time designate
and authorize, may make such transfer of funds by bank wire transfers
through oral or written instructions; and for the purpose of transferring
funds from accounts of the Company to accounts of other third parties, the
Company may make such transfers by electronic funds transfer, irrespective
of amount, when authorized by oral, computer-generated or written
instructions which are given by any two of the Treasurer, an Assistant
Treasurer, the Controller, an Assistant Controller, or such other agents
or employees as the Chairman and President may from time to time authorize
to act for the Treasurer or Controller.
Section 2. The Treasurer of the Company may establish special bank
accounts designated as Agent's Account in such bank or banks as in his
judgment may be needed in carrying on and dispatching the business of the
Company, provided that the Treasurer in establishing and maintaining such
accounts shall keep only such funds therein and in such amount as may be
required for the local needs of such accounts and provided that checks or
drafts issued against or drawn on such accounts shall be valid and binding
on the Company according to their wording, tenor and effect when signed
by either the Treasurer of the Company or by such agent or employee of the
Company as may be designated by the Treasurer in writing to such bank or
when signed in such manner and by such agent or employee of the Company
as may be designated by the Chairman or the President of the Company; and
further provided that checks and drafts issued in the name of the Company
against funds in such Agent's Account in the amount of $1,000.00 or more
must be countersigned by two persons authorized to sign such checks or
drafts.
ARTICLE IX
Fiscal Year
Section 1. The fiscal year shall begin on the first day of January
in each year.
ARTICLE X
Distributions and Share Dividends
Section 1. Distributions and share dividends upon the outstanding
shares of the Company, subject to the provisions of the Articles of
Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting. Distributions may be paid in cash or property,
and share dividends may be paid in shares of the authorized but unissued
shares or in treasury shares, of the Company subject to the provisions of
the Articles of Incorporation.
ARTICLE XI
Reserves
Section 1. There may be created by resolution of the Board of
Directors out of the earned surplus of the Company such reserve or
reserves as the Directors from time to time, in their discretion, think
proper to provide for contingencies, or to equalize dividends, or to
repair or maintain any property of the Company, or for such other purpose
as the Directors shall think beneficial to the Company, and the Directors
may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE XII
Seal
Section 1. The Company's seal shall have inscribed thereon the name
of the Company and the words "Corporate Seal, Texas." Said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE XIII
Indemnification
Section 1. The Company shall indemnify, and advance or reimburse
reasonable expenses incurred by, any person who (1) is or was a director
or officer of the Company or (2) while a director or officer of the
Company, its divisions or subsidiaries, is or was serving at the request
of the Company, pursuant to a resolution adopted by the Board of
Directors, as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise, to the fullest extent that a
Company may or is required to grant indemnification to, or advance or
reimburse reasonable expenses incurred by, a director under the Act. The
Company, pursuant to a resolution adopted by the Board of Directors, may
indemnify any such persons to such further extent as permitted by law.
Section 2. The Company, pursuant to a resolution adopted by the
Board of Directors, may indemnify, and advance or reimburse reasonable
expenses incurred by, any other person to the fullest extent permitted
under the Act.
Section 3. Action by the Board of Directors to amend, modify or
terminate ARTICLE XIII, Section 1 or Section 2, shall be prospective from
the effective date of such action and any rights or obligations resulting
from an event or events occurring prior thereto shall be governed by the
provisions of Section 1 or Section 2, as the case may be, of this ARTICLE
XIII as of the date of such event or events.
ARTICLE XIV
Amendments
Section 1. The power to alter, amend, suspend or repeal the Bylaws
or to adopt new Bylaws shall be vested in, and shall require the approval
of, the majority of Continuing Directors then in office; provided,
however, that any Bylaw or Amendment thereto as adopted by the Board of
Directors may be altered, amended, suspended or repealed by the vote of
the holders of 662/3% of the shares entitled to vote for the election of
Directors or a new Bylaw in lieu thereof may be adopted by vote of such
shareholders. No Bylaw which has been altered, amended or adopted by such
a vote of the shareholders may be altered, amended, suspended or repealed
by vote of the Directors until two years after such action by vote of the
shareholders.
ARTICLE XV
Restrictions on Foreign Ownership
Section 1. The purpose of this Article XV is to limit ownership and
control of shares of any class of capital stock of the Company by persons
who are not Eligible Citizens in order to permit the Company or any of its
Subsidiaries to conduct its business as a U.S. Mineral Lessee. The Board
of Directors is hereby authorized to adopt such resolutions, and to effect
any and all other measures reasonably necessary or desirable (consistent
with applicable law and the provisions of the Articles of Incorporation)
to fulfill the purpose and implement the restrictions of this Article XV,
including without limitation, requiring, as a condition precedent to the
transfer of shares on the records of the Company, representations and
other proof as to the identity of existing or prospective shareholders and
persons on whose behalf of shares of any class of capital stock of the
Company or any interest therein or right thereof are or are to be held and
as to whether or not such persons are Eligible Citizens.
Section 2. Any transfer, or attempted or purported transfer, of any
shares of any class of capital stock issued by the Company or any interest
therein or right thereof, which would result in the ownership or control
by one or more non-Eligible Citizens of the shares of any class of capital
stock of the Company or of any interest or right therein will, until such
condition no longer exists, be void and will be ineffective as against the
Company and the Company will not recognize the purported transferee as a
shareholder of the Company for any purpose other than the transfer of such
shares to a person who is an Eligible Citizen provided, however, that such
shares may nevertheless be deemed to be shares held or owned by
non-Eligible Citizens for the purposes of this Article XV.
Section 3. No shares of the outstanding capital stock of the Company
or any class thereof transferred to, or acquired or held by, a
non-Eligible Citizen shall be entitled to receive or accrue any rights with
respect to any dividends or other distributions of assets declared payable
or paid to the holders of such capital stock during such period.
Furthermore, no shares held by or for the benefit of any non-Eligible
Citizen will be entitled to vote with respect to any matter submitted to
stockholders of the Company so long as such condition exists.
Section 4. If at any time (i) the Company is named, or is threatened
to be named, as a party in a judicial or administrative proceeding that
seeks the cancellation or forfeiture of any property, lease, right or
license in which the Company has an interest or (ii) if, in the opinion
of the Board of Directors, the Company's ability to hold any property,
lease, right or license would be prohibited or restricted because of the
nationality, citizenship, residence, or other status, of any shareholder
of the Company (or, in the case of a shareholder which is a Company,
partnership or association, of any shareholder, owner, partner or member
of such shareholder), the Company may redeem the shares held by such
shareholder at the then Current Market Price and upon such terms as shall
be determined by the Board of Directors, in their sole discretion.
Section 5. "Current Market Price" per share of capital stock of the
Company on any date is the average of the Quoted Prices of such class of
capital stock during the four trading weeks before the date in question.
In the absence of one or more such quotations, the Board of Directors
shall determine the current market price on the basis of such quotations
as it considers appropriate.
"Eligible Citizen" means any person (including a Company,
partnership or other entity) whose ownership, holding or control of shares
in the Company would not, by reason of such person's citizenship or the
citizenship of its members or owners or otherwise, (1) disqualify the
Company or any of its Subsidiaries from owning, acquiring, holding,
possessing, or leasing oil, gas or other minerals, mineral deposits, land,
vessels or any other property, licenses, or rights of any nature
whatsoever in federal lands or leases under federal laws and regulations
in effect from time to time, or (2) violate any other qualifications as
the Board of Directors deems in its reasonable discretion are necessary
or appropriate to permit the Company and its Subsidiaries to engage in any
other business activities for which there may be qualifications or
restrictions on shareholders of the Company or any of its Subsidiaries
applicable under federal or state law. A person is an Eligible Citizen if
the applicable following requirement is met: (1) for an individual, that
he is native-born, naturalized or a derivative Citizen of the United
States or otherwise qualifies as a United States citizen; (2) for a
Company, that is organized or existing under the laws of the United
States, a state, the District of Columbia or United States territory or
possession, that at least 75% of the ownership interest in, and the voting
power over, the Company is held by Eligible Citizens, that the Company's
president or other chief executive officer and the chairman of its board
of directors are United States citizens and that no more than a minority
of the number of directors required to constitute a quorum are non-United
States citizens; (3) for a partnership, that all of the interests in the
partnership, are owned by Eligible Citizens; (4) for a trust, that each
of its trustees and each of its beneficiaries is an Eligible Citizen; and
(5) for an association, joint venture, or other entity, that all members,
venturers or other equity participants are Eligible Citizens and that such
association, joint venture or other entity is capable of holding leases
or other interest in federal minerals or lands under the laws of the
United States.
"Quoted Price" means, with respect to any class of capital stock of
the Company, the last reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the closing bid and
asked prices regular way for such day, in each case on the principal
national securities exchange on which the shares of such class of capital
stock are listed or admitted to trading or, if not listed or admitted to
trading, the last sale price regular way for such shares as published by
NASDAQ, or if such last price is not so published by NASDAQ or if no such
sale takes place on such day, the mean between the closing bid and asked
prices for such shares as published by NASDAQ or in the absence of any of
the foregoing, the fair market value as determined by the Board of
Directors.
"Subsidiary" means any Company more than 50% of the outstanding
capital stock of which is owned by the Company or any Subsidiary of the
Company.
"U.S. Mineral Lessee" means any Company or other entity directly or
indirectly owning, acquiring, holding, possessing, or leasing oil, gas or
other minerals, mineral deposits, lands, vessels or any other property,
licenses, or rights of any nature whatsoever in federal lands or leases
under federal laws and regulations in effect from time to time, including,
without limitation, the Mineral Leasing Act of 1920, as amended, 30
U.S.C.A. 181 et seq.
As amended by the Board of
Directors on August 12, 1997
<PAGE>
<PAGE> EXHIBIT 4.3
AMENDED AND RESTATED
CLASS A CUMULATIVE PERPETUAL INCREASING DIVIDEND
PREFERRED STOCK
SUBSCRIPTION AGREEMENT
among
EEX Capital Inc.,
UBS Securities LLC,
as Placement Agent for the Holders from time
to time of the Preferred Stock,
and
Enserch Exploration, Inc.
(not an issuer)
_____________________________
Effective as of September 29, 1997
_____________________________
AMENDED AND RESTATED PREFERRED STOCK SUBSCRIPTION AGREEMENT
THIS AMENDED AND RESTATED PREFERRED STOCK SUBSCRIPTION
AGREEMENT (this "Agreement"), is entered into as of October 27,
1997, and effective as of September 29, 1997, by and among EEX
Capital Inc., a Delaware corporation (the surviving corporation
of the merger between EEX Preferred Capital Inc. and EEX Capital
L.L.C.) ("EEX Capital"), a wholly owned subsidiary of Enserch
Exploration, Inc., a Texas corporation ("EEX"), and UBS
Securities LLC individually ("UBS") and as placement agent for
the holders from time to time of the Preferred Stock (as defined
below) (in such capacity, the "Placement Agent"), and amends and
restates in its entirety that certain Cumulative Perpetual
Increasing Dividend Preferred Interests and Class A Cumulative
Perpetual Increasing Dividend Preferred Stock Subscription
Agreement dated as of September 29, 1997 by and among EEX
Capital, MIStS Issuer L.L.C., EEX, UBS and the Placement Agent
(the "Existing Agreement").
RECITALS
EEX Capital has authorized the execution and issuance
of 150,000 shares of its Class A Cumulative Perpetual Increasing
Dividend Preferred Stock (the "Preferred Stock").
On September 29, 1997, UBS purchased 75,000 shares of
Preferred Stock for $75,000,000 and purchased 75,000 Cumulative
Perpetual Increasing Dividend Preferred Interests of MIStS Issuer
L.L.C. (the "Preferred Interests") pursuant to the Existing
Agreement.
On October 27, 1997, (i) UBS purchased an additional
75,000 shares of Preferred Stock for $75,000,000 plus accrued and
unpaid dividends, (ii) EEX Capital paid in full and terminated
its obligations under it subordinated promissory note made by EEX
Capital in favor of MIStS Issuer L.L.C., reevidencing $75,000,000
of Indebtedness and (iii) MIStS Issuer L.L.C. redeemed the
Preferred Interests in full. Accordingly, as of the date hereof,
UBS owns all of the authorized, issued and outstanding shares of
the Preferred Stock.
The Preferred Stock was issued pursuant to a
certificate of designations, preferences and relative,
participating, optional and other special rights of preferred
stock and qualifications, limitations and restrictions thereof,
filed with the Secretary of State of the State of Delaware on
September 29, 1997 which is being amended and restated as of the
date hereof (as so amended and restated, the "Certificate of
Designations").
On the terms and subject to the conditions hereinafter
set forth, the parties wish to amend and restate the Existing
Agreement as hereinafter provided to govern certain of the terms
of the Preferred Stock from and after the Effective Date.
AGREEMENT
Accordingly, the parties agree as follows:
ARTICLE
DEFINITIONS
Section Defined Terms. As used in this Agreement,
the following terms shall have the meanings specified below:
"Action" has the meaning specified in Section 10.2.
"Additional Costs" means costs indemnified under
Section 10.4.
"Affected Party" means any Holder, any beneficial owner
of any Holder, and their respective successors and assigns.
"Affiliate" means with respect to any Person, any other
Person that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person. For purposes of the foregoing
definition, "control" means the direct or indirect ownership of
more than 50% of the outstanding capital stock or other equity
interests having ordinary voting power.
"Bankruptcy Law" means Title 11, United States Code, or
any similar federal or state law for the relief of debtors.
"beneficial owner" has the meaning as defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act.
"Benefit Plan" means any employee pension benefit plan,
as defined in section 3(2) of ERISA (other than a Multiemployer
Plan), which (a) is currently or hereafter sponsored, maintained
or contributed to by EEX, a Subsidiary or an ERISA Affiliate or
(b) was at any time during the six preceding years, sponsored,
maintained or contributed to by EEX, a Subsidiary or an ERISA
Affiliate.
"Board" means the Board of Governors of the Federal
Reserve System of the United States or any successor.
"Business Day" means a day other than a Saturday, a
Sunday, any federal holiday or any day on which dealings in U.S.
dollar deposits are not carried out in the London interbank
market.
"Capital Lease Obligations" means, with respect to EEX
or any Subsidiary of EEX (including EEX Capital), the obligations
of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal
property which obligations are required to be classified and
accounted for as a liability for a capital lease on a balance
sheet of such Person in accordance with GAAP and, for purposes of
this Agreement, the amount of such obligations shall be the
capitalized amount thereof.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, (iii)
in the case of a partnership, partnership interests (whether
general or limited) and (iv) any other interest or participation
that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing
Person.
"Certificate of Designations" has the meaning specified
in the recitals to this Agreement and is in the form attached
hereto as Exhibit A.
"Change of Control" means the acquisition by any
Person, or two or more Persons acting in concert, of beneficial
ownership (within the meaning of the Exchange Act) of 35% or more
of the outstanding shares of voting stock of EEX.
"Closing Date" means September 29, 1997.
"Code" means the Internal Revenue Code of 1986, as
amended, and any regulation promulgated thereunder.
"Commitment" means the commitment to purchase Preferred
Stock in the Liquidation Preference amount in each case as set
forth on the signature pages hereto opposite UBS' name.
"Commitment Letter" means that certain bridge
commitment letter, including the summary of terms attached
thereto, by and among UBS, EEX, MIStS Issuer L.L.C. and EEX
Capital, effective as of September 29, 1997.
"Common Stock" means all shares now or hereafter
authorized of any class of common stock of EEX Capital, including
the common stock, par value per share $100.00, and any other
stock of EEX Capital, howsoever designated, authorized after the
Initial Issue Date, that have the right (subject always to prior
rights of any class or series of preferred stock) to participate
in the distribution of the assets and earnings of EEX Capital.
"Consolidated Subsidiaries" means each Subsidiary
(whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been)
consolidated with the financial statements of EEX in accordance
with GAAP.
"Custodian" means any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy
Law.
"Debt" means for EEX and its Subsidiaries (except EEX
Capital), the sum of the following (without duplication): (i)
all obligations for borrowed money or evidenced by bonds,
debentures, mandatorily redeemable preferred stock with
maturities before the Revolving Credit Termination Date (as
defined in the EEX Credit Agreement), notes or other similar
instruments (excluding interest, fees and charges); (ii) all
obligations in respect of bankers acceptances, unreimbursed
drawings on letters of credit, surety or other bonds; (iii) all
Capital Lease Obligations; (iv) all Operating Lease Obligations;
(v) all financial guaranties in respect of Indebtedness of
unconsolidated Affiliates and unrelated Persons; (vi) all
obligations secured by a Lien on any asset, whether or not such
indebtedness is assumed, but excluding obligations secured by a
Lien permitted by Sections 9.02(c), (e), (f), (h), (i), (j), (k)
and (l) of the EEX Credit Agreement; (vii) all production
payments in connection with oil and gas properties; and (viii)
all Indebtedness of Special Entities (as defined in the EEX
Credit Agreement) to the extent EEX, EEX Capital is liable for
such Indebtedness under GAAP or such Indebtedness is reflected on
the consolidated balance sheet of EEX and/or EEX Capital;
provided, however, such term shall not include Permitted
Subordinated Debt.
"Default" means any event that is, or after the passage
of time or the giving of notice (or both) would be, an Event of
Default.
"Effective Date" means October 27, 1997.
"EEX" means Enserch Exploration, Inc., a Texas
corporation.
"EEX Capital" has the meaning specified in the preamble
to this Agreement.
"EEX Credit Agreement" means that certain Credit
Agreement dated as of May 1, 1995 among EEX, as borrower, The
Chase Manhattan Bank, as Administrative Agent, and the lenders
signatory thereto, as amended by the First Amendment dated
September 19, 1996, and the Second Amendment dated June 27, 1997,
and as modified by that certain letter from EEX to the
Administrative Agent and in effect on the Closing Date, together
with such amendments thereto as may be both adopted in accordance
therewith and consented to by the Majority Holders.
"EEX Subordination Agreement" means the subordination
agreement effective as of September 29, 1997, issued by EEX
Capital in favor of the administrative agent and the lenders
under the EEX Credit Agreement subordinating the Subordinated
Note to the "Superior Indebtedness" (as such term is defined in
such subordination agreement).
"Engagement Letter" means that certain amended and
restated engagement letter agreement by and among UBS, EEX and
EEX Capital effective as of September 29, 1997.
"Environmental Laws" means any and all Governmental
Requirements pertaining to health or the environment in effect in
any and all jurisdictions in which EEX or any Subsidiary is
conducting or at any time has conducted business, or where any
Property of EEX or any Subsidiary is located, including without
limitation, 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, the Hazardous Materials
Transportation Act, as amended, and other environmental
conservation or protection laws. The term "oil" shall have the
meaning specified in OPA, the terms "hazardous substance" and
"release" (or "threatened release") shall have the meanings
specified in CERCLA, and the terms "solid waste" and "disposal"
(or "disposed") shall have the meanings specified in RCRA;
provided, however, that (i) in the event either OPA, CERCLA or
RCRA 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 (ii) to the extent the laws
of the state in which any Property of EEX or any Subsidiary 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.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute.
"ERISA Affiliate" means each trade or business (whether
or not incorporated) which together with EEX or a Subsidiary
would be deemed to be a "single employer" within the meaning of
section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o)
of section 414 of the Code.
"ERISA Event" means (i) a "Reportable Event" described
in section 4043 of ERISA and the regulations issued thereunder
(other than a "Reportable Event" not subject to the provision for
30-day notice to the PBGC), (ii) the withdrawal of EEX, a
Subsidiary or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in section
4001(a)(2) of ERISA, (iii) the filing of a notice of intent to
terminate a Plan or the treatment of a Plan amendment as a
termination under section 4041 of ERISA, (iv) the institution of
proceedings to terminate a Plan by the PBGC, (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 or (vi) the partial or complete withdrawal
of EEX, a Subsidiary or any ERISA Affiliate from a Multiemployer
Plan.
"Event of Default" means any event specified in Section
8.1.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Fee Letter" means that certain amended and restated
fee letter agreement by and among UBS, EEX and EEX Capital,
effective as of September 29, 1997.
"Financial Statements" means the financial statement or
statements of EEX and its Consolidated Subsidiaries described or
referred to in Section 4.1.
"GAAP" means generally accepted accounting principles
in the United States of America in effect from time to time.
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof and
any Person exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Governmental Requirement" means any law, statute,
code, ordinance, order, determination, rule, regulation,
judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other directive or requirement (whether
or not having the force of law), including, without limitation,
Environmental Laws, energy regulations and occupational, safety
and health standards or controls, of any Governmental Authority.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the
payment of which obligations or guarantee the full faith and
credit of the United States of America is pledged.
"Guarantee" means a guarantee (other than by
endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner
(including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part
of any Indebtedness.
"Holder" means the record holder of one or more shares
of Preferred Stock, as shown on the books and records of EEX
Capital.
"Incur" has the meaning specified in Section 5.2.
"Indebtedness" of a Person means such Person's (i)
obligations for borrowed money, whether or not evidenced by a
bond, note or similar instrument, (ii) obligations representing
the deferred purchase price of property other than accounts
payable arising in the ordinary course of such Person's business
on terms customary in the trade, (iii) obligations, whether or
not assumed, secured by Liens or payable out of the proceeds or
production from property now or hereafter owned or acquired by
such Person, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) Capital Lease Obligations,
(vi) obligations for which such Person is obligated pursuant to a
Guarantee or pursuant to a letter of credit, (vii) Hedging
Obligations, and (viii) Mandatorily Redeemable Obligations.
"Indemnified Party" has the meaning specified in
Section 10.1.
"Indemnifying Parties" has the meaning specified in
Section 10.1
"Lien" means any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner
of the Property, whether such interest is based on the common
law, statute or contract, and whether such obligation or claim is
fixed or contingent, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes.
"Liquidated Damages" means any and all liquidated
damages then owing pursuant to any of the Transaction Documents.
"Liquidation Preference" means $1,000.00 per share of
Preferred Stock.
"Loan Documents" has the meaning specified in the EEX
Credit Agreement.
"Majority Holders" means a majority in Liquidation
Preference of the Holders of the Preferred Stock.
"Mandatorily Redeemable Obligation" means, with respect
to any Person, an obligation of such Person or any of its
Subsidiaries to the extent that it is redeemable, payable or
required to be purchased or otherwise retired or extinguished (a)
at a fixed or determinable date, whether by operation of a
sinking fund or otherwise, (b) at the option of any Person other
than such Person or such Subsidiary, or (c) upon the occurrence
of a condition not solely within the control of such Person or
such Subsidiary, such as a redemption required to be made out of
future earnings.
"Material Adverse Effect" means any material and
adverse change in the financial condition, business or results of
operations of EEX and its Subsidiaries (including EEX Capital)
taken as a whole which makes EEX unable to perform its
obligations under the Subordinated Note.
"Multiemployer Plan" means a multiemployer plan as
defined in section 3(37) or 4001(a)(3) of ERISA which is, or
within the six preceding years was, contributed to by EEX, a
Subsidiary or an ERISA Affiliate.
"Net Cash Proceeds" means the aggregate cash proceeds
received (including any cash payments received by way of deferred
payment of principal pursuant to a promissory note or installment
receivable or otherwise, but only as and when received) from any
Capital Market Transaction, net of (i) all commissions (including
any underwriters' discounts) and (ii) other ordinary and
reasonable fees and expenses (including legal fees and expenses)
incurred as a consequence of such Capital Market Transaction.
"Obligations" means any principal, interest, penalties,
fees (including, but not limited to, reasonable fees and expenses
of counsel), indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing and
Indebtedness.
"Officer" means, with respect to any Person, the
Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial
Officer, the Managing Member, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or any Vice-President of
such Person.
"Officer's Certificate" means, with respect to any
Person, a certificate signed on behalf of such Person by an
Officer of such Person, who must be the Chief Executive officer,
the Chief Financial officer, the Treasurer or the Principal
accounting officer of such Person that meets the requirements of
Section 13.4.
"Operating Lease Obligations" means, as to EEX or any
direct or indirect Subsidiary, the obligations of such person to
pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which
obligations are not required to be classified and accounted for
as a liability for a capital lease on a balance sheet of such
Person and, the purposes of this Agreement, the amount of such
obligations shall be the discounted present value of the lease
payments, discounted in the same manner a capital lease would be
discounted according to GAAP.
"Opinion of Counsel" means, with respect to any Person,
an opinion from legal counsel to such Person that is reasonably
acceptable to the Majority Holders on the applicable date.
"PBGC" means the Pension Benefit Guaranty Corporation,
or any successor thereto.
"Permanent Securities" means any securities or other
obligation issued by EEX Capital to redeem or otherwise retire
the Preferred Stock in accordance with the terms and conditions
of the Fee Letter.
"Permitted Subordinated Debt" means Debt of EEX or
another Subsidiary (other than EEX Capital) subordinated to the
Indebtedness on terms substantially similar to the terms set
forth in the EEX Subordination Agreement.
"Person" means any individual, corporation, company,
limited liability company, voluntary association, partnership,
joint venture, trust, unincorporated organization or government
or any agency, instrumentality or political subdivision thereof,
or any other form of entity.
"Placement Agent" has the meaning specified in the
preamble to this Agreement.
"Plan" means each Benefit Plan and Multiemployer Plan.
"Preferred Stock" has the meaning specified in the
recitals to this Agreement.
"Preferred Stock Register" means the register
maintained by EEX Capital pursuant to the Certificate of
Designations.
"Prohibited Issuance" means an issuance of securities
or incurrence of Indebtedness in violation of the covenant set
forth in Section 5.2.
"Property" means any interest in any kind of property
or asset, whether real, personal or mixed, or tangible or
intangible.
"Redemption Price" means the Liquidation Preference,
plus (i) accrued and unpaid dividends to the date of redemption
and (ii) any Additional Costs.
"Relevant Parties" means EEX, EEX Capital and each of
their respective Subsidiaries (if any).
"Responsible Officer" means as to EEX or any
Subsidiary, the Chief Executive Officer, the President or any
Vice President of EEX Capital and, with respect to financial
matters, the term "Responsible Officer" shall include the Chief
Financial Officer, Controller, Vice President, Finance, Treasurer
or Treasury Officer of such Person. Unless otherwise specified,
all references to a Responsible Officer herein shall mean a
Responsible Officer of EEX.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Debt" means the principal (whether denominated
as principal, monthly rental or other notional quantity),
premium, if any, and unpaid interest on, and any reasonable fees
or costs related to, (a) any Debt of EEX and its Subsidiaries
(other than EEX Capital), whether outstanding on the date hereof
or hereafter created, which is incurred, assumed, or guaranteed
in compliance with the EEX Credit Agreement, unless in the
instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such indebtedness is
not superior in right of payment to the Subordinated Note, and
(b) renewals, extensions, modifications and refundings of any
such Debt. For the avoidance of doubt, Debt which is created,
incurred, assumed, or guaranteed in violation of terms of the EEX
Credit Agreement shall not constitute Senior Debt, and Debt which
is created, incurred, assumed, or guaranteed in compliance with
the terms of the EEX Credit Agreement Debt shall at all times
constitute Senior Debt, notwithstanding any event or circumstance
which may subsequently occur which would constitute the creation,
incurrence, assumption or guarantee of such Debt at such time a
violation of the EEX Credit Agreement.
"Significant Subsidiary" means any Subsidiary that
would be a "significant subsidiary" as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities
Act, as such Regulation is in effect on the date hereof.
"Special Entity" means any joint venture, limited
liability company, general or limited partnership or any other
type of partnership or company in which EEX or one or more of its
other Subsidiaries is a member, owner, partner or joint venturer
and owns at least a majority of the equity of such entity.
"Stock Registration Rights Agreement" means the
registration rights agreement, dated as of September 29, 1997,
between EEX Capital and the Placement Agent on behalf of the
Holders, in the form attached as Exhibit D.
"Subordinated Note" means the subordinated debenture
issued by EEX and held by EEX Capital evidencing $150.0 million
of Permitted Subordinated Debt, effective as of September 29,
1997.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more
than 50% of the total voting power of shares of Voting Stock
thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and (ii)
any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such
person or (b) the only general partners of which are such Person
or of one or more Subsidiaries of such Person (or any combination
thereof).
"Subsidiary Guarantor" means any Subsidiary or Special
Entity that has executed a Subsidiary Guaranty Agreement.
"Subsidiary Guaranty Agreement" means any Guaranty
Agreement executed by a Subsidiary or a Special Entity as
required by the EEX Credit Agreement.
"Transaction Documents" means this Agreement, the
Certificate of Designations, the Preferred Stock, the Engagement
Letter, the Fee Letter, the Stock Registration Rights Agreement,
the Subordinated Note and the EEX Subordination Agreement.
"UBS" has the meaning specified in the preamble to this
Agreement.
"Voting Stock" means, with respect to any Person at any
time, the Capital Stock of such Person that is at such time
entitled to vote in the election of the board of directors of
such Person.
"Voting Rights Trigger Event" means a voting rights
trigger event as defined in the Certificate of Designations.
"Withdrawal Liability" shall have the meaning given
such term under Part I of Subtitle E of Title IV of ERISA.
Section Interpretation. In this Agreement, the
singular includes the plural and the plural includes the
singular; words implying any gender include the other genders;
references to any section, exhibit or schedule are to sections,
exhibits or schedules hereto unless otherwise indicated;
references to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the
statute referred to; references to "writing" include printing,
typing, lithography and other means of reproducing words in a
visible form; "including" following a word or phrase shall not be
construed to limit the generality of such word or phrase; and an
accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP as in effect from time to time.
ARTICLE
REPRESENTATIONS AND WARRANTIES
As of the Closing Date (after giving pro forma effect
to the Transaction Documents, the issuance of the Preferred Stock
and the application of the proceeds thereof, and the transactions
contemplated hereby and thereby) and as of the Effective Date,
each of EEX and EEX Capital hereby agrees with, and represents
and warrants to, the Placement Agent and the Holders as follows:
Section Due Authorization and Enforceability.
Each of the Transaction Documents (i) has been
duly authorized, executed and delivered by each Relevant Party to
the extent a party thereto and (ii) constitutes a valid and
binding obligation of such Relevant Party, enforceable against
each of them in accordance with its terms, except as enforcement
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the
enforceability of creditors' rights generally and by general
principles of equity (whether arising under a proceeding at law
or in equity).
The shares of Preferred Stock have been duly
authorized by EEX Capital and, when issued and paid for in
accordance with the terms hereof will be fully paid,
nonassessable and entitled to the rights, privileges and
preferences set forth in the Certificate of Designations, and the
issuance of such shares will not be subject to any preemptive or
similar rights.
The Certificate of Designations has been duly
authorized by all necessary corporate and stockholder action.
Section Private Offering; Rule 144A Matters.
Based in part on the accuracy of the
representations of UBS in Section 7.1, the sale of the Preferred
Stock hereunder is and will be exempt from the registration and
prospectus delivery requirements of the Securities Act. Each
Preferred Security shall bear the following legend.
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED
HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NEITHER BE OFFERED, SOLD NOR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM NOR BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON OR
ENTITY PRIMARILY ENGAGED, DIRECTLY OR INDIRECTLY,
IN THE OIL AND GAS EXPLORATION INDUSTRY OTHER THAN
THE CORPORATION OR ANY OF ITS AFFILIATES. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES AT (AND BASED UPON AN OPINION OF
COUNSEL IF THE ISSUER SO REQUESTS), (2) TO THE
ISSUER OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
The Preferred Stock will be eligible for resale
pursuant to Rule 144A under the Securities Act.
Section Existence. Each of EEX and EEX Capital: (i)
is a corporation or limited liability company duly organized,
legally existing and in good standing under the laws of the
jurisdiction of its formation; (ii) has all requisite power, and
has all material governmental licenses, authorizations, consents
and approvals necessary to own its assets and carry on its
business as now being or as proposed to be conducted; and (iii)
is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a Material
Adverse Effect.
Section Financial Condition. The audited balance
sheet of EEX as at December 31, 1996 and the related statements
of operations, cash flows and changes in partners' capital and
common shareholders' equity of EEX and its predecessor for each
of the three years in the period ended on said date, with the
opinion thereon of Deloitte & Touche LLP and the unaudited
interim financial statements of EEX at June 30, 1997 heretofore
furnished to the Placement Agent and each of the Holders, are
complete and correct and fairly present the financial condition
of EEX as at said date and the results of operations and cash
flows of EEX and its predecessor for the stated periods then
ended, all in accordance with GAAP, subject, in the case of the
interim financial statements, to normal year-end adjustments.
Except as contemplated by the Commitment Letter, neither EEX nor
EEX Capital has on the Closing Date or on the Effective Date any
material Debt, contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the Financial
Statements. Since June 30, 1997 to the Effective Date, there has
been no change or event having a Material Adverse Effect. Since
the date of the Financial Statements to the Effective Date,
neither the business nor the Properties of EEX or any Subsidiary
have been materially and adversely affected as a result of any
fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking
of Property or cancellation of contracts, permits or concessions
by any Governmental Authority, riot, activities of armed forces
or acts of God or of any public enemy.
Section Litigation. As of the Closing Date, there is
no litigation, legal, administrative or arbitral proceeding,
investigation or other action of any nature pending or, to the
knowledge of EEX threatened against or affecting EEX or any of
its Subsidiaries which involves the possibility of any judgment
or liability against EEX or any of its Subsidiaries not fully
covered by insurance (except for normal deductibles), and which
would have a Material Adverse Effect.
Section No Breach. Neither the execution and
delivery of the Transaction Documents to which EEX, EEX Capital
or any of their respective Subsidiaries is a party, nor
compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent which has
not been obtained as of the Effective Date under, the respective
charter or by-laws or other organizational documents of EEX, any
Subsidiary or EEX Capital or any Governmental Requirement or any
agreement or instrument for borrowed money to which any of the
foregoing is a party or by which it is bound or to which it or
its Properties are subject, or constitute a default under any
such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the revenues or assets of EEX,
any Subsidiary or EEX Capital pursuant to the terms of any such
agreement or instrument.
Section Authority. EEX and EEX Capital have all
necessary power and authority to execute, deliver and perform its
obligations under the Transaction Documents to which it is a
party; and the execution, delivery and performance by any of the
foregoing of the Transaction Documents to which it is a party,
have been duly authorized by all necessary corporate or member
action on its part; and the Transaction Documents constitute the
legal, valid and binding obligations of EEX and EEX Capital,
enforceable in accordance with their terms, except to the extent
that enforcement may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditor's rights
generally.
Section Approvals. No authorizations, approvals or
consents of, and no filings or registrations with, any
Governmental Authority are necessary for the execution, delivery
or performance by EEX or EEX Capital of the Transaction Documents
or for the validity or enforceability thereof.
Section ERISA. As of the Closing Date, except as
would not have a Material Adverse Effect:
EEX, the Subsidiaries and each ERISA Affiliate
have complied in all material respects with ERISA and, where
applicable, the Code regarding each Plan.
No act, omission or transaction has occurred which
could result in imposition on EEX, any Subsidiary or any ERISA
Affiliate (whether directly or indirectly) of (i) either a
material civil penalty assessed pursuant to subsections (c), (i)
or (l) of section 502 of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary
duty liability damages under section 409 of ERISA.
No liability to the PBGC (other than for the
payment of current premiums which are not past due) by EEX, any
Subsidiary or any ERISA Affiliate has been or is expected by EEX,
any Subsidiary or any ERISA Affiliate to be incurred with respect
to any Plan. No ERISA Event with respect to any Plan has
occurred which could result in a liability of EEX, any Subsidiary
or any ERISA Affiliate.
Full payment when due has been made of all amounts
which EEX, the Subsidiaries or any ERISA Affiliate is required
under the terms of each Plan or applicable law to have paid as
contributions to such Plan as of the date hereof, and no
accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists
with respect to any Benefit Plan.
The actuarial present value of the benefit
liabilities under each Benefit Plan which is subject to Title IV
of ERISA does not, as of the end of EEX's most recently ended
fiscal year, exceed the current value of the assets (computed on
a plan termination basis in accordance with Title IV of ERISA) of
such Benefit Plan allocable to such benefit liabilities. The
term "actuarial present value of the benefit liabilities" shall
have the meaning specified in section 4041 of ERISA.
Neither EEX nor any ERISA Affiliate has received
any notification (or has knowledge of any reason to expect) that
any Multiemployer Plan is in reorganization, is insolvent or has
been terminated, within the meaning of Title IV of ERISA.
Neither EEX nor any ERISA Affiliate is required to
provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability
for the Plan.
Section Taxes. Each of EEX and its Subsidiaries has
filed all United States Federal income tax returns and all other
tax returns which are required to be filed by them and has paid
all material taxes due pursuant to such returns or pursuant to
any assessment received by EEX or any Subsidiary except for any
such tax, assessment, charge or levy the payment of which is
being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained. The
charges, accruals and reserves on the books of EEX and its
Subsidiaries in respect of taxes and other governmental charges
are, in the opinion of EEX, adequate. No tax lien has been filed
and, to the knowledge of EEX and EEX Capital, no claim is being
asserted with respect to any such tax, fee or other charge.
Section Titles, etc. To the best of EEX's knowledge:
Each of EEX and EEX Capital has good and
defensible title to its material (individually or in the
aggregate) Properties in all material respects, free and clear of
all Liens except Liens permitted by Section 5.5.
All leases and agreements necessary for the
conduct of the business of EEX and EEX Capital are valid and
subsisting, in full force and effect and there exists no default
or event or circumstance which with the giving of notice or the
passage of time or both would give rise to a default under any
such lease or leases, which would affect in any material respect
the conduct of the business of EEX and EEX Capital.
The rights, properties and other assets presently
owned, leased or licensed by EEX and EEX Capital, including,
without limitation, all easements and rights of way, include all
rights, Properties and other assets necessary to permit EEX and
EEX Capital to conduct their business in all material respects in
the same manner as its business has been conducted prior to the
Closing Date.
Section No Material Misstatements. No information,
exhibit or report furnished to the Placement Agent or any Holder
by or on behalf of EEX or any of its Subsidiaries in connection
with the negotiation and administration of this Agreement
contains any material misstatement of fact or omits to state a
material fact necessary in order to make the statements contained
therein not misleading.
Section Investment Company Act. Neither EEX nor EEX
Capital is an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
Section Subsidiaries and Partnerships. On the
Closing Date and the Effective Date, except as set forth on
Schedule 2.14, EEX has no Subsidiaries and neither EEX nor any
Subsidiary has any interest in any general or limited
partnerships, but excluding solely tax partnerships and oil and
gas joint ventures under joint operating agreements.
Section Public Utility Holding Company Act. Neither
EEX nor EEX Capital is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," or
a "public utility" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
Section Defaults. As of the Closing Date, neither
EEX nor any of its Subsidiaries is in default nor has any event
or circumstance occurred which, but for the expiration of any
applicable grace period or the giving of notice, or both, would
constitute a default under any agreement or instrument for
borrowed money to which any of the foregoing is a party or by
which it is bound. No Default has occurred and is continuing.
Section Environmental Matters. As of the Closing
Date, except as would not have a Material Adverse Effect (or with
respect to (c), (d) and (e) below, where the failure to take such
actions would not have a Material Adverse Effect):
Neither any Property of EEX or any Subsidiary nor
the operations conducted thereon violate any order or requirement
of any court or Governmental Authority or any Environmental Laws;
Without limitation of clause (a) above, no
Property of EEX or any Subsidiary nor the operations currently
conducted thereon or, to the best knowledge of EEX, by any prior
owner or operator of such Property or operation, are in violation
of or subject to any existing, pending or threatened action,
suit, investigation, inquiry or proceeding by or before any court
or Governmental Authority or to any remedial obligations under
Environmental Laws;
All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in
connection with the operation or use of any and all Property of
EEX and each Subsidiary, including without limitation past or
present treatment, storage, disposal or release of a hazardous
substance or solid waste into the environment, have been duly
obtained or filed, and EEX and each Subsidiary are in compliance
with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
All hazardous substances, solid waste, and oil and
gas exploration and production wastes, if any, generated at any
and all Property of EEX or any Subsidiary have in the past been
transported, treated and disposed of in accordance with
Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of EEX, all such
transport carriers and treatment and disposal facilities have
been and are operating in compliance with Environmental Laws and
so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and are not the
subject of any existing, pending or threatened action,
investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws;
EEX has taken all steps reasonably necessary to
determine and has determined that no hazardous substances, solid
waste, or oil and gas exploration and production wastes, have
been disposed of or otherwise released and there has been no
threatened release of any hazardous substances on or to any
Property of EEX or any Subsidiary except in compliance with
Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the
environment;
To the extent applicable, all Property of EEX and
each Subsidiary currently satisfies all design, operation, and
equipment requirements imposed by the OPA or scheduled as of the
Closing Date or the Effective Date to be imposed by OPA during
the term of this Agreement, and EEX does not have any reason to
believe that such Property, to the extent subject to OPA, will
not be able to maintain compliance with the OPA requirements
during the term of this Agreement; and
Neither EEX nor any Subsidiary has any known
contingent liability in connection with any release or threatened
release of any oil, hazardous substance or solid waste into the
environment.
Section Compliance with Laws. As of the Closing
Date, neither EEX nor any of its Subsidiaries has violated any
Governmental Requirement or failed to obtain any license, permit,
franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its
business, which violation or failure would have (in the event
such violation or failure were asserted by any Person through
appropriate action) a Material Adverse Effect.
Section Subordination. The Liabilities and the
obligations of EEX under the Subordinated Note are subordinated
to Senior Debt.
ARTICLE
SALE AND OPTIONAL REPAYMENT OF PREFERRED STOCK
Section Sale of the Preferred Stock. On the basis of
the representations and warranties herein contained and subject
to the terms and conditions herein set forth, to the extent not
already consummated under the Existing Agreement, EEX Capital
sold to UBS, and UBS purchased from EEX Capital, shares of
Preferred Stock with an aggregate Liquidation Preference equal to
UBS' Commitment, at an aggregate purchase price equal to 100% of
such Liquidation Preference.
Section Indemnity. EEX and EEX Capital jointly and
severally agree to indemnify each Affected Party and to hold each
Affected Party harmless from and against any loss or expense
which such Holder may sustain or incur as a consequence of (a)
the failure by EEX Capital to issue the additional 75,000 shares
of the Preferred Stock on the Closing Date, (b) default by EEX
Capital in making any redemption after EEX Capital has given a
notice thereof in accordance with the provisions of the
Certificate of Designations, or (c) the making of any dividend or
redemption payment on any date other than a dividend payment
date. Such indemnification may include an amount equal to such
Affected Party's actual loss and expenses incurred (excluding
lost profits) in connection with, or by reason of, any of the
foregoing events. A certificate as to any amounts payable
pursuant to this Section 3.2 submitted to EEX Capital by any
Affected Party shall be conclusive in the absence of manifest
error. This covenant shall survive the termination of this
Agreement and the redemption of all outstanding shares of the
Preferred Stock and all other amounts payable hereunder.
Section Method of Payment. All obligations arising
under the Transaction Documents shall be payable by wire transfer
in immediately available funds to the account of the Holder,
designated in a written notice to EEX Capital at least three
Business Days prior to the due date therefor.
Section Payment on Business Days. If any payment to
be made hereunder or under any share of Preferred Stock shall 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 be included in computing dividends in connection with
such payment).
ARTICLE
AFFIRMATIVE COVENANTS
Section Financial Statements. EEX shall deliver, or
shall cause to be delivered, to the Placement Agent and each of
the Holders:
As soon as available and in any event within one
hundred twenty (120) days after the end of each fiscal year of
EEX, (i) EEX's Form 10-K filed with the SEC or (ii) the audited
consolidated statements of income, shareholders' equity, and cash
flows of EEX and its Consolidated Subsidiaries for such fiscal
year, and the related consolidated balance sheet of EEX and its
Consolidated Subsidiaries as at the end of such fiscal year, and
setting forth in each case in comparative form the corresponding
figures as of the end of and for the preceding fiscal year, and
accompanied by the related opinion of independent public
accountants of recognized national standing acceptable to the
Majority Holders which opinion shall state that said financial
statements fairly present the consolidated financial condition,
results of operations and cash flows of EEX and its Consolidated
Subsidiaries as at the end of, and for, such fiscal year and that
such financial statements have been prepared in accordance with
GAAP except for such changes in such principles with which the
independent public accountants shall have concurred and such
opinion shall not contain a "going concern" or like qualification
or exception, and a certificate of such accountants stating that,
in making the examination necessary for their opinion, they
obtained no knowledge, except as specifically stated, of any
Default.
As soon as available and in any event within sixty
(60) days after the end of each of the first three fiscal
quarterly periods of each fiscal year of EEX, (i) EEX's Form 10-Q
filed with the SEC or (ii) unaudited consolidated statements of
income, shareholders' equity, and cash flows of EEX and its
Consolidated Subsidiaries for such period and for the period from
the beginning of the respective fiscal year to the end of such
period, and the related consolidated balance sheets as at the end
of such period, and setting forth in each case in comparative
form the corresponding figures as of the end of and for the
corresponding period in the preceding fiscal year, accompanied by
the certificate of a Responsible Officer, which certificate shall
state that said financial statements fairly present the
consolidated financial condition, results of operations and cash
flows of EEX and its Consolidated Subsidiaries in accordance with
GAAP, as at the end of, and for, such period (subject to normal
year-end adjustments).
As soon as available and in any event within one
hundred twenty (120) days after the end of each fiscal year of
EEX Capital, the unaudited balance sheet of EEX Capital as at the
end of such fiscal year accompanied by the related Certificate of
a Responsible Officer which certificate shall state that said
financial statements fairly present the financial condition of
EEX Capital at the end of, and for, such fiscal year.
Promptly after a Responsible Officer of EEX or EEX
Capital knows that any Default has occurred, a notice of such
Default, describing the same in reasonable detail and the action
EEX and EEX Capital propose to take with respect thereto.
Promptly upon its becoming available, each
financial statement, report, notice or proxy statement sent by
EEX to stockholders generally and each regular or periodic report
and any registration statement or prospectus in respect thereof
filed by EEX with or received by EEX in connection therewith from
any securities exchange or the SEC or any successor agency,
including without limitation, Form 10-K's and Form 10-Q's.
EEX and EEX Capital will furnish to the Placement Agent
and each of the Holders, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a
certificate executed by a Responsible Officer (i) certifying as
to the matters set forth therein and stating that no Default has
occurred and is continuing (or, if any Default has occurred and
is continuing, describing the same in reasonable detail), and
(ii) setting forth in reasonable detail the computations
necessary to determine whether EEX is in compliance with Section
5.1 as of the end of the respective fiscal quarter or fiscal
year.
Section Litigation. EEX shall promptly give to the
Placement Agent and each of the Holders, notice of all legal or
arbitral proceedings, and of all proceedings before any
Governmental Authority affecting EEX or any of its Subsidiaries
except proceedings which, if adversely determined, would not have
a Material Adverse Effect.
Section Maintenance, Etc.
EEX and EEX Capital shall preserve and maintain
their corporate existence and all of their respective material
rights, privileges and franchises; keep books of record and
account in which full, true and correct entries will be made of
all dealings or transactions in relation to its business and
activities; comply with all Governmental Requirements if failure
to comply with such requirements will have a Material Adverse
Effect; pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on
any of its Property prior to the date on which penalties attach
thereto, except for any such tax, assessment, charge or levy the
payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being
maintained; during the continuance of an Event of Default and
upon reasonable notice, permit representatives of the Holders,
during normal business hours, to examine its books and records,
to inspect its Properties, and to discuss its business and
affairs with its financial officers, all to the extent reasonably
requested by the Placement Agent (at the direction of the
Majority Holders), copy and make extracts of its books and
records; and keep, or cause to be kept, insured by financially
sound and reputable insurers all Property of a character usually
insured by Persons engaged in the same or similar business
similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such Persons and carry
such other insurance as is usually carried by such Persons
including, without limitation, pollution liability insurance to
the extent reasonably available. EEX Capital shall not engage in
any activity except as contemplated by the Transaction Documents.
Contemporaneously with the delivery of the
financial statements required by Section 4.1(a) to be delivered
for each year, EEX will furnish or cause to be furnished to the
Placement Agent a certificate of insurance coverage from insurers
and, if requested, will furnish the Placement Agent copies of the
applicable policies.
Section Environmental Matters.
EEX will, and will cause each Subsidiary to,
establish and implement such procedures as may be reasonably
necessary to continuously determine and assure that any failure
of the following does not have a Material Adverse Effect: (i) all
Property of EEX and its Subsidiaries and the operations conducted
thereon and other activities of EEX and its Subsidiaries are in
compliance with and do not violate the requirements of any
Environmental Laws, (ii) no oil, hazardous substances or solid
wastes are disposed of or otherwise released on or to any
Property owned by any such party except in compliance with
Environmental Laws, (iii) no hazardous substance will be released
on or to any such Property in a quantity equal to or exceeding
that quantity which requires reporting pursuant to Section 103 of
CERCLA, and (iv) no oil, oil and gas exploration and production
wastes or hazardous substance is released on or to any such
Property so as to pose an imminent and substantial endangerment
to public health or welfare or the environment.
EEX and EEX Capital will promptly notify the
Holders in writing of any threatened action, investigation or
inquiry by any Governmental Authority of which EEX has knowledge
in connection with any Environmental Laws which may have a
Material Adverse Effect.
Section Further Assurances. EEX and EEX Capital will
cure promptly any defects in the creation and issuance of the
Subordinated Note, the Preferred Stock and the execution and
delivery of the other Transaction Documents. EEX and EEX
Capital, at their expense, will promptly execute and deliver to
the Holders upon request all such other documents, agreements and
instruments to comply with or accomplish the covenants and
agreements of EEX and EEX Capital in the other Transaction
Documents, or to correct any omissions in the Transaction
Documents, or to make any recordings, to file any notices or
obtain any consents, all as may be necessary or appropriate in
connection therewith.
Section ERISA Information and Compliance. If any of
the following would result in a Material Adverse Effect, EEX will
promptly furnish and will cause the Subsidiaries and any ERISA
Affiliate to promptly furnish to the Placement Agent and each of
the Holders: (i) immediately upon becoming aware of the
occurrence of any ERISA Event which could result in a liability
of EEX, any Subsidiary or any ERISA Affiliate having a Material
Adverse Effect (individually or in the aggregate with respect to
all ERISA Events), a written notice signed by a Responsible
Officer of EEX, the Subsidiary or the ERISA Affiliate, as the
case may be, specifying the nature thereof, what action EEX, the
Subsidiary or the ERISA Affiliate is taking or proposes to take
with respect thereto, and, when known, any action taken or
proposed by the Internal Revenue Service, the Department of Labor
or the PBGC with respect thereto, (ii) promptly after request by
the Placement Agent (at the direction of the Majority Holders), a
true and correct copy of each actuarial report for any Plan and
each annual report for any Multiemployer Plan, (iii) immediately
upon receipt of a notice from a Multiemployer Plan regarding the
imposition of Withdrawal Liability having a Material Adverse
Effect, a true and complete copy of such notice, (iv) immediately
upon becoming aware that a Multiemployer Plan has been
terminated, that the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or
that the PBGC has instituted or intends to institute proceedings
under section 4042 of ERISA to terminate a Multiemployer Plan
which occurrence would have a Material Adverse Effect, a written
notice signed by a Responsible Officer of EEX, the Subsidiary or
the ERISA Affiliate, as the case may be, specifying the nature of
such occurrence and any other information relating thereto
requested by the Placement Agent (at the direction of the
Majority Holders), and (v) immediately upon receipt thereof,
copies of any notice of the PBGC's intention to terminate or to
have a trustee appointed to administer any Benefit Plan.
Section Compliance with Engagement Letter and Fee
Letter. EEX and EEX Capital shall, and shall cause each of their
respective Subsidiaries to comply with the provisions of the
Engagement Letter and Fee Letter.
Section Notice of Default. EEX and/or EEX Capital
shall provide written notice to the Placement Agent of any of the
Default or Event of Default under any of the Transaction
Documents or the EEX Credit Agreement at the same time such
entity provides such notice to the agent under the EEX Credit
Agreement or any similar entity.
Section Liquidation of MIStS Issuer L.L.C. EEX and
EEX Capital shall liquidate and dissolve MIStS Issuer L.L.C. as
soon as practicable after the Effective Date, but in no event any
later than October 31, 1997.
ARTICLE
NEGATIVE COVENANTS
So long as any of the Preferred Stock is outstanding or
any obligation in respect of any of the Preferred Stock shall be
unpaid, EEX and EEX Capital covenant and agree with the Placement
Agent and each Holder as follows:
Section Debt to EEX Capital Ratio. EEX will not
permit its ratio ("Debt to EEX Capital Ratio") expressed as a
percentage of (i) Debt of EEX and its Consolidated Subsidiaries
on a consolidated basis ("Consolidated Debt") to (ii) the sum of
Consolidated Debt plus Net Worth to exceed 60% at any time;
provided that in no event will Consolidated Debt ever exceed
$1,000,000,000.
Section Limitation on Incurrence of Additional
Indebtedness and/or Debt and Issuance of Capital Stock.
Except as contemplated by the Transaction
Documents, EEX Capital shall not directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become liable,
contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness or issue any shares of Capital Stock
(other than (i) the issuance of the Permanent Securities and (ii)
the incurrence of Indebtedness owing to Affiliates of up to $10.0
million in aggregate principal amount) unless, in each of the
foregoing cases, the proceeds thereof are used to redeem the
Preferred Stock in full.
Notwithstanding the fact that the EEX Credit
Agreement may permit incurrences and issuances by EEX of
Permitted Subordinated Debt and Capital Stock, EEX shall not,
directly or indirectly, incur additional subordinated Debt or
issue any shares of Capital Stock (other than treasury stock or
issuances of common stock of EEX employee benefit plans) unless,
in each of the foregoing cases, the proceeds thereof are used to
repay the Preferred Stock in full.
Section Line of Business.
EEX Capital shall not directly or indirectly,
engage in any line of business other than the businesses
conducted on the Closing Date and businesses reasonably related
thereto or incidental thereto.
Except as contemplated by the Transaction
Documents, EEX Capital shall not, directly or indirectly, engage
in any activity or line of business other than holding the
Subordinated Note, and enforcing remedies thereunder in
accordance with the terms thereof but subject to the EEX
Subordination Agreement.
Section Payments for Consents. EEX Capital shall not
directly or indirectly, pay or cause to be paid as consideration,
whether by way of divided, fee or otherwise, to any Holder of any
Preferred Stock for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Certificate of
Designations, this Agreement, the Preferred Stock unless such
consideration is offered to be paid or is paid to all Holders of
Preferred Stock that consent, waive or agree to amend in the time
fame set forth in the solicitation documents relating to such
consent, waiver or amendment.
Section Liens. Except as expressly permitted in this
Section 5.5, EEX and EEX Capital will not at any time, directly
or indirectly, create, assume or suffer to exist, and will not
cause, suffer or permit any Subsidiary Guarantor as long as it
remains a Subsidiary Guarantor, directly or indirectly, to
create, assume or suffer to exist, except in favor of EEX, any
Lien upon any of its Properties (now owned or hereafter
acquired), without making effective provision (and EEX covenants
that in any such case it will make or cause to be made effective
provision) whereby the Indebtedness and any other Debt of EEX or
any Subsidiary Guarantor then entitled thereto shall be secured
by such Lien equally and ratably with any and all other
obligations and indebtedness thereby secured, so long as any such
other obligations or indebtedness shall be so secured. Nothing
in this Agreement shall be construed to prevent EEX or any
Subsidiary Guarantor without so securing the amounts outstanding
hereunder, from creating, assuming or suffering to exist the
following Liens, to which the provisions of this paragraph shall
not be applicable:
Liens upon any Property presently owned or
hereafter acquired, created at the time of acquisition to secure
a portion of the purchase price thereof, or existing thereon at
the date of acquisition, whether or not assumed by EEX or one of
its Subsidiary Guarantors, provided that every such Lien shall
apply only to the Property so acquired and fixed improvements
thereon;
any extension, renewal or refunding of any Lien
permitted by Section 5.5(a), if limited to the same Property
subject to, and securing not more than the amount secured by, the
Lien extended, renewed or refunded;
the pledge of current assets in the ordinary
course of business, to secure current liabilities;
Liens upon (i) Property, to secure obligations to
pay all or a part of the purchase price of such Property only out
of or measured by the production, or the proceeds of such
production, from such Property of oil or gas or products or by-
products thereof, or (ii) the production from Property of oil or
gas or products or by-products thereof, or the proceeds of such
production, to secure obligations to pay all or a part of the
expenses of exploration, drilling or development of such Property
only out of such production or the proceeds of such production;
mechanics' or materialmen's liens, good faith
deposits in connection with tenders, leases of real estate, bids
or contracts (other than contracts for the payment of money),
deposits to secure public or statutory obligations, deposits to
secure, or in lieu of, surety, stay or appeal bonds, and deposits
as security for the payment of taxes or assessments or similar
charges, Liens given in connection with bid or completion bonds;
provided that such obligations secured are not yet due or are
being contested in good faith by appropriate action and against
which an adequate reserve has been established;
any Lien arising by reason of deposits with, or
the giving of any form of security to, any governmental agency or
any body created or approved by law or governmental regulation
for any purposes at any time as required by law or governmental
regulation as a condition to the transaction of any business or
the exercise of any privilege or license, or to enable EEX or a
Subsidiary to maintain self-insurance or to participate in any
funds established to cover any insurance risks or in connection
with workmen's compensation, unemployment insurance, old age
pensions or other social security, or to share in the privileges
or benefits required for companies participating in such
arrangements; provided that such obligations secured are not yet
due or are being contested in good faith by appropriate action
and against which an adequate reserve has been established;
the pledge or assignment of accounts receivable,
including customers' installment paper, to banks or others made
in the ordinary course of business (including to or by a
Subsidiary which is principally engaged in the business of
financing the business of EEX and its Subsidiaries);
the Liens of taxes or assessments for the then
current year or not at the time due, or the Liens of taxes or
assessments already due but the validity of which is being
contested in good faith by appropriate action and against which
an adequate reserve has been established;
any judgment or Lien against EEX or a Subsidiary
Guarantor, so long as the finality of such judgment is being
contested in good faith by appropriate action and the execution
thereon is stayed;
assessments or similar encumbrances, the existence
of which does not impair the value or the use of the Property
subject thereto for the purposes for which it was acquired;
landlords' liens on fixtures and movable Property
located on premises leased by EEX or a Subsidiary Guarantor in
the ordinary course of business so long as the rent secured
thereby is not in default;
Liens on the assets of any limited liability
company organized under a limited liability company act of any
state in which a limited liability company is treated as a
partnership for federal income tax purposes; provided that
neither EEX nor any Subsidiary Guarantor is liable for the Debt
of such limited liability company; and
other Liens on any Properties of EEX or any
Subsidiary with an aggregate value not exceeding 1% of the book
value of the total assets of EEX on a consolidated basis.
Section ERISA Compliance. EEX and the Subsidiaries
will not at any time:
Engage in, or permit any ERISA Affiliate to engage
in, any transaction in connection with which EEX, a Subsidiary or
any ERISA Affiliate could be subjected to either a civil penalty
assessed pursuant to subsections (c), (i) or (l) of section 502
of ERISA or a tax imposed by Chapter 43 of Subtitle D of the
Code;
Terminate, or permit any ERISA Affiliate to
terminate, any Benefit Plan in a manner, or take any other action
with respect to any Benefit Plan, which could result in any
liability of EEX, a Subsidiary or any ERISA Affiliate to the
PBGC;
Fail to make, or permit any ERISA Affiliate to
fail to make, full payment when due of all amounts which, under
the provisions of any Plan, agreement relating thereto or
applicable law, EEX, a Subsidiary or any ERISA Affiliate is
required to pay as contributions thereto;
Permit to exist, or allow any ERISA Affiliate to
permit to exist, any accumulated funding deficiency within the
meaning of section 302 of ERISA or section 412 of the Code,
whether or not waived, with respect to any Benefit Plan;
Permit, or allow any ERISA Affiliate to permit,
the actuarial present value of the benefit liabilities under any
Benefit Plan maintained by EEX, a Subsidiary or any ERISA
Affiliate which is regulated under Title IV of ERISA to exceed
the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Benefit Plan
allocable to such benefit liabilities. The term "actuarial
present value of the benefit liabilities" shall have the meaning
specified in section 4041 of ERISA;
Incur, or permit any ERISA Affiliate to incur, a
liability to or on account of a Plan under sections 4062, 4063,
or 4064 of ERISA;
Amend, or permit any ERISA Affiliate to amend, a
Plan resulting in an increase in current liability such that EEX,
a Subsidiary or any ERISA Affiliate is required to provide
security to such Plan under section 401(a)(29) of the Code; or
Incur or permit Withdrawal Liability and liability
in connection with a reorganization or termination of a
Multiemployer Plan of EEX, the Subsidiaries and the ERISA
Affiliates;
provided, however, that the transactions, events and occurrences
described in this Section 5.6 shall be permitted so long as such
transactions, events and occurrences (individually and in the
aggregate) will not result in a Material Adverse Effect.
Section Environmental Matters. Neither EEX nor any
Subsidiary will cause or permit any of its Property to be in
violation of, or do anything or permit anything to be done which
will subject any such Property to any remedial obligations under,
any Environmental Laws, assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such
violations or remedial obligations would have a Material Adverse
Effect.
Section Transactions with Affiliates. Neither EEX
nor any Subsidiary Guarantor will enter into any material
transaction, including, without limitation, any purchase, sale,
lease or exchange of Property including the purchase or sale of
oil and gas properties and hydrocarbons or the rendering of any
service, with any Affiliate unless such transactions are in the
ordinary course of its business and are upon fair and reasonable
terms no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not an
Affiliate.
Section Restrictive Dividend Agreements. Neither EEX
nor EEX Capital will create, incur, assume or suffer to exist any
financing agreement (other than this Agreement and the other
Transaction Documents) which in any way restricts EEX or EEX
Capital from paying dividends to their respective stockholders.
ARTICLE
CONDITIONS TO EFFECTIVENESS
Section Effectiveness. This Agreement shall become
effective as of the Effective Date when each of the following
conditions precedent has been satisfied:
Documentation; Legal Matters; Etc. All matters
relating to the transactions contemplated hereby shall be
satisfactory to UBS, and UBS shall have received such additional
certificates, legal and other opinions and documentation as they
shall reasonably request.
Consent under EEX Credit Agreement. The requisite
lenders party to the EEX Credit Agreement shall have amended the
EEX Credit Agreement to permit the merger of a Subsidiary of the
Company if the Subsidiary is the survivor of such merger.
Approvals and Consents. All governmental, quasi-
governmental, equity holder and third-party approvals and
consents necessary or desirable in connection with the
transactions contemplated hereby shall have been received and
shall be in full force and effect.
Certificate of Designations. The Certificate of
Designations shall have been amended and restated in the form of
Exhibit A hereto and filed with the Delaware Secretary of State.
Litigation, etc. There shall not exist any
action, suit, investigation, litigation or proceeding pending or
threatened in any court or before any arbitrator or governmental
authority that, in the opinion of UBS, affects the transactions
contemplated hereby, or that could have a Material Adverse Effect
on the Relevant Parties (including any such action, suit,
investigation, litigation or proceeding which, in the reasonable
opinion of UBS, is likely to result in such a Material Adverse
Effect) or any of the transactions contemplated hereby.
Legal Opinions. The Placement Agent and each of
the Holders shall have received such legal opinions as it may
reasonably request (including opinions from counsel to EEX and
EEX Capital), as Exhibit E and satisfactory to the Majority
Holders on the date when delivered.
Subordination of the Subordinated Note. The
Subordinated Note shall have been subordinated to Senior Debt.
ARTICLE
TRANSFER OF THE PREFERRED STOCK;
REPRESENTATIONS OF HOLDERS
Section Transfer of Preferred Stock. UBS represents
and agrees that it is purchasing the Preferred Stock for its own
account and with investment intent and that it will not, directly
or indirectly, transfer, sell, assign, pledge or otherwise
dispose of such Preferred Stock unless such transfer, sale,
assignment, pledge or other disposition is made (i) pursuant to
an effective registration statement under the Securities Act or
(ii) pursuant to an available exemption from registration under,
or otherwise in compliance with, the Securities Act. UBS also
represents and warrants to EEX Capital that it (i) is an
"accredited investor" (as that term is defined in Rule 501 of
Regulation D promulgated under the Securities Act) (ii) has been
given or has had access to the information described in Rule 502
of Regulation D promulgated under the Securities Act, and (iii)
has been given the opportunity to ask any question of management
of the Relevant Parties that UBS may have. UBS and each of the
Interim Purchasers acknowledges that the Preferred Stock
certificates will bear a legend (as set forth in Exhibit A to the
LLC Agreement or Section 13(a) of the Certificate of
Designations, as the case may be) restricting the transfer
thereof for so long as may be required by the Securities Act.
Subject to the provisions of the previous paragraph
(including the terms of the legend referred to therein and
applicable law), each of the Relevant Parties agrees that UBS and
each subsequent Holder will be free to sell or transfer all or
any part of the Preferred Stock to any third party and to pledge
any or all of the Preferred Stock to any commercial bank, other
institutional lender, qualified institutional buyer or accredited
investor.
ARTICLE
EVENTS OF DEFAULT
Section Events of Default. An "Event of Default"
with respect to the Preferred Stock shall occur if:
an "Event of Default" as defined in the EEX Credit
Agreement;
EEX Capital fails to pay any dividend on any of
the shares of Preferred Stock, in each case on or within 30 days
after the same is due;
EEX Capital fails to make any Change of Control
redemption within the time periods provided in the Certificate of
Designations and the LLC Agreement, as applicable;
EEX, EEX Capital or any of their respective
Subsidiaries consummates a Prohibited Issuance;
any "Maturity Event" under and as defined in the
Subordinated Note shall occur; or
any of the Relevant Parties fails to observe or
perform any of its covenants or agreements (other than those set
forth in clauses (a) through (e) above) contained in any of the
Transaction Documents and such failure continues for a period of
60 Business Days following the earlier of (i) written notice to
EEX Capital of such failure by the Placement Agent or any Holder
of outstanding Preferred Stock or (ii) the date on which such
failure is discovered by such Relevant Party; (except that breach
of the covenants described in Section 4.9 and Section 12.1 hereof
shall not be entitled to any such cure period).
Section Rights and Remedies. The occurrence of an
Event of Default under this Agreement shall trigger those rights
and remedies available to Holders pursuant to the provisions of
the LLC Agreement or the Certificate of Designations, as
applicable.
Section Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Placement Agent
or Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent
or subsequent assertion or employment of any other appropriate
right or remedy.
Section Delay or Omission Not Waiver. No delay or
omission by the Placement Agent or any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy
given by this Article or by law to the Placement Agent or the
Holders may be exercised from time to time, and as often as may
be deemed expedient, by the Placement Agent or the Holders.
Section Waiver of Past Defaults. Subject to Section
13.3, the Placement Agent (at the direction of the Majority
Holders) by written notice to EEX Capital may rescind an
acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events
of Default have been cured or waived.
Section Rights of Holders to Receive Payment.
Notwithstanding anything to the contrary contained in this
Agreement, the LLC Agreement or the Certificate of Designations,
the right of any Holder to receive payment of dividends on the
Preferred Stock held by such Holder, on or after the respective
due dates expressed in the Preferred Stock, or to bring suit for
the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of
such Holder.
ARTICLE
TERMINATION
Section Termination. This Agreement shall terminate
upon redemption in full of the Preferred Stock at the Redemption
Price.
Section Liability. If this Agreement is terminated
pursuant to Section 9.1, such termination shall be without
liability of any party to any other party, except that, whether
or not the transactions contemplated by this Agreement are
consummated: (i) each of EEX and EEX Capital, jointly and
severally, agrees to reimburse the Placement Agent for all its
reasonable out-of-pocket expenses pursuant to Section 13.1 and
the Commitment Letter and (ii) the indemnity provisions contained
in Article X shall remain operative and in full force and effect.
ARTICLE
INDEMNITY
Section Indemnification. EEX and EEX Capital (each,
an "Indemnifying Party" and, collectively, the "Indemnifying
Parties") jointly and severally agree to indemnify and hold
harmless the Placement Agent, UBS and all subsequent the Holders,
each of their respective controlling persons and each director,
officer, employee, affiliate and agent thereof (each, an
"Indemnified Party") from and against any and all losses, claims,
damages and liabilities, joint or several, to which any
Indemnified Party may become subject relating to or arising out
of or in connection with the transactions contemplated by the
Transaction Documents (including the use of the proceeds from the
sale of the Preferred Stock) or any related transaction, and to
reimburse each Indemnified Party, promptly upon demand, for
expenses (including reasonable counsel fees and expenses) as they
are incurred in connection with the investigation of, preparation
for or defense of any pending or threatened loss, claim, damage
or liability, or any litigation, proceeding or other action in
respect thereof, including any amount paid in settlement of any
litigation, proceeding or other action (commenced or threatened)
to which the Indemnifying Parties shall have consented in writing
(such consent not to be unreasonably withheld) whether or not any
Indemnified Party is a party and whether or not liability
resulted; provided, however, that the indemnity contained in this
Article X will not apply to any Indemnified Party with respect to
losses, claims, damages, liabilities or related expenses arising
from the willful misconduct or gross negligence of such
Indemnified Party.
Section Notice of Action.
Promptly after receipt by an Indemnified Party of
written notice with respect to the commencement of any
investigation, claim, litigation, proceeding or other action
(collectively, an "Action") with respect to which such
Indemnified Party may seek indemnification hereunder, such
Indemnified Party shall notify the Indemnifying Parties in
writing of such Action; but the omission so to notify the
Indemnifying Party shall not relieve the Indemnifying Parties
from any liability that the Indemnifying Parties may have
hereunder to such Indemnified Party unless such failure results
in material prejudice to the Indemnifying Parties, defenses in
such Action.
Upon receipt of such notice by an Indemnifying
Party, such Indemnifying Party will be entitled to participate in
any Action and, to the extent it wishes, to assume the defense
thereof, and after notice from the Indemnifying Party to such
Indemnified Party of its election to assume the defense thereof,
the Indemnifying Party will not be liable to such Indemnified
Party under this indemnity for any legal expenses subsequently
incurred by such Indemnified Party in connection with such
defense; provided, however, that such Indemnified Party will have
the right to employ its own counsel in any such Action, and the
fees and expenses of such counsel will be at the expense of such
Indemnified Party; provided, further, that if (i) the employment
of such counsel has been authorized by such Indemnifying Party in
connection with the defense of such Action, which authorization
shall not be unreasonably withheld, or (ii) the named parties in
any such Action (including any impleaded parties) include any
Indemnified Party and such Indemnifying Party and such
Indemnified Party will have been advised by such counsel that
there may be one or more legal defenses available to such
Indemnified Party which are different from or additional to those
available to the Indemnifying Party (in which case the
Indemnifying Party will not have the right to assume the defense
of such Action on behalf of such Indemnified Party) or (iii) such
Indemnifying Party shall not have assumed the defense of such
Action and employed counsel therefor reasonably satisfactory to
such Indemnified Party within a reasonable time after notice of
commencement of such action, such fees and expenses will be borne
by the Indemnifying Party, it being understood that such
Indemnifying Party will not, in connection with any one such
Action, be liable for the fees and expenses of more than one firm
of attorneys in any one jurisdiction.
Section Indemnity Not Available. If indemnification
were for reason of public policy not to be available, the
Indemnifying Parties and the Holders agree to contribute (in
proportion to their respective commitments in the case of the
Holders) to the losses, claims, damages, liabilities or expenses
(or Actions in respect thereof) for which such indemnification is
held unavailable in such proportion as is appropriate to reflect
the relative benefits to the Indemnifying Party, on the one hand,
and the Holders, on the other hand, in connection with the matter
giving rise to such losses, claims, damages, liabilities or
expenses (or actions in respect thereof).
Section Indemnity for Taxes, Reserves and Expenses.
If after the date hereof, the adoption of any law or guideline or
any amendment or change in the administration, interpretation or
application of any existing or future law or guideline by any
Governmental Authority charged with the administration,
interpretation or application thereof, or the compliance with any
request or directive of any Governmental Authority (whether or
not having the force of law):
subjects an Affected Party to any tax or changes
the basis of taxation with respect to this Agreement or the
Preferred Stock or payments of amounts due hereunder or
thereunder or with respect to this Agreement or the
Transaction Documents, (including, without limitation, any
sales, gross receipts, general corporate, withholding,
personal property, privilege or license taxes, and including
claims, losses and liabilities arising from any failure to
pay or delay in paying any such tax (unless such failure or
delay results solely from such Affected Party's gross
negligence or willful misconduct), but excluding federal,
state or local taxes based on income or franchise taxes
imposed in lieu of income taxes) incurred by such Affected
Party arising out of or as a result of this Agreement or the
Transaction Documents;
imposes, modifies or deems applicable any reserve
(including, without limitation, any reserve imposed by the
Board of Governors of the Federal Reserve System), special
deposit or similar requirement against assets held by,
credit extended by, deposits with or for the account of, or
other acquisition of funds by, an Affected Party;
shall change the amount of capital maintained or
requested or directed to be maintained by an Affected Party;
or
imposes upon an Affected Party any other condition
or expense (including, without limitation, (i) loss of
margin and (ii) attorneys' fees and expenses, expenses
incurred by officers or employees of an Affected Party (or
any successor thereto) and expenses of litigation or
preparation therefor in contesting any of the foregoing)
with respect to this Agreement or the Transaction Documents
or the purchase, maintenance or funding of the purchase of
the Preferred Stock by an Affected Party, and the result of
any of the foregoing is to increase the cost to, reduce the
income receivable by, reduce the rate of return on capital
of, or impose any expense (including loss of margin) upon,
an Affected Party with respect to this Agreement, the
obligations hereunder, the Transaction Documents or the
funding of the purchase of the Preferred Stock hereunder,
the Affected Party may notify the Indemnifying Parties of
the amount of such increase, reduction, or imposition, and
the Indemnifying Parties shall pay to the Affected Party the
amount the Affected Party deems necessary to compensate the
Affected Party for such increase, reduction or imposition.
Any Affected Party claiming additional compensation under
this Section 10.4 shall deliver to EEX a certificate setting
forth any additional amounts that such Affected party is
entitled to receive, including a calculation thereof in
reasonable detail, such certificate to be conclusive absent
manifest error. Such amounts shall be due and payable by
the Indemnifying Parties five (5) Business Days after such
certificate is delivered.
To avoid doubt, the parties hereto acknowledge and
agree that none of EEX, EEX Capital or their Affiliates have
made any representations or warranties to the Placement
Agent, the Holders or any Affected Party concerning the
availability, or lack thereof, of the "dividend received
deduction under the Code." Accordingly, no indemnification
with respect to any taxes owed, or purported to be owed,
relating to such deduction shall be available under this
Agreement or any Transaction Document.
Section Survivorship of Indemnification. The
provisions contained in this Article X and in Section 3.2 shall
remain in full force and effect whether or not any of the
transactions contemplated hereby are consummated and
notwithstanding the termination of this Agreement. The amounts
payable by any Indemnifying Party under this Article X shall be
payable whether or not any of the transactions contemplated under
this Agreement are consummated.
Section Liability Not Exclusive; Payments. The
agreements of each Indemnifying Party in this Article X shall be
in addition to any liability that each may otherwise have. All
amounts due under this Article X shall be payable as incurred
within five (5) Business Days after such written notice is
delivered.
ARTICLE
THE PLACEMENT AGENT
Section Appointment of Placement Agent. In order to
expedite the transactions contemplated by the Transaction
Documents, UBS is hereby appointed to act as the Placement Agent
on behalf of the Holders. Each Holder by its acceptance of
Preferred Stock, irrevocably authorizes the Placement Agent to
take such actions on behalf of the Holders and to exercise such
powers as are specifically delegated to the Placement Agent by
the terms and provisions of the Transaction Documents, together
with such actions and powers as are reasonably incidental
thereto. The Placement Agent is expressly authorized by each
Holder hereby, and by each Holder upon its acceptance of
Preferred Stock without hereby limiting any implied authority,
(a) to give notice on behalf of such Holder to EEX Capital of any
Event of Default specified in this Agreement of which the
Placement Agent has actual knowledge acquired in connection with
its agency hereunder and (b) to distribute to each Holder copies
of all notices, financial statements and other materials
delivered by any of the Relevant Parties pursuant to this
Agreement and the other Transaction Documents as received by the
Placement Agent.
Section No Liability as Placement Agent. Neither the
Placement Agent nor any of its directors, officers, employees,
beneficial owners or agents shall be liable as such to any Holder
for any action taken or omitted by any of them except for its or
his own gross negligence or willful misconduct, or be responsible
for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be
required to ascertain or to make any inquiry concerning the
performance or observance by any of the Relevant Parties of any
of the terms, conditions, covenants or agreements contained
herein. The Placement Agent shall not be responsible to the
Holders for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement, the
Transaction Documents or any other instruments or agreements.
The Placement Agent shall in all cases be fully protected in
acting, or refraining from acting, in accordance with written
instructions signed by any Holder and, except as otherwise
specifically provided herein, such instructions and any action or
inaction pursuant thereto shall be binding on all the Holders.
The Placement Agent shall, in the absence of knowledge to the
contrary, be entitled to rely on any instrument or document
believed by it in good faith to be genuine and correct and to
have been signed or sent by the proper Person or Persons.
Neither the Placement Agent nor any of its directors, officers,
employees or agents shall have any responsibility to EEX or EEX
Capital on account of the failure of or delay in performance or
breach by any Holder of any of its obligations hereunder or to
any Holder on account of the failure of or delay in performance
or breach by any other Holder or any of the Relevant Parties or
any of their respective obligations under the Transaction
Documents or in connection herewith or therewith. The Placement
Agent may execute any and all duties hereunder by or through
agents or employees and shall be entitled to rely upon the advice
of legal counsel selected by it with respect to all matters
arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of
such counsel.
Section No Duty to Act. Each Holder by its
acceptance of Preferred Stock, acknowledges that the Placement
Agent shall be under no duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this
Agreement or any other Transaction Document unless it shall be
requested in writing to do so by a majority in Liquidation
Preference of the Holders of Preferred Stock.
Section Successor Placement Agent. Subject to the
appointment and acceptance of a successor Placement Agent as
provided below, the Placement Agent may resign at any time by
notifying the Holders and EEX or EEX Capital. Upon any such
resignation, the Holders shall have the right to appoint a
successor. If no successor shall have been so appointed by the
Holders and shall have accepted such appointment within 30 days
after the retiring Placement Agent files notice of its
resignation, then the retiring Placement Agent may, on behalf of
the Holders, appoint a successor Placement Agent, which shall be
a bank having a combined capital and surplus of at least
$500,000,000 or an Affiliate of any such bank. Upon the
acceptance of any appointment as Placement Agent hereunder by a
successor bank, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the
retiring Placement Agent, and the retiring Placement Agent shall
be discharged from its duties and obligations hereunder. After
the Placement Agent's resignation hereunder, the provisions of
this Article XI and Article X hereof shall continue in effect for
its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as Placement Agent.
Section Rights Placement Agent as Holder of Preferred
Stock. With respect to its Commitment made in its capacity as a
Holder, the Placement Agent in its individual capacity and not as
Placement Agent shall have the same rights and powers as any
other Holder and may exercise the same as though it were not the
Placement Agent, and the Placement Agent and its Affiliates may
accept deposits from, lend money to and generally engage in any
kind of business with the Relevant Parties or other Affiliate
thereof as if it were not the Placement Agent.
Section Expenses of Placement Agent. Each Holder by
acceptance of Preferred Stock, agrees that (a) the Placement
Agent shall be reimbursed, on demand, for any expenses incurred
for the benefit of the Holders by the Placement Agent, including
reasonable counsel fees and compensation of agents and employees
paid for services rendered on behalf of the Holders, that shall
not have been reimbursed by EEX or EEX Capital and (b) to
indemnify and hold harmless the Placement Agent and its
beneficial owners, directors, officers, employees or agents, on
demand, from and against any and all suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be
imposed on, incurred by or asserted against it in its capacity as
the Placement Agent or any of them in any way relating to or
arising out this Agreement or any other Transaction Document or
any action taken or omitted by it or any of them under this
Agreement or any other Transaction Document, to the extent the
same shall not have been reimbursed by EEX or EEX Capital;
provided, however, no Holder shall be liable to the Placement
Agent or any such other indemnified Person for any portion of
such liabilities, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements that are determined by a
court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful
misconduct of the Placement Agent or any of its directors,
officers, employees or agents. If no Preferred Stock are then
outstanding, each Holder shall contribute an amount equal to its
pro rata share of the aggregate Commitment of all of the Holders
to any amounts payable to the Placement Agent pursuant to this
paragraph. If any Preferred Stock is then outstanding, each
Holder shall contribute an amount equal to its pro rata share of
the aggregate Liquidation Preference, of all outstanding
Preferred Stock to any amounts payable to the Placement Agent
pursuant to this paragraph.
Section Due Diligence by Holders. Each Holder by its
acceptance of Preferred Stock, acknowledges that it has,
independently and without reliance upon the Placement Agent, or
any other Holder, and based on such documents and information as
it has deemed appropriate, made its own investment analysis and
decision to purchase the Preferred Stock. Each Holder by its
acceptance of Preferred Stock, also acknowledges that it (i)
will, independently and without reliance upon the Placement Agent
or any other Holder, and based on such documents and information
as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based
upon this Agreement, the Transaction Documents or any related
agreement or any document furnished hereunder or thereunder and
(ii) has reviewed publicly available information filed with the
SEC.
ARTICLE
THE SUBORDINATED NOTE
Section Covenants With Respect to the Subordinated
Note. EEX Capital hereby agrees to deliver prompt written notice
to the Placement Agent of the occurrence of a Voting Rights
Trigger Event and to defend the Subordinated Note against all
claims and demands of all Persons at any time claiming the same
or any interest therein except as expressly provided in this
Article XII. Upon demand by the Placement Agent (at the
direction of the Majority Holders) after the occurrence of a
Voting Rights Trigger Event, EEX Capital agrees to deliver to the
Placement Agent the originals of the Subordinated Note and the
EEX Subordination Agreement. EEX Capital hereby further agrees
that at any time while the Preferred Stock remains outstanding,
EEX Capital will not, without the prior written consent of the
Majority Holders, in any way encumber, or hypothecate, or create
or permit to exist any lien, security interest or encumbrance on
or other interest in the Subordinated Note except for the rights
granted to the Placement Agent, for the benefit of the Holders,
under this Article XII, nor will EEX Capital sell, transfer,
assign, exchange or otherwise dispose of the Subordinated Note or
any interest therein.
Section Power of Attorney. EEX Capital hereby
irrevocably appoints the Placement Agent as EEX Capital's agent
and attorney-in-fact, coupled with an interest, with full power
and authority in the place and stead of EEX Capital and in the
name of EEX Capital or otherwise, from and after the occurrence
of a Voting Rights Trigger Event in the Placement Agent's
reasonable discretion, but at EEX's and EEX Capital's joint and
several cost and expense, to:
upon instruction of EEX Capital or the Placement
Agent (at the direction of the Majority Holders), make
demand for payment under the Subordinated Note,
take any actions necessary or desirable, in the
Majority Holders' sole discretion, to collect, on behalf of
EEX Capital, the amounts due to EEX Capital under the
Subordinated Note, including compromising any amounts due
thereunder and acknowledging satisfaction of the maker's
liability thereunder,
instruct EEX, as the maker of the Subordinated
Note, to pay all sums payable thereunder to EEX Capital,
endorse, cash, sue upon, collect and otherwise
enforce, the Subordinated Note and all instruments made
payable to EEX Capital representing any payment of principal
or interest thereon or any part thereof and to give full
discharge for the same, and
pay all reasonable costs and expenses incurred in
the exercise or enforcement of its rights hereunder,
including reasonable attorneys' fees,
subject, in each of the foregoing cases, to the provisions of the
EEX Subordination Agreement. EEX Capital shall send to the
Placement Agent a copy of any written payment notice given to EEX
with respect to the Subordinated Note, concurrently with sending
such notice to EEX. The Placement Agent shall only be
accountable for monies which it actually receives as attorney-in-
fact for EEX Capital from or out of the Subordinated Note. The
power of attorney granted herein shall automatically terminate
and be of no further force and effect upon redemption for value
of the Preferred Stock and payment of all accrued and unpaid
dividends thereon and any other fees, expenses, LIBOR breakage
fees and Additional Costs owing to the Placement Agent or the
Holders in accordance with this Agreement in connection with the
Preferred Stock. EEX hereby acknowledges receipt of notice of
the foregoing power of attorney, agrees to comply with any
payment instructions it receives from the Placement Agent
following a Voting Rights Trigger Event, as attorney-in-fact for
EEX Capital, and hereby agrees that it will not assert against
the Subordinated Note any right of setoff, defense or
counterclaim it may have against EEX Capital, whether or not such
right, defense or counterclaim arises out of the loan evidenced
by the Subordinated Note or otherwise.
ARTICLE
MISCELLANEOUS
Section Expenses; Documentary Taxes. EEX and EEX
Capital jointly and severally agree to pay, within 30 days of the
date of invoice, (a) all reasonable out-of-pocket expenses
(including, without limitation, expenses incurred in connection
with due diligence of the Holders) associated with the
preparation, execution and delivery, administration, waiver,
enforcement or modification and enforcement of the documentation
contemplated hereby and (b) the reasonable fees and disbursements
of Latham & Watkins and Richards, Layton & Finger legal counsel
to the Placement Agent and the Holders in connection with the
transactions contemplated herein. EEX and EEX Capital jointly
and severally agree to indemnify the Placement Agent and the
Holders against any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by
reason of the execution and delivery, or the terms, of this
Agreement or the Transaction Documents.
Section Notices. All notices and other
communications pertaining to this Agreement, the Certificate of
Designations or any share of Preferred Stock shall be in writing
and shall be delivered in person, with receipt acknowledged, or
by facsimile and confirmed immediately in writing by a copy
mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed as hereafter set forth, or mailed by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(i) If to the Placement Agent or the Holders, to them
at:
UBS Securities LLC
229 Park Avenue
New York, New York 10171-0026
Attention: James A. Ajello
Facsimile No.: (212) 821-6119
with a copy to:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022
Attention: Nancy L. Schimmel, Esq.
Facsimile No.: (212) 751-4864
(ii) If to EEX or EEX Capital, to it at:
c/o Enserch Exploration, Inc.
2500 City West Boulevard, Suite 1400
Houston, Texas 77042
Attention: Joseph T. Leary
Facsimile No.: (281) 271-3416
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1900 Pennzoil-South Tower
711 Louisiana Street
Houston, Texas 77002
Attention: William D. Morris, Esq.
Facsimile No.: (713) 236-0822
or to such other Person or address as shall be furnished to the
other parties in compliance with this Section 13.2.
Section Consent to Amendments and Waivers. (a)
Except as provided in Section 13.3(b), this Agreement may be
amended or supplemented with the consent of each of EEX, EEX
Capital and the Majority Holders (including, without limitation,
consents obtained in connection with a purchase of, or tender
offer or exchange offer for, Preferred Stock), and any event of
default or compliance with any provision of this Agreement or the
Preferred Stock may be waived with the consent of the Majority
Holders (including consents obtained in connection with a
purchase of, or tender offer or exchange offer for Preferred
Stock). Preferred Stock held by EEX, EEX Capital or any of their
Affiliates will not be deemed to be outstanding for purposes of
this Section 13.3.
None of the Relevant Parties shall, directly or
indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder for or as an
inducement to any consent, waiver or amendment permitted by
Section 13.3(a) unless such consideration is offered to be paid
or is paid to all Holders that consent, waive or agree to amend
in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Section Statements Required in Officer's Certificate
and Opinion. Each Officer's Certificate with respect to
compliance provided for in this Agreement shall include:
a statement that the Person making such
certificate or opinion has read such covenant or
condition;
a brief statement as to the nature and scope of
the examination or investigation upon which the
statements or opinions contained in such
certificate or opinion are based;
a statement that, in the opinion of such Person,
he or she has made such examination or
investigation as is necessary to enable him or her
to express an informed opinion as to whether or
not such covenant or condition has been complied
with; and
a statement as to whether, in such Person's
opinion, such condition or covenant has been
complied with.
Section Parties. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and each
subsequent Holder and each of their respective successors and
assigns. Except as otherwise expressly provided in Section 3.2
and Article X in the preceding sentence, nothing expressed or
mentioned in this Agreement is intended or shall be construed to
give any Person, other than the parties hereto, the Holders and
their respective successors and assigns, any legal or equitable
right, remedy or claim under or in respect of this Agreement or
any provision herein contained. Except as otherwise expressly
provided in Section 3.2 and Article X in the preceding sentence,
all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of UBS, the parties hereto and the
affiliates and beneficial owners of the Holders, and any
subsequent Holder of any of the Preferred Stock and their
respective successors and assigns, and for the benefit of no
other person.
Section New York Law; Submission to Jurisdiction;
Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN SUCH STATE,
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS
THEREOF. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE PLACEMENT AGENT, EEX AND EEX CAPITAL HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN NEW YORK
CITY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE PROVISIONS OF THIS AGREEMENT AND IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH SUIT, ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH
OF THE PLACEMENT AGENT, EEX AND EEX CAPITAL WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT, AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
Section Successors and Assigns. Whenever in this
Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns
of such party; and all covenants and agreements of EEX and EEX
Capital or of the Placement Agent, UBS or any subsequent Holder
in this Agreement or any Preferred Stock shall bind their
respective successors and assigns. Neither EEX nor EEX Capital
may assign or transfer any of its rights or obligations hereunder
(by operation of law or otherwise) without the prior written
consent of the Holders of at least a majority in Liquidation
Preference of Preferred Stock then outstanding. Prior to
purchase of the Preferred Stock, UBS may not assign or transfer
any of its rights or obligations hereunder (by operation of law
or otherwise) without the prior written consent of EEX.
Section Severability Clause. In case any provision
in this Agreement shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or
impaired thereby and such provision shall be ineffective in such
jurisdiction only to the extent of such invalidity, illegality or
unenforceability.
Section Representations, Warranties and Agreements to
Survive Delivery. All representations, warranties and agreements
contained in or incorporated into this Agreement, or contained in
Officers' Certificates submitted pursuant hereto, shall remain
operative and in full force and effect until the Preferred Stock
have been repaid in full, regardless of any investigation made by
or on behalf of the Holders or any controlling person of the
Interim Purchasers, or by or on behalf of EEX or EEX Capital, and
shall survive delivery of the Preferred Stock.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement on the Effective Date, effective as of
September 29, 1997.
Enserch Exploration, Inc.
By:
Name: Joseph T. Leary
Title: Vice PresidentFinance and
Treasurer
EEX Capital Inc.
By:
Name: Joseph T. Leary
Title: Vice PresidentFinance and
Treasurer
<PAGE>
<PAGE>
UBS Securities LLC, as Placement
Agent
By:
Name: James A. Ajello
Title: Managing Director
By:
Name: Jeffrey M. Donahue
Title: Director
<PAGE>
<PAGE>
PREFERRED STOCK:
Commitment UBS Securities LLC
$150,000,000.00
(150,000 Shares)
By:
Name: James A. Ajello
Title: Managing Director
By:
Name: Jeffrey M. Donahue
Title: Director
Wire Transfer Instructions
Account Name: UBS Securities LLC
Name of Bank: The Chase Manhattan
Bank
ABA#: 021000021
Account No.: 140083231
Attention: Bruce J. Burmester
<PAGE>
<PAGE> EXHIBIT 4.4
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
CLASS A CUMULATIVE PERPETUAL INCREASING DIVIDEND
PREFERRED STOCK
OF
EEX CAPITAL INC.
_________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
_________________________
EEX Capital Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the
State of Delaware, certifies that pursuant to the authority
contained in Article 4 of its Certificate of Incorporation (the
"Certificate of Incorporation") and in accordance with the
provisions of Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors of the Corporation by
unanimous written consent dated September 25, 1997 duly approved
and adopted the following resolution which resolution remains in
full force and effect on the date hereof:
RESOLVED, that pursuant to the authority vested in the Board
of Directors by its Certificate of Incorporation, the Board of
Directors does hereby reconfirm its prior designation, creation,
authorization and provision for the issue of Class A Cumulative
Perpetual Increasing Dividend Preferred Stock (the "Class A
Preferred Stock"), par value $0.001 per share, with a liquidation
preference of $1,000.00 per share, consisting of 150,000 shares,
having amended and restated voting powers, preferences and
relative, participating, optional and other special rights, and
qualifications, limitations and restrictions thereof as follows:
Certain Definitions.
Unless the context otherwise requires, the terms
defined in this Section 1 shall have, for all purposes of this
resolution, the meanings herein specified (with terms defined in
the singular having comparable meanings when used in the plural):
Additional Costs. The term "Additional Costs" shall have
the meaning assigned to it in the Subscription Agreement.
Affiliate. The term "Affiliate" shall mean with respect to
any Person, any other Person that, directly or indirectly,
through one or more intermediaries, controls, or is controlled
by, or is under common control with, such Person. For purposes
of the foregoing definition, "control" means the direct or
indirect ownership of more than 50% of the outstanding capital
stock or other equity interests having ordinary voting power.
Affiliate Transaction. The term "Affiliate Transaction"
shall have the meaning set forth in Section 7(n) below.
Business Day. The term "Business Day" shall mean a day
other than a Saturday, a Sunday, any federal holiday or any day
on which dealings in U.S. dollar deposits are not carried out in
the London interbank market.
Capital Lease Obligation. The term "Capital Lease
Obligation" shall mean, with respect to EEX or any Subsidiary of
EEX, the obligations of such Person to pay rent or other amounts
under a lease of (or other agreement conveying the right to use)
real and/or personal property which obligations are required to
be classified and accounted for as a liability for a capital
lease on a balance sheet of such Person in accordance with GAAP
and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof.
Capital Stock. The term "Capital Stock" shall mean (i) in
the case of a corporation, corporate stock, (ii) in the case of
an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated)
of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
Change of Control. The term "Change of Control" shall mean
the acquisition by any Person, or two or more Persons acting in
concert, of beneficial ownership (within the meaning of the
Exchange) Act of 35% or more of the outstanding shares of voting
stock of EEX.
Change of Control Offer. The term "Change of Control Offer"
shall have the meaning set forth in Section 6(a) below.
Change of Control Payment. The term "Change of Control
Payment" shall have the meaning set forth in Section 6(a) below.
Change of Control Payment Date. The term "Change of Control
Payment Date" shall have the meaning set forth in Section
6(d)(ii) below.
Common Stock. The term "Common Stock" shall mean all shares
now or hereafter authorized of any class of common stock of the
Corporation, including the common stock, par value $100.00 per
share, and any other stock of the Corporation, howsoever
designated, authorized after the Initial Issue Date, that have
the right (subject always to prior rights of any class or series
of preferred stock) to participate in the distribution of the
assets and earnings of the Corporation without limit as to per
share amount.
Debt. The term "Debt" shall mean for EEX and its
Subsidiaries (except the Corporation), the sum of the following
(without duplication): (i) all obligations for borrowed money or
evidenced by bonds, debentures, mandatorily redeemable preferred
stock with maturities before the Revolving Credit Termination
Date (as defined in the EEX Credit Agreement), notes or other
similar instruments (excluding interest, fees and charges); (ii)
all obligations in respect of bankers' acceptances, unreimbursed
drawings on letters of credit, surety or other bonds; (iii) all
Capital Lease Obligations; (iv) all Operating Lease Obligations;
(v) all financial guaranties in respect of Indebtedness of
unconsolidated Affiliates and unrelated Persons; (vi) all
obligations secured by a Lien on any asset, whether or not such
Indebtedness is assumed, but excluding obligations secured by
Liens permitted by Sections 9.02(c), (e), (f), (h), (i), (j), (k)
and (l) of the EEX Credit Agreement; (vii) all production
payments in connection with oil and gas properties; and (viii)
all Indebtedness of Special Entities (as defined in the EEX
Credit Agreement) to the extent the Corporation or any Subsidiary
is liable for such Indebtedness and is reflected on the
consolidated balance sheet of EEX or any Subsidiary; provided,
however, such term shall not include Permitted Subordinated Debt.
Debt to Capital Ratio. The term "Debt to Capital Ratio"
shall have the meaning set forth in Section 5(b) below.
Default. The term "Default" shall mean an Event of Default
or an event which with notice or lapse of time or both would be
an Event of Default.
Dividend. The term "Dividend" shall mean any dividend
payable in accordance with Section 2(a) below.
Dividend Payment Date. The term "Dividend Payment Date"
shall have the meaning set forth in Section 2(a) below.
Dividend Period. The term "Dividend Period" shall mean the
period from, and including, the Initial Issue Date to, but not
including, the first Dividend Payment Date and thereafter, each
period from, and including, the preceding Dividend Payment Date
to, but not including the next Dividend Payment Date.
EEX. The term "EEX" shall mean Enserch Exploration, Inc., a
Texas corporation.
EEX Credit Agreement. The term "EEX Credit Agreement" shall
mean that certain Credit Agreement dated as of May 1, 1995 among
EEX, as borrower, The Chase Manhattan Bank, as Administrative
Agent, and the lenders signatory thereto, as amended by First
Amendment dated September 19, 1996, and Second Amendment dated
June 27, 1997, and as modified by that certain letter from EEX to
the Administrative Agent and in effect on the Closing Date
together with such amendments thereto as may be adopted in
accordance therewith and consented to by the Majority Holders.
EEX Subordination Agreement. The term "EEX Subordination
Agreement" shall mean the subordination agreement effective as of
September 29, 1997 issued by the Corporation in favor of the
administrative agent and the lenders under the EEX Credit
Agreement and subordinating the Subordinated Note to the
"Superior Indebtedness" (as defined in such subordination
agreement.)
Effective Date. The term "Effective Date" shall mean
October 27, 1997.
Engagement Letter. The term "Engagement Letter" shall mean
that certain amended and restated engagement letter agreement by
and among UBS, EEX and the Corporation, effective as of September
29, 1997.
Equity Interests. The term "Equity Interests" shall mean
Capital Stock and all warrants, options or other rights to
acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
Event of Default. The term "Event of Default" shall mean
(i) an "Event of Default" as defined in the EEX Credit Agreement,
(ii) failure by the Corporation to pay any scheduled Dividend on
the Preferred Stock or any fee or other amount owing to the
Placement Agent or any of the Holders pursuant to the Transaction
Documents on or within 30 days after the same is due, (iii)
failure by the Corporation to make any Change of Control
redemption within the time periods specified in Section 6 hereof,
(iv) a Prohibited Issuance, (v) the occurrence of a Voting Rights
Trigger Event, (vi) breach of any other provision of this
Certificate of Designations or of the other Transaction
Documents, as in effect on the date hereof or as subsequently
modified which is not cured within 60 days (except that breach of
the covenants described in Section 12.1 of the Subscription
Agreement shall not be entitled to any such cure period) and
(vii) any representation or warranty on the part of EEX or any
Subsidiary of EEX in any Transaction Document shall prove to have
been false or misleading in any material respect when made,
deemed made or furnished.
Exchange Act. The term "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
Executive Officer. The term "Executive Officer" shall mean
any officer of the Corporation that would be deemed to be an
"executive officer" within meaning of the rules and regulations
of the Securities and Exchange Commission.
Fee Letter. The term "Fee Letter" shall mean that certain
amended and restated fee letter agreement by and among UBS, EEX
and the Corporation effective as September 29, 1997.
GAAP. The term "GAAP" shall mean generally accepted
accounting principles in the United States of America in effect
from time to time.
Governmental Authority. The term "Governmental Authority"
shall mean any nation or government, any state or other political
subdivision thereof and any Person exercising executive,
legislative, judicial, regulatory or administrative functions of
or pertaining to government.
Government Securities. The term "Government Securities"
shall mean direct obligations of, or obligations guaranteed by,
the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States of
America is pledged.
Guarantee. The term "Guarantee" shall mean a guarantee
(other than by endorsement of negotiable instruments for
collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters
of credit and reimbursement agreements in respect thereof), of
all or any part of any Indebtedness.
Holder. The term "Holder" shall mean the record holder of
one or more shares of Class A Preferred Stock, as shown on the
books and records of the Corporation.
Indebtedness. The term "Indebtedness" of a Person shall
mean such Person's (i) obligations for borrowed money, whether or
not evidenced by a bond, note or similar instrument, (ii)
obligations representing the deferred purchase price of property
other than accounts payable arising in the ordinary course of
such Person's business on terms customary in the trade, (iii)
obligations, whether or not assumed, secured by Liens or payable
out of the proceeds or production from property now or hereafter
owned or acquired by such Person, (iv) obligations which are
evidenced by notes, acceptances, or other instruments, (v)
Capital Lease Obligations, (vi) obligations for which such Person
is obligated pursuant to a Guarantee or pursuant to a letter of
credit, (vii) Hedging Obligations, and (viii) Mandatorily
Redeemable Obligations.
Initial Issue Date. The term "Initial Issue Date" shall
mean the date that shares of Class A Preferred Stock are first
issued by the Corporation.
Junior Securities. The term "Junior Securities" shall mean
any class of stock ranking junior to the Class A Preferred Stock
as to the payment of dividends and as to rights in liquidation,
dissolution or winding up of the affairs of the Corporation.
Lien. The term "Lien" shall mean any interest in Property
securing an obligation owed to, or a claim by, a Person other
than the owner of the Property, whether such interest is based on
the common law, statute or contract, and whether such obligation
or claim is fixed or contingent, and including but not limited to
the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or
trust receipt or a lease, consignment or bailment for security
purposes.
Liquidation Preference. The term "Liquidation Preference"
shall mean $1,000.00 per share of Class A Preferred Stock.
Majority Holders. The term "Majority Holders" shall mean a
majority in aggregate liquidation preference of the Holders of
the Class A Preferred Stock (with shares held by the Corporation
or any of its Affiliates not being considered to be outstanding
for this purpose).
Mandatorily Redeemable Obligation. The term "Mandatorily
Redeemable Obligation" shall mean, with respect to any Person, an
obligation of such Person or any of its Subsidiaries to the
extent that it is redeemable, payable or required to be purchased
or otherwise retired or extinguished (a) at a fixed or
determinable date, whether by operation of a sinking fund or
otherwise, (b) at the option of any Person other than such Person
or such Subsidiary, or (c) upon the occurrence of a condition not
solely within the control of such Person or such Subsidiary, such
as a redemption required to be made out of future earnings.
Material Adverse Effect. The term "Material Adverse Effect"
shall mean any material and adverse change in the financial
condition, business or results of operations of EEX and its
Subsidiaries taken as a whole which makes EEX unable to perform
its obligations under the Subordinated Note.
Obligations. The term "Obligations" shall mean any
principal, interest, penalties, fees (including, but not limited
to, reasonable fees and expenses of counsel), indemnifications,
reimbursements, damages and other liabilities payable under the
documentation governing any Indebtedness.
Officer's Certificate. The term "Officer's Certificate"
shall mean a certificate signed on behalf of the Corporation by
an officer of the Corporation who must be the Chief Executive
Officer, the Chief Financial Officer, the Treasurer or the
principal accounting officer of the Corporation that meets the
requirements of Section 9 hereof.
Operating Lease Obligations. The term "Operating Lease
Obligations" shall mean, as to the Corporation or any Subsidiary,
the obligations of such person to pay rent or other amounts under
a lease of (or other agreement conveying the right to use) real
and/or personal property which obligations are not required to be
classified and accounted for as a liability for a capital lease
on a balance sheet of such Person and, for purposes of this
Certificate of Designations, the amount of such obligations shall
be the discounted present value of the lease payments, discounted
in the same manner a capital lease would be discounted according
to GAAP.
Parity Securities. The term "Parity Securities" shall mean
any class or series of stock of the Corporation authorized after
the Initial Issue Date that is entitled to receive payment of
dividends and to receive assets upon liquidation, dissolution or
winding up of the affairs of the Corporation on a parity with the
Class A Preferred Stock.
Paying Agent. The term "Paying Agent" shall mean the
Corporation until such time, if any, as an additional or other
Paying Agent is appointed pursuant to Section 8(c).
Permits. The term "Permits" shall mean such material
permits, licenses, franchises, consents, approvals and
authorizations of Governmental Authorities as are necessary to
own, lease and operate the Corporation's Properties and to
conduct its business as presently conducted.
Permitted Subordinated Debt. The term "Permitted
Subordinated Debt" shall mean Indebtedness of EEX or a Subsidiary
owing to EEX or another Subsidiary subordinated to the "Superior
Indebtedness" (as such term is defined in the EEX Subordination
Agreement) on terms substantially similar to the terms set forth
in the EEX Subordination Agreement.
Person. The term "Person" shall mean any individual,
corporation, company, limited liability company, voluntary
association, partnership, joint venture, trust, unincorporated
organization or government or any agency, instrumentality or
political subdivision thereof, or any other form of entity.
Preferred Stock. The term "Preferred Stock" of any Person,
shall mean Capital Stock of such Person of any class or series
(however designated) that ranks prior, as to payment of dividends
or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class or series
of such Person.
Prohibited Issuance. The term "Prohibited Issuance" shall
mean issuance by EEX, the Corporation or any of their respective
Subsidiaries of subordinated debt or equity securities in
violation of the provisions under Article V of the Subscription
Agreement, the proceeds of which are not used to fully redeem the
Preferred Stock.
Property. The term "Property" shall mean any interest in
any kind of property or asset, whether real, personal or mixed,
or tangible or intangible.
Record Date. The term "Record Date" shall have the meaning
set forth in Section 2(a) below.
Redemption Date. The term "Redemption Date" shall have the
meanings set forth in Section 4(c) below.
Redemption Price. The "Redemption Price" shall be the
Liquidation Preference plus (i) Additional Costs and (ii) accrued
and unpaid dividends to the date of redemption.
Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended.
Senior Debt. The term "Senior Debt" means the principal
(whether denominated as principal, monthly rental or other
notional quantity), premium, if any, and unpaid interest on, and
any reasonable fees or costs related to, (a) any Debt of EEX and
its Subsidiaries (other than the Corporation), whether
outstanding on the date hereof or hereafter created, which is
incurred, assumed, or guaranteed in compliance with the EEX
Credit Agreement, unless in the instrument creating or evidencing
the same or pursuant to which the same is outstanding it is
provided that such indebtedness is not superior in right of
payment to the Subordinated Note, and (b) renewals, extensions,
modifications and refundings of any such Debt. For the avoidance
of doubt, Debt which is created, incurred, assumed, or guaranteed
in violation of terms of the EEX Credit Agreement shall not
constitute Senior Debt, and Debt which is created, incurred,
assumed, or guaranteed in compliance with the terms of the EEX
Credit Agreement Debt shall at all times constitute Senior Debt,
notwithstanding any event or circumstance which may subsequently
occur which would constitute the creation, incurrence, assumption
or guarantee of such Debt at such time a violation of the EEX
Credit Agreement.
Senior Securities. The term "Senior Securities" shall mean
any class or series of Capital Stock of the Corporation
authorized after the Initial Issue Date ranking senior to the
Class A Preferred Stock in respect of the right to receive
dividends and in respect of the right to participate in any
distribution upon liquidation, dissolution or winding up of the
affairs of the Corporation.
Stock Registration Rights Agreement. The term "Stock
Registration Rights Agreement" shall mean the registration
rights, agreement effective as of September 29, 1997, between,
the Corporation and the Placement Agent on behalf of the Holders,
pursuant to which the Class A Preferred Stock is required to be
registered for public sale.
Subordinated Note. The term "Subordinated Note" means the
subordinated promissory note issued by EEX and held by the
Corporation reevidencing $150.0 million of Indebtedness,
effective as of September 29, 1997.
Subscription Agreement. The term "Subscription Agreement"
shall mean the Amended and Restated Preferred Stock Subscription
Agreement, effective as of September 29, 1997, among EEX, the
Corporation and UBS, individually and as Placement Agent for the
Holders.
Subsidiary. The term "Subsidiary" shall mean, with respect
to any Person, (i) any corporation, association or other business
entity of which more than 50% of the total voting power of shares
of Voting Stock thereof is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person
or of one or more Subsidiaries of such Person (or any combination
thereof).
Transaction Documents. The term "Transaction Documents"
shall mean the Subscription Agreement, the Certificate of
Designations, the Class A Preferred Stock, the Engagement Letter,
the Fee Letter, the Stock Registration Rights Agreement, the
Subordinated Note and the EEX Subordination Agreement.
Transfer Agent. The term "Transfer Agent" shall mean the
entity designated from time to time by the Corporation to act as
the registrar and transfer agent for the Class A Preferred Stock.
UBS. The term "UBS" shall mean UBS Securities LLC, a
Delaware limited liability company.
Voting Stock. The term "Voting Stock" shall mean with
respect to any specified Person, Capital Stock with voting power,
under ordinary circumstances and without regard to the occurrence
of any contingency, to elect the directors or other managers or
trustees of such Person.
Voting Rights Trigger Event. The term "Voting Rights
Trigger Event" shall have the meaning set forth in Section 5(b)
below.
Dividends.
The Holders of shares of the Class A Preferred
Stock shall be entitled to receive, when, as and if dividends are
declared by the Board of Directors out of funds of the
Corporation legally available therefor, cumulative preferential
dividends from the date such shares of Class A Preferred Stock
are issued accruing, subject to Section 2(b), at a variable rate
per annum equal to the sum of (A) Union Bank of Switzerland's
three-month London interbank offered rate, reset quarterly, plus
(B) a spread equal to (i) 300 basis points for the period from
the Initial Issue Date to but excluding December 31, 1997, (ii)
400 basis points for the period from December 31, 1997, to but
excluding March 31, 1998, (iii) 500 basis points for the period
from March 31, 1998, to but excluding June 30, 1998, (iv) 600
basis points for the period from June 30, 1998, to but excluding
September 30, 1998, and (v) 700 basis points at all time from and
after September 30, 1998; provided, however, that upon the
occurrence and during the continuance of an Event of Default, the
spread otherwise applicable under this clause (B) shall increase
by 100 basis points. Dividends shall be payable quarterly in
arrears on the last Business Day of each March, June, September
and December in each year (each, a "Dividend Payment Date"), to
the Holders of record as of the tenth Business Day preceding such
Dividend Payment Date (each, a "Record Date"). Dividends will be
payable in cash. The first dividend payment will be payable on
December 31, 1997. Dividends payable on the Class A Preferred
Stock will be computed on the basis of a 360-day year and actual
days elapsed occurring in the period with respect to which such
dividends are payable.
At any time after September 30, 1998, the
Placement Agent, at the direction of the Majority Holders, may
deliver a written notice (a "Rate Fixing Notice") fixing the
dividend rate, terms and conditions on the Class A Preferred
Stock at the rate, terms and conditions which UBS, as the
Corporation's exclusive financial advisor with respect to the
Class A Preferred Stock, in good faith determines would be
necessary to effect a sale of the Class A Preferred Stock at par,
whereupon the dividend rate on all of the Class A Preferred Stock
shall become a fixed rate per annum; provided, however, that (i)
such security shall be of a perpetual nature and (ii) upon the
occurrence and during the continuance of an Event of Default, the
dividend rate specified in the Rate Fixing Notice shall increase
by 100 basis points.
Dividends on the Class A Preferred Stock shall
accrue whether or not the Corporation has earnings or profits,
whether or not there are funds legally available for the payment
of such dividends and whether or not dividends are declared.
Dividends will accumulate to the extent they are not paid on the
Dividend Payment Date for the period to which they relate.
Accumulated unpaid dividends will bear interest at the rate per
annum then applicable pursuant to Section 2(a) above. The
Corporation shall take all actions required or permitted under
Delaware law to permit the payment of dividends on the Class A
Preferred Stock.
No dividend whatsoever shall be declared or paid
upon, or any sum set apart for the payment of dividends upon, any
outstanding Class A Preferred Stock with respect to any Dividend
Period unless all dividends for all preceding Dividend Periods
have been declared and paid upon, or declared and a sufficient
sum set apart for the payment of such dividend upon, all
outstanding shares of Class A Preferred Stock. Unless full
cumulative dividends on all outstanding shares of Class A
Preferred Stock due for all past dividend periods shall have been
declared and paid, or declared and a sufficient sum for the
payment thereof set apart, then: (i) no dividend (other than a
dividend payable solely in shares of any Junior Securities) shall
be declared or paid upon, or any sum set apart for the payment of
dividends upon, any shares of Junior Securities; (ii) no other
distribution shall be made upon or any sum set apart for the
payment of any distribution upon, any shares of Junior
Securities; (iii) no shares of Junior Securities shall be
purchased, redeemed or otherwise acquired or retired for value
(excluding an exchange for shares of other Junior Securities) by
the Corporation or any of its Subsidiaries; and (iv) no monies
shall be paid into or set apart or made available for a sinking
or other like fund for the purchase, redemption or other
acquisition or retirement for value of any shares of Junior
Securities by the Corporation or any of its Subsidiaries.
Holders of the Class A Preferred Stock will not be entitled to
any dividends, whether payable in cash, property or stock, in
excess of the full cumulative dividends as herein described.
The Corporation will not claim any deduction from
gross income for dividends paid on the Class A Preferred Stock in
any Federal income tax return, claim for refund, or other
statement, report or submission made to the Internal Revenue
Service, and will make any election or take any similar action to
effectuate the foregoing except, in each case, if there shall be
a change in law such that the Corporation may claim such
dividends as deductions from gross income without affecting the
ability of the Holders of the Class A Preferred Stock to claim
the dividends received deduction under Section 243(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code") (or any
successor provision). At the reasonable request of any Holder of
Class A Preferred Stock (and at the expense of such Holder), the
Corporation will join in the submission to the Internal Revenue
Service of a request for a ruling that the dividends paid on
Class A Preferred Stock will be eligible for the dividends
received deduction under Section 243(a)(1) of the Code (or any
successor provision). In addition, the Corporation will
cooperate with any Holder of the Class A Preferred Stock (at the
expense of such Holder) in any litigation, appeal or other
proceeding relating to the eligibility for the dividends received
deduction under Section 243(a)(1) of the Code (or any successor
provision) of any dividends (within the meaning of Section 316(a)
of the Code or any successor provision) paid on the Class A
Preferred Stock. To the extent possible, the principles of this
Section 2(e) shall also apply with respect to State and local
income taxes.
Distributions Upon Liquidation, Dissolution or
Winding Up.
Upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation or reduction or
decrease in its Capital Stock resulting in a distribution of
assets to the holders of any class or series of the Corporation's
Capital Stock (a "reduction or decrease in Capital Stock"), each
Holder of shares of the Class A Preferred Stock shall be entitled
to payment out of the assets of the Corporation available for
distribution of an amount equal to the Liquidation Preference per
share of Class A Preferred Stock held by such Holder, plus
accrued and unpaid dividends to the date fixed for liquidation,
dissolution, winding up or reduction or decrease in Capital
Stock, before any distribution is made on any Junior Securities,
including, without limitation, Common Stock of the Corporation.
After payment in full of the Liquidation Preference and all
accrued dividends to which Holders of Class A Preferred Stock are
entitled, such Holders will not be entitled to any further
participation in any distribution of assets of the Corporation.
However, neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or
assets of the Corporation nor the consolidation or merger of the
Corporation with or into one or more corporations will be deemed
to be a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation or reduction or decrease in capital
stock, unless such sale, conveyance, exchange or transfer shall
be in connection with a liquidation, dissolution or winding up of
the business of the Corporation or reduction or decrease in
Capital Stock.
Redemption by the Corporation.
(a) The Corporation may, at its option, redeem the
Class A Preferred Stock on any Dividend Payment Date at the
Redemption Price, by giving not less than ten (10) Business Days'
prior written notice in accordance with Section 4(b) below;
provided, however, that any partial redemption shall be in an
amount not less than $25.0 million and shall be made ratably
among the Holders.
(b) Notice of any redemption shall be sent by or on
behalf of the Corporation ten (10) Business Days prior to the
date specified for redemption in such notice (the "Redemption
Date"), by either first class mail, postage prepaid, or facsimile
transmission to all Holders of record of the Class A Preferred
Stock at their respective last addresses as they shall appear on
the books of the Corporation; provided, however, that no failure
to give such notice or any defect therein or in the mailing
thereof shall affect the validity of the proceedings for the
redemption of any shares of Class A Preferred Stock except as to
the Holder to whom the Corporation has failed to give notice or
except as to the Holder to whom notice was defective. In
addition to any information required by law or by the applicable
rules of any exchange upon which Class A Preferred Stock may be
listed or admitted to trading, such notice shall state: (i) the
paragraph of this Certificate of Designations pursuant to which
the redemption is made; (ii) the Redemption Date; (iii) the
Redemption Price; (iv) the number of shares of Class A Preferred
Stock to be redeemed and, if less than all shares held by such
Holder are to be redeemed, the number of such shares to be
redeemed; (v) the place or places where certificates for such
shares are to be surrendered for payment of the Redemption Price,
including any procedures applicable to redemptions to be
accomplished through book-entry transfers; and (vi) that
dividends on the shares to be redeemed will cease to accrue on
the Redemption Date. Upon the mailing of any such notice of
redemption, the Corporation shall become obligated to redeem at
the time of redemption specified thereon all shares called for
redemption.
(c) If notice has been mailed or transmitted in
accordance with Section 4(c) above and provided that on or before
the Redemption Date specified in such notice, all funds necessary
for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds in trust for the pro rata
benefit of the Holders of the shares so called for redemption, so
as to be, and to continue to be available therefor, then, from
and after the Redemption Date, dividends on the shares of the
Class A Preferred Stock so called for redemption shall cease to
accrue, and said shares shall no longer be deemed to be
outstanding and shall not have the status of shares of Class A
Preferred Stock, and all rights of the Holders thereof as
stockholders of the Corporation (except the right to receive from
the Corporation the Redemption Price) shall cease. Upon
surrender, in accordance with said notice, of the certificates
for any shares so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require and the notice
shall so state), such shares shall be redeemed by the Corporation
at the Redemption Price. In case fewer than all the shares
represented by any such certificate are redeemed, a new
certificate or certificates shall be issued representing the
unredeemed shares without cost to the Holder thereof.
(d) The deposit of any funds deposited with a bank or
trust company for the purpose of redeeming Class A Preferred
Stock shall be irrevocable except that:
(i) the Corporation shall be entitled to receive
from such bank or trust company the interest or other
earnings, if any, earned on any money so deposited in trust,
and the Holders of any shares redeemed shall have no claim
to such interest or other earnings; and
(ii) any balance of monies so deposited by the
Corporation and unclaimed by the Holders of the Class A
Preferred Stock entitled thereto at the expiration of two
years from the applicable Redemption Date shall be repaid,
together with any interest or other earnings earned thereon,
to the Corporation, and after any such repayment, the
Holders of the shares entitled to the funds so repaid to the
Corporation shall look only to the Corporation for payment
without interest or other earnings.
(e) No Class A Preferred Stock may be redeemed except
with funds legally available for such purpose. The Corporation
shall take all actions required or permitted under Delaware Law
to permit any such redemption.
(f) Notwithstanding the foregoing provisions of this
Section 4, unless the full cumulative dividends on all
outstanding shares of Class A Preferred Stock shall have been
paid or contemporaneously are declared and paid for all past
dividend periods, none of the shares of Class A Preferred Stock
shall be redeemed unless all outstanding shares of Class A
Preferred Stock are simultaneously redeemed.
(g) All shares of Class A Preferred Stock redeemed
pursuant to this Section 4 shall be restored to the status of
authorized and unissued shares of preferred stock, without
designation as to series and may thereafter be reissued as shares
of any series of preferred stock other than shares of Class A
Preferred Stock.
Voting Rights.
(a) The Holders of record of shares of Class A
Preferred Stock shall not be entitled to any voting rights except
as hereinafter provided in this Section 5 or as otherwise
provided by law.
(b) If (i) the Corporation fails to declare or pay
dividends in full (including any arrearages and additional
dividends owed pursuant to Section 2(b)) on the Class A Preferred
Stock for any Dividend Period and such failure is not cured
within 30 days, (ii) the Corporation fails to consummate a Change
of Control Offer within 60 days of a Change of Control (or 90
days, if a consent is required after the occurrence of a Change
of Control), (iii) a Prohibited Issuance occurs, or (iv) EEX
breaches the "Debt to Capital Ratio" covenant described in
Section 9.01 of the EEX Credit Agreement (each of (i), (ii),
(iii) and (iv), a "Voting Rights Trigger Event"), then the
authorized number of members of the Corporation's Board of
Directors will be immediately and automatically increased by the
Required Number and the Holders of a majority of the outstanding
shares of Class A Preferred Stock, voting separately as a class,
shall be entitled to elect the Required Number of directors of
the Corporation, so as to gain and maintain majority voting
control of the Corporation. As used in the preceding sentence,
"Required Number" means the sum of (x) the authorized number of
members of the Corporation's Board of Directors immediately prior
to the increase of such number pursuant to such sentence and (y)
one (1).
(c) Whenever such voting right shall have vested, such
right may be exercised initially either at a special meeting of
the Holders of Class A Preferred Stock, called as hereinafter
provided, or at any annual meeting of stockholders held for the
purpose of electing directors, and thereafter at such annual
meetings or by the written consent of the Holders of Class A
Preferred Stock. Such right of the Holders of Class A Preferred
Stock to elect directors may be exercised until (i) all dividends
in arrears shall have been paid in full and (ii) all other Voting
Rights Trigger Events have been cured or waived, at which time
the right of the Holders of Class A Preferred Stock to elect such
number of directors shall cease, the term of such directors
previously elected shall thereupon terminate, and the authorized
number of directors of the Corporation shall thereupon return to
the number of authorized directors otherwise in effect, but
subject always to the same provisions for the renewal and
divestment of such special voting rights in the case of any such
future dividend default or defaults or any such failure to make
redemption payments.
(d) At any time when such voting right shall have
vested in the Holders of Class A Preferred Stock and if such
right shall not already have been initially exercised, a proper
officer of the Corporation shall, upon the written request of
Holders of record of 10% or more of the Class A Preferred Stock
then outstanding, addressed to the Secretary of the Corporation,
call a special meeting of Holders of Class A Preferred Stock.
Such meeting shall be held at the earliest practicable date upon
the notice 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
Class A Preferred Stock then outstanding may designate in writing
a Holder of Class A Preferred Stock to call such meeting at the
expense of the Corporation, and such meeting may be called by
such person so designated upon the notice required for annual
meetings of stockholders and shall be held at the place for
holding annual meetings of the Corporation or, if none, at a
place designated by such Holder. Any Holder of Class A Preferred
Stock 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 Section. Notwithstanding the provisions of
this paragraph, however, no such special meeting shall be called
if any such request is received less than 30 days before the date
fixed for the next ensuing annual or special meeting of
stockholders.
(e) If any director so elected by the Holders of Class
A Preferred Stock shall cease to serve as a director before his
term shall expire, the Holders of Class A Preferred Stock then
outstanding may, at a special meeting of the Holders called as
provided above, elect a successor to hold office for the
unexpired term of the director whose place shall be vacant.
(f) The Corporation shall not, without the affirmative
vote or consent of the Holders of a majority of the then
outstanding shares of Class A Preferred Stock (with shares held
by the Corporation or any of its Affiliates not being considered
to be outstanding for this purpose) amend or otherwise alter its
Certificate of Incorporation in any manner that adversely affects
the rights of Holders of Class A Preferred Stock.
(g) Without the consent of each Holder of Class A
Preferred Stock affected, an amendment or waiver may not (with
respect to any shares of Class A Preferred Stock held by a non-
consenting Holder of Class A Preferred Stock):
(i) alter the voting rights with respect to the
Class A Preferred Stock or reduce the number of shares of
Class A Preferred Stock whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the Liquidation Preference of any
share of Class A Preferred Stock or alter the provisions
with respect to the redemption of the Class A Preferred
Stock (other than provisions relating to the covenant
described in Section 6 hereof);
(iii) reduce the rate of or change the time
for payment of dividends on any share of Class A Preferred
Stock;
(iv) waive a default or event of default in the
payment of dividends on the Class A Preferred Stock;
(v) make any share of Class A Preferred Stock
payable in any form other than that stated in this
Certificate of Designations;
(vi) make any change in the provisions of this
Certificate of Designations relating to waivers of the
rights of Holders of Class A Preferred Stock to receive the
Liquidation Preference or dividends on the Class A Preferred
Stock;
(v) waive a redemption payment with respect to
any share of Class A Preferred Stock (other than a payment
required by the covenant described in Section 6 hereof);
(viii) alter the effect of the Rate Fixing
Notice; or
(ix) make any change in the foregoing amendment
and waiver provisions.
(h) The Corporation shall not, without the consent of
at least 100% of the then outstanding shares of Class A Preferred
Stock (with shares held by the Corporation or its Affiliates not
being considered to be outstanding for this purpose), authorize,
create (by way of reclassification or otherwise) or issue any
securities or any obligation or security convertible or
exchangeable into or evidencing a right to purchase, shares of
any class or series of securities.
(i) The Corporation in its sole discretion may without
the vote or consent of any Holders of the Class A Preferred Stock
amend or supplement this Certificate of Designations:
(i) to cure any ambiguity, defect or
inconsistency;
(ii) to provide for uncertificated Class A
Preferred Stock in addition to or in place of certificated
Class A Preferred Stock; or
(iii) to make any change that would provide
any additional rights or benefits to the Holders of the
Class A Preferred Stock or that does not adversely affect
the legal rights or benefits under this Certificate of
Designations of any such Holder.
Change of Control.
(a) Upon the occurrence of a Change of Control, each
Holder of Class A Preferred Stock shall have the right to require
the Corporation to repurchase all or any part of such Holder's
shares of Class A Preferred Stock (a "Change of Control Offer")
at an offer price in cash equal to 101% of the aggregate
Liquidation Preference thereof plus (i) accrued and unpaid
dividends, if any, thereon to the date of purchase and (ii) any
Additional Costs (together, the "Change of Control Payment").
(b) The Change of Control Offer shall include all
instructions and materials necessary to enable Holders to tender
their shares of Class A Preferred Stock.
(c) The Corporation shall comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of
the shares of Class A Preferred Stock as a result of a Change of
Control.
(d) Within 30 days following any Change of Control,
the Corporation shall mail or deliver by facsimile transmission a
notice to each Holder stating:
(i) that the Change of Control Offer is being
made pursuant to this Section 6 and that all shares of Class
A Preferred Stock tendered will be accepted for payment;
(ii) the purchase price and the purchase date,
which shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed (the "Change of
Control Payment Date");
(iii) that any share of Class A Preferred
Stock not tendered will continue to accrue dividends;
(iv) that, unless the Corporation fails to pay the
Change of Control Payment, all shares of Class A Preferred
Stock accepted for payment pursuant to the Change of Control
Offer shall cease to accrue dividends after the Change of
Control Payment Date;
(v) that Holders electing to have any shares of
Class A Preferred Stock purchased pursuant to a Change of
Control Offer will be required to surrender the shares of
Class A Preferred Stock, with the form entitled "Option of
Holder to Elect Purchase," which shall be included with the
Notice of Change of Control, completed, to the Paying Agent
at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of
Control Payment Date;
(vi) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than
the close of business on the second Business Day preceding
the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of
the Holder, the number of shares of Class A Preferred Stock
delivered for purchase, and a statement that such Holder is
withdrawing his election to have such shares purchased; and
(vii) the circumstances and relevant facts
regarding such Change of Control (including, but not limited
to, information with respect to pro forma historical
financial information after giving effect to such Change of
Control and information regarding the Person or Persons
acquiring control).
(e) On the Change of Control Payment Date, the
Corporation shall, to the extent lawful: (i) accept for payment
all shares of Class A Preferred Stock properly tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect
of all shares of Class A Preferred Stock so tendered and (iii)
deliver or cause to be delivered to the Transfer Agent shares of
Class A Preferred Stock so accepted together with an Officers'
Certificate stating the aggregate Liquidation Preference of the
shares of Class A Preferred Stock or portions thereof being
purchased by the Corporation. The Paying Agent shall promptly
mail to each Holder of Class A Preferred Stock so tendered the
Change of Control Payment for such Class A Preferred Stock and
the Transfer Agent will promptly authenticate and mail (or cause
to be transferred by book-entry) to each Holder a new certificate
representing the shares of Class A Preferred Stock equal in
Liquidation Preference amount to any unpurchased portion of the
shares of Class A Preferred Stock surrendered, if any. The
Corporation shall announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control
Payment Date.
(f) Prior to complying with the provisions of this
Section 6, but in any event within 90 days following a Change of
Control, the Corporation shall either repay all of its
outstanding Indebtedness or obtain the requisite consents, if
any, under all agreements governing outstanding Indebtedness, in
each case to the extent required to permit the repurchase of
Class A Preferred Stock required by this Section 6. The
Corporation will announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control
Payment Date.
(g) The Corporation shall not be required to make a
Change of Control Offer upon a Change of Control if a third party
makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this
Section 6 applicable to a Change of Control Offer made by the
Corporation and purchases all shares of Class A Preferred Stock
validly tendered and not withdrawn under such Change of Control
Offer.
Certain Covenants.
(a) Use of Proceeds. [intentionally deleted]
(b) Activities; Business.
The Corporation shall not, directly or indirectly, engage in
any activity or line of business other than holding the
Subordinated Note and enforcing remedies thereunder in accordance
with the terms thereof but subject to the EEX Subordination
Agreement.
(c) Subsidiaries.
The Corporation shall not, directly or indirectly, create or
form any Subsidiaries.
(d) Capitalization; Restrictions on Certain
Amendments.
(i) From and after the Effective Date, the
Corporation shall not issue or agree to issue any additional
Capital Stock unless the net proceeds from such issuance are
used to redeem all outstanding Preferred Stock.
(ii) From and after the Effective Date, the
Corporation shall not amend its organizational documents
(including its Certificate of Incorporation or bylaws) or
any terms of its Capital Stock or the Subordinated Note.
(e) Liens.
The Corporation shall not directly or indirectly, create,
incur, assume or suffer to exist any Lien on any asset now owned
or hereafter acquired, or any income or profits therefrom.
(f) Corporate Existence; Compliance with Laws; Taxes.
(i) The Corporation shall do or cause to be done
all things necessary to preserve and keep in full force and
effect its corporate, partnership or other existence in
accordance with its organizational documents and its rights
(charter and statutory), licenses and franchises.
(ii) The Corporation shall comply in all material
respects with all statutes, laws, ordinances, or government
rules and regulations to which it is subject.
(iii) The Corporation shall pay prior to
delinquency all taxes, assessments, and governmental levies
except those contested in good faith and by appropriate
proceedings.
(g) Notice of Default and Related Matters.
The Corporation shall furnish to the Placement Agent and
each of the Holders of record of shares of Class A Preferred
Stock written notice, promptly upon any Officer of the
Corporation becoming aware of the existence thereof, of:
(i) any condition or event that constitutes a
Default or a Voting Rights Trigger Event, specifying the
nature and period of existence thereof and the action that
the Corporation is taking or proposes to take with respect
thereto;
(ii) the filing or commencement of, or any threat
or notice of intention of any Person to file or commence,
any action, suit or proceeding, whether at law or in equity
or by or before any Governmental Authority, against or
affecting the Corporation that, if adversely determined,
would constitute a Material Adverse Effect; and
(iii) any development that constitutes a
Material Adverse Effect.
(h) Authorizations and Approvals.
The Corporation shall promptly obtain, from time to time,
all such Permits, consents and approvals as may be required to
enable the Corporation to comply with its obligations under the
Transaction Documents and the Class A Preferred Stock.
(i) No Senior Indebtedness.
Notwithstanding any other provision hereof, the Corporation
shall not incur, create, issue, assume, guarantee or otherwise
become directly or indirectly liable for any Indebtedness that is
senior in any respect in right of payment to the Class A
Preferred Stock, other than Indebtedness owing to Affiliates of
up to $10.0 million in aggregate principal amount unless, in each
of the foregoing cases, the proceeds thereof are used to repay
the Class A Preferred Stock in full.
(j) Liquidation.
The Corporation shall not adopt a plan of liquidation or
dissolution.
(k) Restricted Payments.
The Corporation shall not directly or indirectly: (i)
declare or pay any dividend or make any other payment or
distribution on account of the Corporation's Parity Securities or
Junior Securities (including, without limitation, any payment in
connection with any merger or consolidation involving the
Corporation) or to the direct or indirect holders of the
Corporation's Parity Securities or Junior Securities in their
capacity as such; or (ii) make any payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any
Junior Securities.
(l) Incurrence of Indebtedness and Issuance of
Preferred Stock.
Except as contemplated in Section 7(i), the Corporation
shall not, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness, and from and after the date hereof,
the Corporation shall not issue any additional Class A Preferred
Stock.
(m) Merger, Consolidation or Sale of Assets.
The Corporation shall not consolidate or merge with or into
(whether or not the Corporation is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its properties or assets in one or more
related transactions, to another corporation, Person or entity.
(n) Transactions with Affiliates.
Neither the Corporation nor any Subsidiary will enter into
any material transaction, including, without limitation, any
purchase, sale, lease or exchange of Property including the
purchase or sale of oil and gas properties and hydrocarbons or
the rendering of any service, with any Affiliate unless such
transactions are in the ordinary course of its business and are
upon fair and reasonable terms no less favorable to it than it
would obtain in a comparable arm's length transaction with a
Person not an Affiliate. For the avoidance of doubt, each of the
transactions set forth in or required by the Transaction
Documents shall be deemed to satisfy the covenant set forth in
this Section 7(n).
(o) Payments for Consent.
The Corporation shall not, directly or indirectly, pay or
cause to be paid any consideration, whether by way of dividend or
other distribution, fee or otherwise, to any Holder of any Class
A Preferred Stock for or as an inducement to any consent, waiver
or amendment of any of the terms or provisions of this
Certificate of Designations or the Class A Preferred Stock unless
such consideration is offered to be paid and is paid to all
Holders of the Class A Preferred Stock that consent, waive or
agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
(p) Reports.
(i) Whether or not required by the rules and
regulations of the Securities and Exchange Commission (the
"Commission"), so long as any shares of Class A Preferred Stock
are outstanding, the Corporation shall furnish to the Holders of
Class A Preferred Stock all quarterly and annual financial
information that would be required to be contained in a filing by
EEX with the Commission on Forms 10-Q and 10-K if EEX were
required to file such Forms, including "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report
thereon by EEX's certified independent accountants; and
(ii) The Corporation shall deliver to the Holders,
within 120 days after the end of each fiscal year, an unaudited
financial statement prepared in accordance with GAAP together
with an Officer's Certificate stating that a review of the
activities of the Corporation and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the
signing officers with a view to determining whether the
Corporation has kept, observed, performed and fulfilled its
obligations under this Certificate of Designations and further
stating, that to the best of his or her knowledge the Corporation
has kept, observed, performed and fulfilled each and every
covenant contained in this Certificate of Designations and is not
in default in the performance or observance of any of the terms,
provisions and conditions of this Certificate of Designations
(or, if any such default shall have occurred, describing all such
defaults of which he or she may have knowledge and what action
the Corporation is taking or proposes to take with respect
thereto) and that to the best of his or her knowledge no event
has occurred and remains in existence by reason of which payments
on account of the Liquidation Preference of or dividends, if any,
on the Class A Preferred Stock is prohibited or if such event has
occurred, a description of the event and what action the
Corporation is taking or proposes to take with respect thereto.
(iii) The Corporation shall, so long as any of
the shares of Class A Preferred Stock are outstanding, deliver to
the Holders, forthwith upon any Executive Officer of the
Corporation becoming aware of any default under this Certificate
of Designations, an Officers' Certificate specifying such default
and what action the Corporation is taking or proposes to take
with respect thereto.
(q) Conflicts with By-laws.
If any provisions of the Corporation's By-laws conflict in
any way with this Certificate of Designations, the Corporation
shall, so long as any of the shares of Class A Preferred Stock
are outstanding, take all necessary actions to amend such By-laws
and thereby resolve the conflict.
(r) Compliance with Engagement Letter and Fee Letter.
The Corporation shall, and shall cause its Subsidiaries to
comply with, the provision of the Engagement Letter and Fee
Letter.
Payment.
(a) All amounts payable in cash with respect to the
Class A Preferred Stock shall be payable in United States dollars
at the office or agency of the Corporation maintained for such
purpose within the City and State of New York or, at the option
of the Corporation, payment of dividends may be made by check
mailed to the Holders of the Class A Preferred Stock at their
respective addresses set forth in the register of Holders of
Class A Preferred Stock maintained by the Transfer Agent,
provided that all cash payments with respect to the Global Shares
(as defined below) and shares of Class A Preferred Stock the
Holders of which have given wire transfer instructions to the
Corporation will be required to be made by wire transfer of
immediately available funds to the accounts specified by the
Holders thereof. Unless otherwise designated by the Corporation,
the Corporation's office or agency in New York shall be the
office of the Paying Agent maintained for such purpose.
(b) Any payment on the Class A Preferred Stock due on
any day that is not a Business Day need not be made on such day,
but may be made on the next succeeding Business Day with the same
force and effect as if made on such due date.
(c) The Corporation has initially appointed the
Transfer Agent to act as the Paying Agent. The Corporation may
at any time terminate the appointment of any Paying Agent and
appoint additional or other Paying Agents, provided that until
the Class A Preferred Stock has been delivered to the Corporation
for cancellation, or moneys sufficient to pay the Liquidation
Preference and accrued dividends on the Class A Preferred Stock
have been made available for payment and either paid or returned
to the Corporation as provided in this Certificate of
Designations, it shall maintain an office or agency in the
Borough of Manhattan, The City of New York for surrender of Class
A Preferred Stock.
(d) Dividends payable on the Class A Preferred Stock
on any redemption date or repurchase date that is a Dividend
Payment Date will be paid to the Holders of record as of the
immediately preceding Record Date.
(e) All moneys deposited with any Paying Agent or then
held by the Corporation in trust for the payment of the
Liquidation Preference and dividends on any shares of Class A
Preferred Stock which remain unclaimed at the end of two years
after such payment has become due and payable will be repaid to
the Corporation, and the Holder of such shares of Class A
Preferred Stock will thereafter look only to Corporation for
payment thereof.
Officer's Certificate.
Each Officer's Certificate provided for in this
Certificate of Designations shall include:
(a) a statement that the officer making such
certificate or opinion has read such covenant or
condition;
(b) a brief statement as to the nature and scope
of the examination or investigation upon which the
statements or opinions contained in such certificate or
opinion are based;
(c) a statement that, in the opinion of such
officer, he or she has made such examination or
investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant
or condition has been satisfied; and
(d) a statement as to whether or not, in the
opinion of such officer, such condition or covenant has
been satisfied.
Exclusion of Other Rights.
Except as may otherwise be required by law, the shares
of Class A Preferred Stock shall not have any voting powers,
preferences and relative, participating, optional or other
special rights, other than those specifically set forth in this
Certificate of Designations (as such Certificate of Designations
may be amended from time to time) and in the Certificate of
Incorporation. The shares of Class A Preferred Stock shall have
no preemptive or subscription rights.
Headings of Subdivisions.
The headings of the various subdivisions hereof are for
convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
Severability of Provisions.
If any voting powers, preferences and relative,
participating, optional and other special rights of the Class A
Preferred Stock and qualifications, limitations and restrictions
thereof set forth in this resolution (as such resolution may be
amended from time to time) is invalid, unlawful or incapable of
being enforced by reason of any rule of law or public policy, all
other voting powers, preferences and relative, participating,
optional and other special rights of Class A Preferred Stock and
qualifications, limitations and restrictions thereof set forth in
this resolution (as so amended) which can be given effect without
the invalid, unlawful or unenforceable voting powers, preferences
and relative, participating, optional and other special rights of
Class A Preferred Stock and qualifications, limitations and
restrictions thereof shall, nevertheless, remain in full force
and effect, and no voting powers, preferences and relative,
participating, optional or other special rights of Class A
Preferred Stock and qualifications, limitations and restrictions
thereof herein set forth shall be deemed dependent upon any other
such voting powers, preferences and relative, participating,
optional or other special rights of Class A Preferred Stock and
qualifications, limitations and restrictions thereof unless so
expressed herein.
Form of Class A Preferred Stock.
(a) The shares of Class A Preferred Stock will bear a
legend to the following effect, unless the Corporation determines
otherwise in compliance with applicable law:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED
HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NEITHER BE
OFFERED, SOLD, OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER NOR BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED TO ANY PERSON OR
ENTITY PRINCIPALLY ENGAGED, DIRECTLY OR
INDIRECTLY, IN THE OIL AND GAS EXPLORATION
INDUSTRY OTHER THAN THE CORPORATION OR ANY OF
ITS AFFILIATES. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
THE CORPORATION THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN
A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, OR (c) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE CORPORATION SO REQUESTS), (2) TO THE
CORPORATION OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(b) Upon surrender of any share of Class A Preferred
Stock by a holder for registration of transfer or exchange, the
Corporation will execute and deliver in exchange therefor a new
certificate or certificates representing shares of Class A
Preferred Stock of the same aggregate tenor and Liquidation
Preference, registered in such names and in such denominations as
such holder may request. The Corporation may require
certificates of transferrers and transferees of shares of Class A
Preferred Stock, or an opinion of counsel, in order to establish
compliance with the Securities Act. The Corporation may require
payment by such holder of a sum sufficient to cover any stamp tax
or governmental charge imposed in respect of any such transfer.
(c) The Corporation shall maintain a register (the
"Class A Preferred Stock Register") of the holders of all the
shares of Class A Preferred Stock issued pursuant to this
Certificate of Designations. The Corporation will allow any
Holder of record of shares of Class A Preferred Stock to inspect
and copy such register at the Corporation's principal place of
business during normal business hours.
Notice.
Any notice or communication by the Corporation to UBS
is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier
guaranteeing next day delivery, to the following address:
UBS Securities LLC
299 Park Avenue
New York, New York 10171-0026
Telecopier No.: (212) 821-6119
Attention: James A. Ajello,
with a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
Telecopier No.: (212) 751-4864
Attention: Nancy L. Schimmel
Subordination of Subordinated Note.
(a) The Corporation, for itself, its successors and
assigns, covenants and agrees, and each Holder of the Class A
Preferred Stock, by its acceptance thereof, likewise covenants
and agrees, that payment by EEX of the principal of and premium,
if any, and interest on the Subordinated Note, and any fees or
costs related thereto, is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all Senior Debt. The
provisions of this Section 15 are made for the benefit of all
holders of Senior Debt and any such holder may proceed to enforce
such provisions.
(b) During such time as any Senior Debt remains unpaid
and an Event of Default (under and as defined in the EEX Credit
Agreement) exists and is continuing, the Corporation will not ask
for, demand, sue for, take, receive or accept from EEX, by set-
off or in any other manner, any payment or distribution on
account of the Subordinated Note, or present any instrument
evidencing the Subordinated Note for payment (other than such
presentment as may be necessary to prevent discharge of EEX or
other liable parties on such instrument).
(c) In the event that the Corporation shall receive
any payment or distribution on account of the Subordinated Note
which the Corporation is not entitled to receive under the
provisions of this Section 15, the Corporation will hold any such
amount so received in trust for the holders of the Senior Debt
and will forthwith turn over such payment to any court of
competent jurisdiction in the form received by the Corporation
(together with any necessary endorsement) to be applied ratably
to the Senior Debt.
<signature page follows>
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be duly executed by Joseph T. Leary, its Vice
PresidentFinance and Treasure, on the Effective Date, effective
as of Septemebr 29, 1997.
EEX Capital Inc.
By:
Name: Joseph T. Leary
Title: Vice
PresidentFinance and Treasurer
Consented to and Approved
by each of the Holders as of the
date hereof:
UBS Securities LLC
By: _____________________________
Name: James A. Ajello
Title: Managing Director
By: _____________________________
Name: Jeffrey M. Donahue
Title: Director
<PAGE>
<PAGE> EXHIBIT 4.5
SUBORDINATED NOTE
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (4) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES AND OTHER JURISDICTIONS.
No.1 $150,000,000
Original Issuance Date: September 29, 1997
Issuance Date: October 27, 1997
ENSERCH EXPLORATION, INC.
Subordinated Increasing Rate Note
ENSERCH EXPLORATION, INC., a Texas corporation
(together with its successors, the "Issuer"), for value received,
hereby promises to pay to:
EEX CAPITAL INC.
and registered assigns (the "Holder")
the principal sum of
ONE HUNDRED FIFTY MILLION DOLLARS
on demand, or if no demand has been made, on August 4, 2005,
together with interest thereon from and after the date hereof
until maturity on the dates and at the rates hereinafter
provided.
This Subordinated Note is subject to the terms of that
certain Subordination Agreement effective as of September 29,
1997 executed by Holder in favor of The Chase Manhattan Bank, as
Administrative Agent and for the benefit of the Lenders from time
to time party to the EEX Credit Agreement hereinafter described
(the "Subordination Agreement"), and shall replace that certain
demand note dated June 5, 1997 in the original face principal
amount of $150,000,000 made by EEX in favor of Payee (the
"Existing Note") and to re-evidence the debt evidenced by the
Existing Note, which debt remains outstanding as of the date
hereof. Notwithstanding the execution of the replacement of the
Existing Note with this Subordinated Note, any accrued and unpaid
interest under the Existing Note as of the date hereof shall
remain outstanding and shall be payable in full on the next
Interest Payment Date hereunder.
Issuer shall keep at its principal office a register
(the "Register") in which shall be entered the names and
addresses of the registered Holders of this Subordinated Note and
of all transfers of hereof. The ownership of this Subordinated
Note (or any Subordinated Note issued in replacement herefor)
shall be proven by the Register.
Section 1. Definitions. As used herein:
(a) capitalized terms used and not otherwise defined herein
shall have the meanings attributed thereto in the Subscription
Agreement, and
(b) the following terms shall have the following meanings:
"Dividend Period" have the meaning assigned in the
Certificate of Designations.
"Dividends" have the meaning assigned in the
Certificate of Designations.
"Dollars" and "$" shall mean lawful money of the United
States of America.
"Interest Payment Date" shall mean a "Dividend Payment
Date" under and as described in the Certificate of Designations.
"Interest Periods" shall mean the periods (i) in the
case of the first Interest Period, from September 29, 1997, to
but excluding December 31, 1997, and in the case of each
subsequent Interest Period, from the last Business Day of a
calendar quarter to but excluding the last Business Day of the
following calendar quarter or, if earlier, the maturity date of
this Subordinated Note.
"Prohibited Indebtedness" shall mean any Indebtedness
of or guaranteed by EEX Capital other than (a) the Indebtedness
evidenced by this Subordinated Note (and subordinated Notes
issued in replacement hereof), and (b) additional Indebtedness of
EEX Capital to EEX or another Affiliate not to exceed $10,000,000
in aggregate principal amount.
"Responsible Officer" shall mean, as to EEX or any
Subsidiary, the Chief Executive Officer, the President or any
Vice President of EEX Capital and, with respect to financial
matters, the term "Responsible Officer" shall include the Chief
Financial Officer, Controller, Vice President, Finance, Treasurer
or Treasury Officer of such Person. Unless otherwise specified,
all references to a Responsible Officer herein shall mean a
Responsible Officer of EEX.
"Subscription Agreement" shall mean the Amended and
Restated Preferred Stock Subscription Agreement effective as of
September 29, 1997 by and among EEX, EEX Capital and UBS
Securities LLC, individually and as Placement Agent for the
holders of the Preferred Stock, as the same may be amended,
supplemented, restated or replaced from time to time.
Section 2. Interest and Payment. Subject in each of
the following cases to the terms of the Subordination Agreement:
(a) Interest shall accrue on the unpaid principal balance of
this Subordinated Note for each Interest Period at the rate of
interest equal to the lesser of (i) the sum of the Dividends and
Additional Costs owing for the continuous Dividend Period for the
Preferred Stock whether or not such Dividends or Additional Costs
are described or paid and (ii) the Maximum Rate (defined below);
(b) The outstanding principal balance of this Subordinated Note
shall be due and payable on demand, but if no demand has been
made, on August 4, 2005. Interest on the unpaid principal
balance of this Subordinated Note shall be due and payable on
each Interest Payment Date, commencing on the Interest Payment
Date occurring on December 31, 1997, until the maturity hereof
(whether due to demand, a Maturing Event, or expiration of term),
at which time all unpaid principal of and accrued interest on
this Subordinated Note shall be due and payable; and
(c) Issuer may redeem this Subordinated Note upon ten (10)
Business Days' prior notice to Holder and the Placement Agent
which notice shall specify the redemption date (which shall be an
Interest Payment Date) and the amount of the redemption (which
shall be at least $10,000,000 or any whole multiple of $100,000
in excess thereof or the remaining aggregate principal balance
outstanding on this Subordinated Note) and shall be irrevocable
and effective only upon receipt by Holder and the Placement
Agent, provided that interest on the principal prepaid, accrued
to the redemption date, shall be paid on the redemption date.
Section 3. General Provisions.
All principal, interest and other sums payable under
this Subordinated Note shall be paid on the day when due in
immediately available funds in lawful money of the United States
of America. All payments made as scheduled on this Subordinated
Note shall be applied, to the extent thereof, first to accrued
but unpaid interest and the balance to unpaid principal.
Notwithstanding the failure of the holder hereof to
make prior actual demand hereon, this Subordinated Note shall
mature and, subject to the Subordination Agreement, be due and
payable at once, without demand, upon the occurrence of any of
the following events (each, a "Maturing Event"):
(a) If Issuer shall fail to pay when due any principal of or
interest on this Subordinated Note and such failure shall
continue unremedied for a period of thirty (30) days; or
(b) If Issuer or Holder shall admit in writing its inability to,
or be generally unable to, pay its debts as such debts become
due; or
(c) If Issuer or Holder shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition, as debtor, seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code, or (vi) take
any corporate or partnership action for the purpose of effecting
any of the foregoing;
(d) If a proceeding or case shall be commenced, without the
application or consent of Issuer or Holder in any court of
competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of Issuer or Holder
of all or any substantial part of its Property, or (iii) similar
relief in respect of Issuer or Holder under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 days; or (iv)
an order for relief against Issuer or Holder shall be entered in
an involuntary case under the Federal Bankruptcy Code; or
(e) If an "Event of Default" under and as defined in (i) the EEX
Credit Agreement, (ii) the Subscription Agreement or (iii) the
Certificate of Designations shall occur; or
(f) If EEX or any of its Subsidiaries shall default in the
performance of any of its obligations under any other Transaction
Document or EEX Capital shall default in the performance of any
of its obligations under any other Section of this Subordinated
Note not covered by the foregoing clauses (a) through (e) and
such default shall continue unremedied for a period of sixty (60)
days after the earlier to occur of (i) notice thereof to EEX by
the Placement Agent, as EEX Capital's attorney-in-fact, or (ii) a
Responsible Officer of EEX otherwise becoming aware of such
default; or
(g) If any Change of Control shall occur.
Upon the occurrence of a Maturing Event under
subparagraph (a), (e), (f) or (g) above, subject to the terms of
the Subordination Agreement, Holder shall have the right to
declare the unpaid principal balance and accrued but unpaid
interest on this Subordinated Note at once due and payable (and
upon such declaration, the same shall be at once due and payable)
and to exercise any of its other rights, powers and remedies
under this Subordinated Note or at law or in equity. Upon the
occurrence of a Maturing Event under subparagraph (b), (c) or (d)
above, the entire unpaid principal balance of this Subordinated
Note and all accrued but unpaid interest thereon shall
automatically be accelerated and immediately due and payable in
full, without notice, presentment, protest, demand or notice of
any kind, each of which is hereby expressly waived by Issuer.
Subject to the terms of the Subordination Agreement,
this Subordinated Note is a demand obligation subject to being
called at any time without reason upon actual demand by the
holder hereof. The inclusion of a payment schedule and maturity
clause in this Subordinated Note is merely to provide terms for
payment and acceleration in the absence of actual demand, and
does not affect or impair the holder's absolute right, subject to
the Subordination Agreement, to demand payment of this
Subordinated Note at any time without reason. Issuer has agreed
that the holder may delay demand until, or make demand at any
time before, the maturity date otherwise specified above.
Neither the failure by the holder hereof to exercise,
nor delay by the holder hereof in exercising, the right to
accelerate the maturity of this Subordinated Note or any other
right, power or remedy upon any Maturing Event shall be
considered as a waiver of such Maturing Event or as a waiver of
the right to exercise any such right, power or remedy at any
time. Without limiting the generality of the foregoing
provisions, the acceptance by Holder from time to time of any
payment under this Subordinated Note which is past due or which
is less than the payment in full of all amounts due and payable
at the time of such payment, shall not constitute a waiver of or
impair or establish any right or remedy of Holder.
It is the intent of Holder and Issuer in the execution
of this Subordinated Note to contract in strict compliance with
applicable usury law. In furtherance thereof, Holder and Issuer
stipulate and agree that none of the terms and provisions
contained in this Subordinated Note, or in any other instrument
executed in connection herewith, shall ever be construed to
create a contract to pay for the use, forbearance or detention of
money, or interest at a rate in excess of the Maximum Rate; that
neither Issuer nor any guarantors, endorsers or other parties now
or hereafter becoming liable for payment of this Subordinated
Note shall ever be obligated or required to pay interest on this
Subordinated Note at a rate in excess of the Maximum Rate; and
that the provisions of this paragraph shall control over all
other provisions of this Subordinated Note and any other
instruments now or hereafter executed in connection herewith
which may be in apparent conflict herewith. The holder of this
Subordinated Note expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the
event demand is made prior to the maturity date hereof or if the
maturity of this Subordinated Note is accelerated. If demand
shall be made, or if the maturity of this Subordinated Note shall
be accelerated for any reason or if the principal of this
Subordinated Note is paid prior to maturity of this Subordinated
Note, and as a result thereof the interest received for the
actual period of existence of the loan evidenced by this
Subordinated Note exceeds the Maximum Rate, the holder of this
Subordinated Note shall, at its option, either refund to Issuer
the payment of such excess or credit the amount of such excess
against the principal balance of this Subordinated Note then
outstanding and thereby shall render inapplicable any and all
penalties of any kind provided by applicable law as a result of
such excess interest. In the event that Holder or any other
holder of this Subordinated Note shall contract for, charge or
receive any amount or amounts and/or any other thing of value
which is determined to constitute interest which would increase
the effective interest rate on this Subordinated Note to a rate
in excess of the Maximum Rate, an amount equal to interest in
excess of the Maximum Rate shall, upon such determination, at the
option of the holder of this Subordinated Note, be either
immediately returned to Issuer or credited against the principal
balance of this Subordinated Note then outstanding, in which
event any and all penalties of any kind under applicable law a
result of such excess interest shall be inapplicable. As used
herein, the term "Maximum Rate" means the maximum nonusurious
rate of interest per annum permitted by Texas law, including to
the extent permitted by applicable law, any amendments thereof
hereafter or any new law hereafter coming into effect to the
extent a higher Maximum Rate is permitted thereby. To the
extent, if any, that Chapter One ("Chapter One") of Title 79,
Texas Revised Civil Statutes, 1925, as amended, establishes the
Maximum Rate, the Maximum Rate shall be the "indicated rate
ceiling" (as defined in Chapter One) in effect from time to time.
The Maximum Rate shall be applied by taking into account all
amounts characterized by applicable law as interest on the debt
evidenced by this Subordinated Note, so that the aggregate of all
interest does not exceed the maximum nonusurious amount permitted
by applicable law.
Issuer waives demand (unless upon occurrence of the
stated maturity date), presentment for payment, notice of
dishonor, protest and notice of protest, diligence in collecting
or in bringing suit against any party to this Subordinated Note,
and the application of any bank balance or collateral security or
the proceeds therefrom as payment or part payment on this
obligation or as an offset to this Subordinated Note, and agrees
to all extensions and partial payments, with or without notice,
before or after maturity (whether due to demand, a Maturing Event
or expiration of term).
All of the covenants, stipulations, promises, and
agreements contained in this Subordinated Note by or on behalf of
Issuer shall bind its successors and assigns.
THIS SUBORDINATED NOTE, AND ITS VALIDITY, ENFORCEMENT
AND INTERPRETATION, SHALL BE GOVERNED BY TEXAS LAW.
Time shall be of the essence in this Subordinated Note
with respect to all of Issuer's obligations hereunder.
THIS NOTICE REPRESENTS THE FINAL AGREEMENT BETWEEN
ISSUER AND HOLDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF ISSUER
AND HOLDER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
ISSUER AND HOLDER.
<PAGE>
<PAGE>
ENSERCH EXPLORATION, INC.
By:_______________________________
Joseph T. Leary
Vice PresidentFinance and Treasurer
<PAGE>
<PAGE>
EXHIBIT 10.6
CREDIT AGREEMENT
AMONG
ENSERCH EXPLORATION, INC.
AS BORROWER,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT,
THE CHASE MANHATTAN BANK, N.A.,
AS SYNDICATION AGENT
CHEMICAL BANK,
AS AUCTION AGENT
AND
THE LENDERS NOW OR HEREAFTER PARTIES HERETO
DATED AS OF MAY 1, 1995
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above.................. 1
Section 1.02 Certain Defined Terms................ 1
Section 1.03 Accounting Terms and Determinations.. 14
ARTICLE II
BORROWINGS
Section 2.01 Committed Loans...................... 14
Section 2.02 Borrowings, Continuations and
Conversions of Committed Loans....... 15
Section 2.03 Changes of Commitments............... 17
Section 2.04 Fees................................. 17
Section 2.05 Several Obligations.................. 17
Section 2.06 Notes................................ 17
Section 2.07 Prepayments.......................... 18
Section 2.08 Lending Offices...................... 19
Section 2.09 Competitive Loans.................... 19
Section 2.10 Designated Subsidiaries.............. 23
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans................... 23
Section 3.02 Interest............................. 24
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments............................. 25
Section 4.02 Pro Rata Treatment................... 25
Section 4.03 Computations......................... 26
Section 4.04 Non-receipt of Funds by the
Administrative Agent................. 26
Section 4.05 Sharing of Payments, Etc............. 26
Section 4.06 Taxes................................ 27
i
ARTICLE V
CAPITAL ADEQUACY, ADDITIONAL COSTS, ETC.
Section 5.01 Additional Costs..................... 30
Section 5.02 Limitation on Eurodollar Loans....... 31
Section 5.03 Illegality........................... 31
Section 5.04 Base Rate Loans Pursuant to Sections
5.02 and 5.03........................ 31
Section 5.05 Compensation......................... 32
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding...................... 32
Section 6.02 Initial and Subsequent Loans......... 33
Section 6.03 Loans to Designated Subsidiaries..... 33
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 Corporate Existence.................. 34
Section 7.02 Financial Condition.................. 35
Section 7.03 Litigation........................... 35
Section 7.04 No Breach............................ 35
Section 7.05 Authority............................ 35
Section 7.06 Approvals............................ 36
Section 7.07 Use of Loans......................... 36
Section 7.08 ERISA................................ 36
Section 7.09 Taxes................................ 37
Section 7.10 Titles, etc.......................... 37
Section 7.11 No Material Misstatements............ 38
Section 7.12 Investment Company Act............... 38
Section 7.13 Public Utility Holding Company Act... 38
Section 7.14 Subsidiaries and Partnerships........ 38
Section 7.15 Location of Business and Offices..... 38
Section 7.16 Defaults............................. 38
Section 7.17 Environmental Matters................ 39
Section 7.18 Compliance with Laws................. 40
Section 7.19 Pari Passu........................... 40
ii
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01 Financial Statements................. 40
Section 8.02 Litigation........................... 42
Section 8.03 Maintenance, Etc..................... 42
Section 8.04 Environmental Matters................ 43
Section 8.05 Further Assurances................... 43
Section 8.06 ERISA Information and Compliance..... 43
Section 8.07 Lease Payments....................... 44
Section 8.08 Subsidiary Guaranty Agreements....... 44
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01 Debt to Capital Ratio................ 45
Section 9.02 Liens................................ 45
Section 9.03 Investments, Loans and Advances...... 47
Section 9.04 Dividends, Distributions and
Redemptions.......................... 47
Section 9.05 Nature of Business................... 47
Section 9.06 Mergers, Etc......................... 47
Section 9.07 Proceeds of Notes.................... 48
Section 9.08 ERISA Compliance..................... 48
Section 9.09 Environmental Matters................ 49
Section 9.10 Transactions with Affiliates......... 49
Section 9.11 Restrictive Dividend Agreements...... 49
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default................... 49
Section 10.02 Remedies............................ 51
ARTICLE XI
THE ADMINISTRATIVE AGENT
Section 11.01 Appointment, Powers and Immunities.. 52
Section 11.02 Reliance by Agent................... 53
Section 11.03 Defaults............................ 53
Section 11.04 Rights as a Lender.................. 53
Section 11.05 INDEMNIFICATION..................... 53
Section 11.06 Non-Reliance on the Agents and other
Lenders............................. 54
iii
Section 11.07 Action by Agent....................... 54
Section 11.08 Resignation or Removal of the Agents.. 55
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver................................ 55
Section 12.02 Notices............................... 56
Section 12.03 Payment of Expenses, Indemnities, etc. 56
Section 12.04 Amendments, Etc....................... 58
Section 12.05 Successors and Assigns................ 59
Section 12.06 Assignments and Participations........ 59
Section 12.07 Invalidity............................ 60
Section 12.08 Counterparts.......................... 60
Section 12.09 References............................ 60
Section 12.10 Survival.............................. 61
Section 12.11 Captions.............................. 61
Section 12.12 NO ORAL AGREEMENTS.................... 61
Section 12.13 GOVERNING LAW; SUBMISSION TO
JURISDICTION.......................... 61
Section 12.14 Interest.............................. 62
Section 12.15 Confidentiality....................... 63
Section 12.16 Effectiveness......................... 64
Section 12.17 EXCULPATION PROVISIONS................ 64
Annex 1 - List of Commitments
Exhibit A - Form of Committed Note
Exhibit B - Form of Competitive Note
Exhibit C - Form of Competitive Bid Request
Exhibit D - Form of Notice to Lenders of Competitive Bid
Request
Exhibit E - Form of Competitive Bid
Exhibit F - Form of Competitive Bid Administration
Questionnaire
Exhibit G - Form of Borrowing, Continuation and Conversion
Request
Exhibit H - Form of Compliance Certificate
Exhibit I - Form of Legal Opinion of Counsel for the Company
Exhibit J - Form of Legal Opinion of Counsel for the
Designated Subsidiary
Exhibit K - Form of Assignment Agreement
Exhibit L - Form of Notice of Designation of Designated
Subsidiaries
Exhibit M - Form of Permitted Subordinated Debt Subordination
Provisions
Exhibit N - Form of Legal Opinion of Counsel for the Subsidiary
Guarantor
Schedule 1.02 - Capital and Operating Lease Obligations
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
iv
[S] [C]
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
v
THIS CREDIT AGREEMENT dated as of May 1, 1995 is among: ENSERCH
EXPLORATION, INC., a corporation formed under the laws of the State of
Texas (the "Company"); each of the lenders that is a signatory hereto or
which becomes a signatory hereto as provided in Section 12.06
(individually, together with its successors and assigns, a "Lender" and,
collectively, the "Lenders"); TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a
national banking association (in its individual capacity, "TCB"), as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent"); CHEMICAL BANK,
a New York banking corporation (in its individual capacity, "Chemical"),
as auction agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Auction Agent"); and THE CHASE MANHATTAN
BANK, N.A., a national association (in its individual capacity, "Chase"),
as syndication agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Syndication Agent").
R E C I T A L S
A. The Company has requested that the Lenders provide certain loans to
the Company and to certain of its subsidiaries; and
B. The Lenders have agreed to make such loans subject to the terms and
conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans and commitments hereinafter referred to, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement, the
terms "Administrative Agent," "Auction Agent," "Company," "Chase,"
"Chemical," "Lender," "Lenders," "Syndication Agent," and "TCB" shall have
the meanings indicated above.
Section 1.02 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Article
I or in other provisions of this Agreement in the singular to have the
same meanings when used in the plural and vice versa):
"Additional Costs" shall have the meaning assigned such term in
Section 5.01(a).
"Affected Loans" shall have the meaning assigned such term in Section
5.04.
1
<PAGE>
"Affiliate" shall mean with respect to any Person, any other Person
that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such
Person. For purposes of the foregoing definition, "control" means the
direct or indirect ownership of more than 50% of the outstanding capital
stock or other equity interests having ordinary voting power.
"Agents" shall mean the Administrative Agent, the Syndication Agent
and/or the Auction Agent.
"Agreement" shall mean this Credit Agreement, as the same may from
time to time be amended or supplemented.
"Aggregate Commitments" at any time shall equal the sum of the
Commitments of the Lenders ($350,000,000), as the same may be reduced
pursuant to Section 2.03(a).
"Applicable Lending Office" shall mean, for each Lender, the lending
office of such Lender (or an Affiliate of such Lender) designated for each
Type of Loan on the signature pages hereof or such other offices of such
Lender (or of an Affiliate of such Lender) as such Lender may from time to
time specify to the Administrative Agent and the Company as the office by
which its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean the following rates per annum as are
applicable based upon the Debt to Capital Ratio calculated as of the last
day of a fiscal quarter of the Company to be effective for any Committed
Loan outstanding or for the facility fee during the period from the
Financial Statement Delivery Date following such fiscal quarter to but not
including the next succeeding Financial Statement Delivery Date:
<TABLE>
<CAPTION>
DEBT TO CAPITAL RATIO
---------------------------------
<S> <C> <C> <C> <C> <C>
40% 45% 50%
BUT BUT BUT
40% 45% 50% 55% 55%
---- ---- ---- ---- ----
Facility Fee .150% .175% .200% .225% .250%
Eurodollar Loans .350% .425% .500% .575% .750%
Base Rate Loans 0% 0% 0% 0% 0%
</TABLE>
"Assignment" shall have the meaning assigned such term in Section
12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan, for any
day, the higher of (i) the Federal Funds Rate for any such day plus 1/2 of
1%
2
<PAGE>
or (ii) the Prime Rate for such day. Each change in any interest rate
provided for herein based upon the Base Rate resulting from a change in
the Base Rate shall take effect at the time of such change in the Base
Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Benefit Plan" shall mean any employee pension benefit plan, as
defined in section 3(2) of ERISA (other than a Multiemployer Plan), which
(a) is currently or hereafter sponsored, maintained or contributed to by
the Company, a Subsidiary or an ERISA Affiliate or (b) was at any time
during the six preceding years, sponsored, maintained or contributed to by
the Company, a Subsidiary or an ERISA Affiliate.
"Borrowing" shall mean a borrowing pursuant to a Borrowing Request or
a Competitive Bid Request or a continuation or a conversion pursuant to
Section 2.02 consisting, in each case, of the same Type of Loans having,
in the case of Eurodollar Loans and Fixed Rate Loans, the same Interest
Period.
"Borrowing Request" shall mean a request for a Borrowing of Committed
Loans pursuant to Section 2.02, substantially in the form attached as
Exhibit G.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in New York, New York, Dallas,
Texas, or at the location of the Principal Office and, where such term is
used in the definition of "Quarterly Date" or if such day relates to a
Borrowing or continuation of, a payment or prepayment of principal of or
interest on, or a conversion of or into, or the Interest Period for, a
Eurodollar Loan or a notice by the Company with respect to any such
Borrowing or continuation, payment, prepayment, conversion or Interest
Period, any day which is also a day on which dealings in Dollar deposits
are carried out in the London interbank market.
"Capital Lease Obligations" shall mean, as to the Company or any
Subsidiary, the obligations of such person to pay rent or other amounts
under a lease of (or other agreement conveying the right to use) real
and/or personal property which obligations are required to be classified
and accounted for as a liability for a capital lease on a balance sheet of
such Person in accordance with GAAP and, for purposes of this Agreement,
the amount of such obligations shall be the capitalized amount thereof.
"Closing Date" shall mean the as of date of this Agreement set forth
in the first paragraph hereof.
3
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute.
"Commitment" shall mean, for any Lender, its obligation to make
Committed Loans up to the amount set forth opposite such Lender's name on
Annex 1 under the caption "Commitments" (as the same may be reduced
pursuant to Section 2.03(a) pro rata to each Lender based on its
Percentage Share) as modified from time to time to reflect any assignments
permitted by Section 12.06(b).
"Committed Loan" shall mean a Loan made pursuant to Section 2.01.
"Committed Note" shall mean for each Obligor a promissory note of such
Obligor described in Section 2.06(a) payable to any Lender and being
substantially in the form of Exhibit A, evidencing the aggregate
Indebtedness of such Obligor to such Lender resulting from Committed Loans
made by such Lender, together with all renewals, extensions, modifications
and replacements thereof and substitutions therefor.
"Competitive Bid" shall mean an offer by a Lender to make a
Competitive Loan pursuant to Section 2.09.
"Competitive Bid Administrative Questionnaire" shall mean a
questionnaire in the form of Exhibit F.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by
a Lender pursuant to Section 2.09, (a) in the case of a Eurodollar Loan,
the Margin (which will be added to or subtracted from the Eurodollar Rate)
and (b) in the case of a Fixed Rate Loan, the fixed rate of interest, in
each case, offered by the Lender making such Competitive Bid.
"Competitive Bid Request" shall have the meaning assigned such term in
Section 2.09.
"Competitive Loans" shall mean the loans provided for in Section 2.09.
"Competitive Note" shall mean for each Obligor a promissory note of
such Obligor described in Section 2.06(b) payable to any Lender and being
substantially in the form of Exhibit B, evidencing the aggregate
Indebtedness of such Obligor to such Lender resulting from Competitive
Loans made by such Lender, together with all renewals, extensions,
modifications and replacements thereof and substitutions therefor.
"Consolidated Subsidiaries" shall mean each Subsidiary (whether now
existing or hereafter created or acquired) the financial statements of
which
4
<PAGE>
shall be (or should have been) consolidated with the financial statements
of the Company in accordance with GAAP.
"Debt" shall mean, for the Company or any Subsidiary the sum of the
following (without duplication): (i) all obligations for borrowed money or
evidenced by bonds, debentures, mandatorily redeemable preferred stock
with maturities before the Revolving Credit Termination Date, notes or
other similar instruments (excluding interest, fees and charges); (ii) all
obligations in respect of bankers' acceptances, unreimbursed drawings on
letters of credit, surety or other bonds; (iii) all Capital Lease
Obligations, but excluding such Capital Lease Obligations in existence as
of the Closing Date and set forth on Schedule 1.02 and any renewals and
rearrangements, but not increases in the amount thereof; (iv) all
Operating Lease Obligations, but excluding such Operating Lease
Obligations in existence as of the Closing Date and set forth on Schedule
1.02 and any renewals and rearrangements and increases up to an additional
15% in the amount thereof; (v) all financial guaranties in respect of Debt
of unconsolidated Affiliates and unrelated Persons; (vi) all obligations
secured by a Lien on any asset, whether or not such Debt is assumed, but
excluding obligations secured by Liens permitted by Sections 9.02(c), (e),
(f), (h), (i), (j), (k) and (l); (vii) all production payments in
connection with oil and gas properties; and (viii) all Debt of Special
Entities to the extent the Company or any Subsidiary is liable for such
Debt under GAAP or such Debt is reflected on the consolidated balance
sheet of the Company or any Subsidiary. "Debt" shall not include
Permitted Subordinated Debt.
"Debt to Capital Ratio" shall have the meaning assigned such term in
Section 9.01.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Designated Subsidiary" shall mean a Subsidiary during the period that
it has been designated by the Company pursuant to Section 2.10 to have the
right to borrow hereunder.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"Effective Date" shall mean the date on which (i) each of the
conditions precedent set forth in Article VI has been satisfied or waived
by each of the Lenders and (ii) the conditions to effectiveness set forth
in Section 12.16 have been satisfied. Subject to Section 6.01, the
Effective Date and Closing Date may be the same date.
5
<PAGE>
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all
jurisdictions in which the Company or any Subsidiary is conducting or at
any time has conducted business, or where any Property of the Company or
any Subsidiary is located, including without limitation, 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, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall have
the meaning specified in OPA, the terms "hazardous substance" and
"release" (or "threatened release") shall have the meanings specified in
CERCLA, and the terms "solid waste" and "disposal" (or "disposed") shall
have the meanings specified in RCRA; provided, however, that (i) in the
event either OPA, CERCLA or RCRA 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 (ii) to the extent the laws of
the state in which any Property of the Company or any Subsidiary 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.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Company or a Subsidiary would be
deemed to be a "single employer" within the meaning of section 4001(b)(1)
of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in section
4043 of ERISA and the regulations issued thereunder (other than a
"Reportable Event" not subject to the provision for 30-day notice to the
PBGC), (ii) the withdrawal of the Company, a Subsidiary or any ERISA
Affiliate from a Plan during a plan year in which it was a "substantial
employer" as defined in section 4001(a)(2) of ERISA, (iii) the filing of
a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of ERISA, (iv) the
institution of proceedings to terminate a Plan by the PBGC, (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
6
<PAGE>
or (vi) the partial or complete withdrawal of the Company, a Subsidiary
or any ERISA Affiliate from a Multiemployer Plan.
"Eurodollar Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of
"Eurodollar Rate".
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan, the
rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
quoted by the Administrative Agent at approximately 11:00 a.m. London time
(or as soon thereafter as practicable) two (2) Business Days prior to the
first day of the Interest Period for such Loan for the offering by the
Administrative Agent to leading banks in the London interbank market of
Dollar deposits having a term comparable to such Interest Period and in an
amount comparable to the principal amount of the Eurodollar Loan, if a
Committed Loan, to be made by the Administrative Agent for such Interest
Period, or, if a Competitive Loan, requested for such Interest Period.
"Event of Default" shall have the meaning assigned such term in
Section 10.01.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
a member of the Federal Reserve System arranged by federal funds brokers
on such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that (i) if the date for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding
Business Day, and (ii) if such rate is not so published for any day, the
Federal Funds Rate for such day shall be the average rate charged to the
Administrative Agent on such day on such transactions as determined by the
Administrative Agent.
"Fee Letter" shall mean collectively that certain letter agreement
from the Company to the Administrative Agent and the Syndication Agent
dated April 4, 1995 and that certain letter agreement from the Company to
the Auction Agent, both letters concerning certain fees in connection with
this Agreement and any agreements or instruments executed in connection
therewith, as the same may be amended or replaced from time to time.
"Financial Statement Delivery Date" means the date on which the
quarterly or annual financial statements of the Company are delivered
pursuant to Section 8.01(a) or (b), as the case may be.
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"Financial Statements" shall mean the financial statement or
statements of the Company and its Consolidated Subsidiaries described or
referred to in Section 7.02.
"Fixed Rate Loan" shall mean any Competitive Loan made by a Lender
pursuant to Section 2.09 bearing interest based upon an actual percentage
rate per annum offered by such Lender (as opposed to a Margin over the
Eurodollar Rate) and accepted by the Company.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any Person exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or
other directive or requirement (whether or not having the force of law),
including, without limitation, Environmental Laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental
Authority.
"Guarantors" shall mean the Company and the Subsidiary Guarantors.
"Guaranty Agreements" shall mean the Parent Guaranty Agreement and the
Subsidiary Guaranty Agreements.
"Highest Lawful Rate" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time
to time may be contracted for, taken, reserved, charged or received on the
Notes or on other Indebtedness under laws applicable to such Lender which
are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
"Indebtedness" shall mean any and all amounts owing or to be owing by
the Obligors to the Administrative Agent and/or Lenders in connection with
the Loan Documents and all renewals, extensions and/or rearrangements of
any of the above.
"Indemnified Parties" shall have the meaning assigned such term in
Section 12.03(b).
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"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands
and causes of action made or threatened against a Person and, in
connection therewith, all losses, liabilities, damages (including, without
limitation, punitive damages except those arising from the gross
negligence or wilful misconduct of such Indemnified Party) or reasonable
costs and expenses of any kind or nature whatsoever incurred by such
Person whether caused by the negligent acts or omissions of such Person
seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans pursuant
to Section 6.01.
"Interest Period" shall mean, (a) with respect to any Eurodollar Loan,
the period commencing on the date such Eurodollar Loan is made and ending
on the numerically corresponding day in the first, second, third or sixth
calendar month thereafter, as the Company may select as provided in
Section 2.02 (or such longer period as may be requested by the Company and
agreed to by the Majority Lenders), except that each Interest Period which
commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month; and (b) with respect to any Fixed
Rate Loan, the period commencing on the date such Fixed Rate Loan is made
and ending on the date set forth in the Competitive Bid in which the offer
to make such Fixed Rate Loan was extended.
Notwithstanding the foregoing: (i) no Interest Period may commence
before and end after the Revolving Credit Termination Date; (ii) each
Interest Period which would otherwise end on a day which is not a Business
Day shall end on the next succeeding Business Day (or, for Eurodollar
Loans, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (iii) no Interest
Period for Eurodollar Loans shall have a duration of less than one month
and, if the Interest Period for any Eurodollar Loans would otherwise be
for a shorter period, such Loans shall not be available hereunder; and
(iv) no Interest Period for Fixed Rate Loans shall have a duration of less
than one (1) day nor more than 365 days.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and whether
such obligation or claim is fixed or contingent, and including but not
limited to (i) the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes or (ii)
production payments
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and the like payable out of Properties. For the purposes of this
Agreement, the Company or any Subsidiary shall be deemed to be the owner
of any Property which it has acquired or holds subject to a conditional
sale agreement, or leases under a financing lease or other arrangement
pursuant to which title to the Property has been retained by or vested in
some other Person in a transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes, the Borrowing
Requests, the Competitive Bid Requests, the Fee Letter, the Guaranty
Agreements and the Notices of Designation of Designated Subsidiaries.
"Loans" shall mean Committed Loans or Competitive Loans.
"Majority Lenders" shall mean, at any time while no Committed Loans
are outstanding, Lenders having at least fifty-one percent (51%) of the
Aggregate Commitments and, at any time while Committed Loans are
outstanding, Lenders holding at least fifty-one percent (51%) of the
outstanding aggregate principal amount of the Committed Loans (without
regard to any sale by a Lender of a participation in any Loan under
Section 12.06(c)).
"Margin" shall mean, as to any Competitive Bid relating to a
Eurodollar Loan, the margin (expressed as a percentage rate per annum) to
be added to or subtracted from the Eurodollar Rate in order to determine
the interest rate payable to such Lender with respect to such Eurodollar
Loan.
"Material Adverse Effect" shall mean any material and adverse change
in the financial condition, business or results of operations of the
Company and its Subsidiaries taken as a whole which makes them unable to
perform their obligations under the Loan Documents.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
section 3(37) or 4001(a)(3) of ERISA which is, or within the six preceding
years was, contributed to by the Company, a Subsidiary or an ERISA
Affiliate.
"Net Worth" shall mean, as at any date, the sum of the following for
the Company and its Consolidated Subsidiaries determined (without
duplication) in accordance with GAAP:
(i) the amount of preferred stock (excluding mandatorily redeemable
preferred stock) and common stock at par plus the amount of paid in
capital of the Company, plus
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(ii) the amount of retained earnings (or, in the case of a retained
earnings deficit, minus the amount of such deficit), minus
(iii) the cost of treasury shares, minus
(iv) unamortized restricted stock compensation, plus
(v) foreign currency translation adjustment gains (or minus losses),
plus
(vi) any other additions (or minus any other deductions) to the net
worth of the Company required by GAAP.
"Notes" shall mean the Committed Notes and the Competitive Notes.
"Notice of Designation of Designated Subsidiaries" shall be
substantially in the form of Exhibit L and delivered pursuant to Section
6.03.
"Obligor" shall mean either the Company or any Designated Subsidiary.
"Operating Lease Obligations" shall mean, as to the Company or any
Subsidiary, the obligations of such person to pay rent or other amounts
under a lease of (or other agreement conveying the right to use) real
and/or personal property which obligations are not required to be
classified and accounted for as a liability for a capital lease on a
balance sheet of such Person and, for purposes of this Agreement, the
amount of such obligations shall be the discounted present value of the
lease payments, discounted in the same manner a capital lease would be
discounted according to GAAP.
"Other Taxes" shall have the meaning assigned such term in Section
4.06(b).
"Parent Guaranty Agreement" shall mean the Guaranty Agreement of even
date with this Agreement executed by the Company guaranteeing the
Indebtedness of the Designated Subsidiaries as such agreement may be
amended, supplemented or restated from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Percentage Share" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated
on Annex 1 hereto, as modified from time to time to reflect any
assignments permitted by Section 12.06(b).
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"Permitted Subordinated Debt" shall mean Debt of the Company or a
Subsidiary owing to the Company, ENSERCH Corporation or another Subsidiary
subordinated to the Indebtedness on terms substantially similar to the
terms set forth in Exhibit M or on terms and pursuant to documentation
acceptable to the Administrative Agent and the Syndication Agent.
"Person" shall mean any individual, corporation, company, limited
liability company, voluntary association, partnership, joint venture,
trust, unincorporated organization or government or any agency,
instrumentality or political subdivision thereof, or any other form of
entity.
"Plan" shall mean each Benefit Plan and Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan which is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period commencing
on the due date until such amount is paid in full or the default is cured
or waived equal to 2% per annum plus the Base Rate as in effect from time
to time plus the Applicable Margin (if any), but in no event to exceed the
Highest Lawful Rate provided that, if such amount in default is principal
of a Eurodollar Loan or a Fixed Rate Loan, the "Post-Default Rate" for
such principal shall be, for the period commencing on the due date and
ending on the last day of the Interest Period therefor, 2% per annum plus
the applicable interest rate for such Loan as provided in Section 3.02(b),
(c) or (d), but in no event to exceed the Highest Lawful Rate.
"Prime Rate" shall mean the rate of interest from time to time
announced publicly by the Administrative Agent at the Principal Office as
its prime rate. Such rate is set by the Administrative Agent as a general
reference rate of interest, taking into account such factors as the
Administrative Agent may deem appropriate, it being understood that many
of the Administrative Agent's commercial or other loans are priced in
relation to such rate, that it is not necessarily the lowest or best rate
actually charged to any customer and that the Administrative Agent may
make various commercial or other loans at rates of interest having no
relationship to such rate.
"Principal Office" shall mean the principal office of the
Administrative Agent, presently located at 2200 Ross Avenue, Dallas, Texas
75201, Attention: Energy Group.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
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"Quarterly Dates" shall mean the last day of each March, June,
September, and December, in each year, the first of which shall be June
30, 1995; provided, however, that if any such day is not a Business Day,
such Quarterly Date shall be the next succeeding Business Day.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as the same may be amended
or supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including
Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of lenders
(including such Lender or its Applicable Lending Office) of or under any
Governmental Requirement (whether or not having the force of law) by any
Governmental Authority charged with the interpretation or administration
thereof.
"Required Payment" shall have the meaning assigned such term in
Section 4.04.
"Responsible Officer" shall mean, as to the Company or any Subsidiary,
the Chief Executive Officer, the President or any Vice President of such
Person and, with respect to financial matters, the term "Responsible
Officer" shall include the Chief Financial Officer, Controller, Treasurer
or Treasury Officer of such Person. Unless otherwise specified, all
references to a Responsible Officer herein shall mean a Responsible
Officer of the Company.
"Revolving Credit Termination Date" shall mean, unless the Commitments
are sooner terminated pursuant to Sections 2.03(a) or 10.02, May 1, 1999.
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"Special Entity" shall mean any joint venture, limited liability
company, general or limited partnership or any other type of partnership
or company in which the Company or one or more of its other Subsidiaries
is a member, owner, partner or joint venturer and owns at least a majority
of the equity of such entity.
"Subsidiary" shall mean any corporation of which at least a majority
of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time stock of any other
class or classes
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of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time directly or indirectly
owned or controlled by the Company or one or more of its Subsidiaries or
by the Company and one or more of its Subsidiaries.
"Subsidiary Guarantor" shall mean any Subsidiary or Special Entity
that has executed a Subsidiary Guaranty Agreement.
"Subsidiary Guaranty Agreement" shall mean any Guaranty Agreement
executed by a Subsidiary or a Special Entity as required by Section 8.08
as such agreement may be amended, supplemented or restated from time to
time.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Type" shall mean, with respect to any Loan, a Base Rate Loan,
Eurodollar Loan or Fixed Rate Loan.
"Withdrawal Liability" shall have the meaning given such term under
Part I of Subtitle E of Title IV of ERISA.
Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all determinations with respect to accounting matters hereunder shall be
made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Administrative Agent or
the Lenders hereunder shall be prepared, in accordance with GAAP, applied
on a basis consistent with the audited financial statements of the Company
referred to in Section 7.02 (except for changes concurred with by the
Company's independent public accountants).
ARTICLE II
BORROWINGS
Section 2.01 Committed Loans.
(a) Loans. Each Lender severally agrees, on the terms of this
Agreement, to make Committed Loans to any Obligor during the period from
and including (i) the Effective Date or (ii) such later date that such
Lender becomes a party to this Agreement as provided in Section 12.06(b),
to and up to, but excluding, the Revolving Credit Termination Date in an
aggregate principal amount at any one time outstanding and owing by all
Obligors up to but not exceeding the amount of such Lender's Commitment as
then in effect; provided, however, that the aggregate principal amount of
all Committed Loans and Competitive Loans by all Lenders to any or all
Obligors at any one time outstanding shall not exceed the Aggregate
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Commitments. Subject to the terms of this Agreement, during the period
from the Effective Date to and up to, but excluding, the Revolving Credit
Termination Date, any Obligor may borrow, repay and reborrow the amount
described in this Section 2.01.
(b) Limitation on Types of Loans. Subject to the other terms and
provisions of this Agreement, at the option of the Company, the Committed
Loans may be Base Rate Loans or Eurodollar Loans; provided that, without
the prior written consent of the Majority Lenders, no more than seven (7)
Eurodollar Loans which are Committed Loans to any or all Obligors by any
Lender may be outstanding at any time.
Section 2.02 Borrowings, Continuations and Conversions of Committed
Loans.
(a) Borrowings. An Obligor shall cause the Company to give the
Administrative Agent (which shall promptly notify the Lenders) advance
notice as hereinafter provided of each Borrowing of a Committed Loan
hereunder, which shall specify the name of the Obligor making such
Borrowing; the aggregate amount of such Borrowing, the Type and the date
(which shall be a Business Day) of the Committed Loans to be borrowed and
(in the case of Eurodollar Loans) the duration of the Interest Period
therefor.
(b) Minimum Amounts. All Borrowings of Base Rate Loans shall be in
amounts of at least $10,000,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $1,000,000 in excess
thereof, and all Borrowings in the form of Eurodollar Loans shall be in
amounts of at least $10,000,000 or any whole multiple of $1,000,000 in
excess thereof.
(c) Notices. All Borrowings, continuations and conversions of
Committed Loans shall require advance written notice to the Administrative
Agent (which shall promptly notify the Lenders) in the form of Exhibit G
(or telephonic notice promptly confirmed by such a written notice), which
in each case shall be irrevocable, from the Company on behalf of an
Obligor to be received by the Administrative Agent not later than 10:00
a.m. Central time on the Business Day of each Base Rate Loan borrowing and
three Business Days prior to the date of each Eurodollar Loan borrowing,
continuation or conversion. Without in any way limiting the Company's
obligation to confirm in writing any telephonic notice, the Administrative
Agent may act without liability upon the basis of telephonic notice
believed by the Administrative Agent in good faith to be from the Company
prior to receipt of written confirmation. In each such case, each Obligor
hereby waives the right to dispute the Administrative Agent's record of
the terms of such telephonic notice except in the case of gross negligence
or willful misconduct by the Administrative Agent.
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(d) Continuation Options. With respect to Committed Loans and subject
to the provisions made in this Section 2.02(d), the Company on behalf of
an Obligor may elect to continue all or any part of any Borrowing of
Eurodollar Loans beyond the expiration of the then current Interest Period
relating thereto by giving advance notice as provided in Section 2.02(c)
to the Administrative Agent (which shall promptly notify the Lenders) of
such election, specifying the amount of such Loan to be continued and the
Interest Period therefor. In the absence of such a timely and proper
election, the Company on behalf of an Obligor shall be deemed to have
elected to convert such Eurodollar Loan to a Base Rate Loan pursuant to
Section 2.02(e). All or any part of any Eurodollar Loan may be continued
as provided herein, provided that (i) any continuation of any such Loan
shall be (as to each Borrowing as continued for an applicable Interest
Period) in amounts of at least $10,000,000 or any whole multiple of
$1,000,000 in excess thereof and (ii) no Default shall have occurred and
be continuing. If a Default shall have occurred and be continuing, each
Eurodollar Loan shall be converted to a Base Rate Loan on the last day of
the Interest Period applicable thereto.
(e) Conversion Options. With respect to Committed Loans, the Company
on behalf of an Obligor may elect to convert all or any part of any
Eurodollar Loan on the last day of the then current Interest Period
relating thereto to a Base Rate Loan by giving notice as provided in
Section 2.02(c) to the Administrative Agent (which shall promptly notify
the Lenders) of such election. Subject to the provisions made in this
Section 2.02(e), the Company on behalf of an Obligor may elect to convert
all or any part of any Base Rate Loan at any time and from time to time to
a Eurodollar Loan by giving advance notice as provided in Section 2.02(c)
to the Administrative Agent (which shall promptly notify the Lenders) of
such election. All or any part of any outstanding Base Rate Loan may be
converted as provided herein, provided that (i) any conversion of any Base
Rate Loan into a Eurodollar Loan shall be (as to each such Borrowing into
which there is a conversion for an applicable Interest Period) in amounts
of at least $10,000,000 or any whole multiple of $1,000,000 in excess
thereof and (ii) no Default shall have occurred and be continuing. If a
Default shall have occurred and be continuing, no Base Rate Loan may be
converted into a Eurodollar Loan.
(f) Advances. Not later than 1:00 p.m. (Central time) on the date
specified for each Borrowing hereunder, each Lender shall make available
the amount of the Committed Loan to be made by it on such date to the
Administrative Agent, to an account which the Administrative Agent shall
specify, in immediately available funds, for the account of the Company.
The amounts so received by the Administrative Agent shall, subject to the
terms and conditions of this Agreement, be made available to the Company
on behalf of an Obligor by depositing the same, in immediately available
funds, in an account of the Company, designated by the Company on behalf
of an Obligor and maintained at the Principal Office, or to be deposited
at the direction of the Company on behalf of an Obligor.
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Section 2.03 Changes of Commitments.
(a) The Company on behalf of an Obligor shall have the right to
terminate or to reduce the amount of the Aggregate Commitments at any time
or from time to time upon not less than two (2) Business Days' prior
notice to the Administrative Agent (which shall promptly notify the
Lenders) of each such termination or reduction, which notice shall specify
the effective date thereof and the amount of any such reduction (which
shall not be less than $10,000,000 or any whole multiple of $1,000,000 in
excess thereof) and shall be irrevocable and effective only upon receipt
by the Administrative Agent.
(b) The Aggregate Commitments once terminated or reduced may not be
reinstated.
Section 2.04 Fees.
(a) The Company shall pay to the Administrative Agent for the account
of each Lender a facility fee on the daily average amount of the Aggregate
Commitments (regardless of usage) for the period from and including the
Closing Date up to but excluding the earlier of the date the Aggregate
Commitments are terminated or the Revolving Credit Termination Date at a
rate per annum equal to the amount set forth in the definition of
Applicable Margin for the period designated therein. Accrued facility
fees shall be payable quarterly in arrears on each Quarterly Date and on
the earlier of the date the Aggregate Commitments are terminated or the
Revolving Credit Termination Date.
(b) The Company shall pay to the Administrative Agent for its own
account an administration fee of $25,000.00 per annum payable on the
Closing Date and each anniversary of the Closing Date during the term of
this Agreement.
Section 2.05 Several Obligations. The failure of any Lender to make
any Loan to be made by it on the date specified therefor shall not relieve
any other Lender of its obligation to make its Loan on such date, but no
Lender shall be responsible for the failure of any other Lender to make a
Loan to be made by such other Lender.
Section 2.06 Notes.
(a) The Committed Loans made by each Lender to an Obligor shall be
evidenced by a single promissory note of such Obligor in substantially the
form of Exhibit A, dated (i) the Closing Date or (ii) the effective date
of an Assignment pursuant to Section 12.06(b) or (iii) the date that the
Company designates a Designated Subsidiary pursuant to Section 2.10,
payable to the order of such Lender in a principal amount equal to its
Commitment and otherwise duly completed. The date, amount, Type, interest
rate and Interest Period, if any, of each Committed Loan made by each
Lender, and all payments made on account of the principal
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thereof, shall be recorded by such Lender on its books for its Committed
Note, and, prior to any transfer, endorsed by such Lender on the schedule
attached to such Committed Note or any continuation thereof. Failure to
make any such notation shall not affect the Obligor's obligations in
respect of such Loans, or affect the validity of such transfer by any
Lender of such Note.
(b) The Competitive Loans made by each Lender to an Obligor shall be
evidenced by a single promissory note of such Obligor in substantially the
form of Exhibit B, dated (i) the Closing Date or (ii) the effective date
of an Assignment pursuant to Section 12.06(b) or (iii) the date that the
Company designates a Designated Subsidiary pursuant to Section 2.10,
payable to the order of such Lender in a principal amount equal to the
Aggregate Commitments and otherwise duly completed. The date, amount,
Type, interest rate and Interest Period of each Competitive Loan made by
each Lender, and all payments made on account of the principal thereof,
shall be recorded by such Lender on its books for its Competitive Note,
and, prior to any transfer, endorsed by such Lender on the schedule
attached to such Competitive Note or any continuation thereof. Failure to
make any such notation shall not affect the Obligor's obligations in
respect of such Loans, or affect the validity of such transfer by any
Lender of such Note.
Section 2.07 Prepayments.
(a) Any Obligor may prepay its Base Rate Loans upon prior notice to
the Administrative Agent (which shall promptly notify the Lenders), which
notice shall specify the prepayment date (which shall be a Business Day)
and the amount of the prepayment (which shall be at least $5,000,000 or
any whole multiple of $1,000,000 in excess thereof or the remaining
aggregate principal balance outstanding on the Notes) and shall be
irrevocable and effective only upon receipt by the Administrative Agent,
provided that interest on the principal prepaid, accrued to the prepayment
date, shall be paid on the prepayment date. Any Obligor may prepay its
Eurodollar Loans and Fixed Rate Loans on the same condition as for Base
Rate Loans and in addition such prepayments of Eurodollar Loans and Fixed
Rate Loans shall be subject to the terms of Section 5.05 and shall be in
an amount equal to all of the Eurodollar Loans and Fixed Rate Loans for
such Obligor for the Interest Period prepaid.
(b) If, after giving effect to any termination or reduction of the
Aggregate Commitments pursuant to Section 2.03, the outstanding aggregate
principal amount of the Loans exceeds the Aggregate Commitments, the
Obligors shall prepay the Loans on the date of such termination or
reduction in an aggregate principal amount equal to the excess, together
with interest on the principal amount paid accrued to the date of such
prepayment.
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(c) Prepayments permitted or required under this Section 2.07 shall be
without premium or penalty, except as required under Section 5.05 for
prepayment of Eurodollar Loans or Fixed Rate Loans.
Section 2.08 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending
Office for Loans of such Type.
Section 2.09 Competitive Loans.
(a) In accordance with the terms, conditions and procedures set forth
in this Section 2.09, the Company on behalf of any Obligor may on any
Business Day prior to the Revolving Credit Termination Date request
Competitive Bids.
(i) Provided, however, no Lender shall be obligated to make
Competitive Loans to an Obligor unless such Lender has irrevocably offered
to make such a Competitive Loan pursuant to Section 2.09(c); and,
provided, further, the aggregate principal amount of all Competitive Loans
to any or all Obligors at any one time outstanding shall not, at any date,
exceed an amount equal to (A) the Aggregate Commitments as of such date,
less (B) the aggregate principal amount of the Committed Loans to any or
all Obligors outstanding as of such date. For purposes of determining the
amount to be calculated pursuant to the foregoing sentence, any Committed
Loans that the Company on behalf of an Obligor has requested be made,
which have not yet been made, shall be given effect as if made in the full
requested amount with respect thereto.
(ii) Notwithstanding the limitations on the aggregate amount of
Competitive Loans that the Obligors may borrow under this Agreement set
forth in clause (i) of this Section 2.09(a), the making of any Competitive
Loan to an Obligor by any Lender shall not be deemed to be a utilization
of such Lender's Commitment (although it shall be deemed to be a
utilization of the Aggregate Commitments for all purposes of this
Agreement).
(b) In order to request Competitive Bids, the Company on behalf of an
Obligor shall hand deliver, telex or telecopy to the Administrative Agent
and the Auction Agent a duly completed request substantially in the form
of Exhibit C, with the blanks appropriately completed (a "Competitive Bid
Request"), to be received by such Agents (i) in the case of Eurodollar
Loans, not later than 9:00 a.m. (Central time) four (4) Business Days
before the date specified for a proposed Competitive Loan, and (ii) in the
case of Fixed Rate Loans, not later than 9:00 a.m. (Central time) one (1)
Business Day before the date specified for a proposed Competitive Loan.
No Base Rate Loan shall be requested in, or made pursuant to, a
Competitive Bid Request. A Competitive Bid Request that does not conform
substantially to the format of Exhibit C may be rejected at the Auction
Agent's sole
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discretion, and the Auction Agent shall promptly notify the Company of
such rejection by telex or telecopier. Each Competitive Bid Request shall
in each case refer to this Agreement and specify (A) whether the
Competitive Loans then being requested are to be Eurodollar Loans or Fixed
Rate Loans, (B) the date of such Competitive Loans (which shall be a
Business Day), (C) the aggregate principal amount thereof (which shall not
be less than $10,000,000 and shall be an integral multiple of $1,000,000),
and (D) the Interest Period with respect thereto. Promptly after its
receipt of a Competitive Bid Request that is not rejected as aforesaid,
the Auction Agent shall invite by telex or telecopier (in substantially
the form set forth in Exhibit D) the Lenders to bid, on the terms and
conditions of this Agreement, to make Competitive Loans pursuant to such
Competitive Bid Request. Notwithstanding the foregoing, the Auction Agent
shall have no obligation to invite any Lender to make a Competitive Bid
pursuant to this Section 2.09(b) until such Lender has delivered a
properly completed Competitive Bid Administrative Questionnaire to the
Auction Agent.
(c) Each Lender may, in its sole discretion, make one or more
Competitive Bids to an Obligor responsive to each Competitive Bid Request.
Each Competitive Bid by a Lender must be received by the Auction Agent via
telex or telecopier, in the form of Exhibit E, (i) in the case of
Eurodollar Loans, not later than 8:30 a.m. (Central time) three (3)
Business Days before the date specified for a proposed Competitive Loan
and (ii) in the case of Fixed Rate Loans, not later than 8:30 a.m.
(Central time) on the date specified for a proposed Competitive Loan.
Competitive Bids that do not conform substantially to the format of
Exhibit E may be rejected by the Auction Agent after conferring with, and
upon the instruction of, the Company on behalf of an Obligor, and the
Auction Agent shall notify the applicable Lender of such rejection as soon
as practicable. Each Competitive Bid shall refer to this Agreement and
(A) specify the principal amount (which shall be in a minimum principal
amount of $10,000,000 and in an integral multiple of $1,000,000 and which
may equal the entire aggregate principal amount of the Competitive Loan
requested by the Company on behalf of an Obligor) of the Competitive Loan
that the applicable Lender is willing to make to such Obligor, (B) specify
the Competitive Bid Rate at which such Lender is prepared to make such
Competitive Loan and (C) confirm the Interest Period with respect thereto
specified by the Company on behalf of an Obligor in its Competitive Bid
Request. If any Lender shall elect not to make a Competitive Bid, such
Lender shall so notify the Auction Agent via telex or telecopier in the
case of Fixed Rate Loans, not later than 8:30 a.m. (Central time) on the
date of the proposed Competitive Loan and in the case of Eurodollar Loans,
not later than 8:30 a.m. (Central time) three (3) Business Days before the
date specified for a proposed Competitive Loan; provided, however, that
failure by any Lender to give such notice shall not cause such Lender to
be obligated to make any Competitive Loan. A Competitive Bid submitted by
a Lender pursuant to this Subsection 2.09(c) shall be irrevocable.
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(d) The Auction Agent shall promptly notify the Company by telex or
telecopier of all the Competitive Bids made, the Competitive Bid Rate and
the maximum principal amount of each Competitive Loan in respect of which
a Competitive Bid was made and the identity of the Lender that made each
Competitive Bid. The Auction Agent shall send a copy of all Competitive
Bids to the Company for its records as soon as practicable after
completion of the bidding process set forth in this Section 2.09.
(e) The Company on behalf of an Obligor may in the sole and absolute
discretion of the applicable Obligor, subject only to the provisions of
this Section 2.09(e), accept or reject any Competitive Bid referred to in
Section 2.09(d); provided, however, that the aggregate amount of the
Competitive Bids so accepted by the Company on behalf of an Obligor may
not exceed the principal amount of the Competitive Loan requested by the
Company on behalf of an Obligor. The Company on behalf of an Obligor
shall notify the Auction Agent by telex or telecopier whether and to what
extent the Obligor has decided to accept or reject any or all of the
Competitive Bids referred to in Section 2.09(d), (i) in the case of
Eurodollar Loans, not later than 9:30 a.m. (Central time) three (3)
Business Days before the date specified for a proposed Competitive Loan,
and (ii) in the case of Fixed Rate Loans, not later than 9:30 a.m.
(Central time) on the date specified for a proposed Competitive Loan;
provided, however, that (A) the failure by the Company on behalf of an
Obligor to give such notice shall be deemed to be a rejection of all the
Competitive Bids referred to in Section 2.03(c), (B) the Company on behalf
of an Obligor shall not accept a Competitive Bid made at a particular
Competitive Bid Rate if the Company on behalf of an Obligor has decided to
reject a Competitive Bid made at a lower Competitive Bid Rate, (C) if the
Company on behalf of an Obligor shall accept Competitive Bids made at a
particular Competitive Bid Rate but shall be restricted by other
conditions hereof from borrowing the maximum principal amount of
Competitive Loans in respect of which Competitive Bids at such Competitive
Bid Rate have been made, then the Company on behalf of an Obligor shall
accept a pro rata portion of each Competitive Bid made at such Competitive
Bid Rate based as nearly as possible on the respective maximum principal
amounts of Competitive Loans for which such Competitive Bids were made and
(D) no Competitive Bid shall be accepted for a Competitive Loan unless
such Competitive Loan is in a minimum principal amount of $10,000,000 and
an integral multiple of $1,000,000. Notwithstanding the foregoing, if it
is necessary for the Company on behalf of an Obligor to accept a pro rata
allocation of the Competitive Bids made in response to a Competitive Bid
Request (whether pursuant to the events specified in clause (C) above or
otherwise) and the available principal amount of Competitive Loans to be
allocated among the Lenders is not sufficient to enable Competitive Loans
to be allocated to each Lender in a minimum principal amount of
$10,000,000 and in integral multiples of $1,000,000, then the Company on
behalf of an Obligor shall select the Lenders to be allocated such
Competitive Loans and shall round allocations up or down to the next
higher or lower multiple of $1,000,000 as it shall deem appropriate. In
addition, the Company on behalf of an Obligor shall
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be permitted under the foregoing procedures to accept a Competitive Bid
or Competitive Bids in a principal amount of less than $10,000,000 (i) in
order to enable the Company on behalf of an Obligor to accept Competitive
Bids equal to (but not in excess of) the principal amount of the
Competitive Loan requested by the Company on behalf of an Obligor or (ii)
in order to enable the Company on behalf of an Obligor to accept all
remaining Competitive Bids, or all remaining Competitive Bids at a
particular Competitive Bid Rate. A notice given by the Company on behalf
of an Obligor pursuant to this Subsection (e) shall be irrevocable.
(f) The Auction Agent shall promptly notify each bidding Lender by
telex or telecopy whether or not its Competitive Bid has been accepted
(and if so, in what amount and at what Competitive Bid Rate). Each
successful bidder will thereupon become bound, subject to the other
applicable conditions hereof, to make the Competitive Loan in respect of
which its Competitive Bid has been accepted. After completing the
notifications referred to in the immediately preceding sentence, the
Auction Agent shall notify each Lender and the Administrative Agent of the
aggregate principal amount of all Competitive Bids accepted.
(g) Upon receipt from the Administrative Agent of the notice of
Eurodollar Rate applicable to any Eurodollar Loan to be made by any Lender
pursuant to a Competitive Bid that has been accepted by the Company on
behalf of an Obligor pursuant to Section 2.03(e), the Auction Agent shall
notify such Lender of (i) the applicable Eurodollar Rate and (ii) the sum
of the applicable Eurodollar Rate plus the Margin bid by such Lender.
(h) No Competitive Loan shall be made within five (5) Business Days of
the date of any other Competitive Loan, unless the Company and the Auction
Agent shall mutually agree otherwise.
(i) If the Auction Agent shall at any time have a Commitment hereunder
and shall elect to submit a Competitive Bid in its capacity as a Lender,
it shall submit such Competitive Bid directly to the Company on behalf of
an Obligor one quarter of an hour earlier than the time at which the other
Lenders are required to submit their Competitive Bids to the Auction Agent
pursuant to Section 2.09(c).
(j) All notices required by this Section 2.09 shall be made in
accordance with Section 12.02 and the Competitive Bid Administrative
Questionnaire most recently placed on file by each Lender with the Auction
Agent.
(k) No Competitive Loan may be continued or converted, except to the
extent converted to a Base Rate Loan pursuant to Section 5.04; provided,
however, a Competitive Loan may be repaid with the proceeds of a Borrowing
of Competitive Loans or Committed Loans made pursuant to the terms of this
Agreement, and the Administrative Agent is authorized to net the Borrowing
and repayments for convenience.
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(l) Not later than 12:00 noon (Central time) on the date specified for
each Borrowing hereunder, each Lender that is a successful bidder shall
make available the amount of the Competitive Loan to be made by it on such
date to the Administrative Agent, to an account which the Administrative
Agent shall specify, in immediately available funds, for the account of
the Company on behalf of an Obligor. The amounts so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company on behalf of an Obligor by
depositing the same, in immediately available funds, in an account of the
Company on behalf of an Obligor, designated by the Company on behalf of an
Obligor and maintained at the Principal Office.
Section 2.10 Designated Subsidiaries. The Company may from time to
time designate one or more of its Subsidiaries to have the right to borrow
both Committed Loans and Competitive Loans by sending to the
Administrative Agent a Notice of Designation of a Designated Subsidiary
and otherwise complying with Section 6.03. Each Designated Subsidiary
shall be liable for (i) the principal and interest on Loans made to it as
requested in any Borrowing Request or Competitive Bid Requests signed by
it or the Company on its behalf, (ii) all fees, indemnities and
reimbursement obligations as set forth in this Agreement and (iii) to the
extent the Designated Subsidiary is a Guarantor pursuant to Section 8.08,
the obligations set forth in its Subsidiary Guaranty Agreement. No
Designated Subsidiary shall be liable for any principal or interest on any
Loan to another Obligor except to the extent that such Designated
Subsidiary is a Guarantor pursuant to Section 8.08. The Company shall be
liable for all Indebtedness of all Obligors as set forth either in this
Agreement or the Parent Guaranty Agreement. As agreed to in each Notice
of Designation of Designated Subsidiary executed and delivered by the
Company and each Designated Subsidiary, each Designated Subsidiary
appoints the Company as its agent to execute all Borrowing Requests and
Competitive Bid Requests, give and receive all notices on its behalf and
take whatever other action is required of it under the Loan Documents, and
the Agents and Lenders are entitled to fully rely on all action taken and
notices given by the Company on behalf of any Designated Subsidiary.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans. Each Obligor will pay to the
Administrative Agent, for the account of each applicable Lender, the
principal payments required by this Section 3.01. On the last day of the
Interest Period for each Competitive Loan to an Obligor, such Obligor
shall repay the outstanding aggregate principal and accrued and unpaid
interest on such Loan. On the Revolving Credit Termination Date each
Obligor shall repay the outstanding aggregate principal and accrued and
unpaid interest under its Notes.
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Section 3.02 Interest. Each Obligor will pay to the Administrative
Agent, for the account of each Lender, interest on the unpaid principal
amount of each Loan made by such Lender to such Obligor for the period
commencing on the date such Loan is made to but excluding the date such
Loan shall be paid in full, at the following rates per annum:
(a) if such Loan is a Committed Loan and a Base Rate Loan, the Base
Rate (as in effect from time to time), but in no event to exceed the
Highest Lawful Rate;
(b) if such Loan is a Committed Loan and a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan plus
the Applicable Margin, but in no event to exceed the Highest Lawful Rate;
(c) if such Loan is a Competitive Loan and a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan plus
or minus the Margin as accepted by the Company on behalf of an Obligor,
but in no event to exceed the Highest Lawful Rate; and
(d) if such Loan is a Competitive Loan and a Fixed Rate Loan, for each
Interest Period relating thereto, the fixed rate per annum offered by the
respective Lender in its Competitive Bid and accepted by the Company on
behalf of an Obligor pursuant to Section 2.09, but in no event to exceed
the Highest Lawful Rate.
Notwithstanding the foregoing, each Obligor will pay to the Administrative
Agent, for the account of each applicable Lender interest at the
applicable Post-Default Rate on any principal of any Loan made by such
Lender to such Obligor, which shall not be paid in full when due (whether
at stated maturity, by acceleration or otherwise), for the period
commencing on the due date thereof until the same is paid in full. To the
fullest extent permitted by law, each Obligor will pay to the
Administrative Agent for the account of each applicable Lender interest at
the Base Rate on interest and any other amount payable by such Obligor
hereunder other than principal on the Loans, under any other Loan Document
or under any Note held by such Lender to or for the account of such
Lender, which shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise), for the period commencing on the
due date thereof until the same is paid in full.
Accrued interest on Base Rate Loans shall be payable on each Quarterly
Date commencing on June 30, 1995, and accrued interest on each Eurodollar
Loan and Fixed Rate Loan shall be payable on the last day of the Interest
Period therefor and, if such Interest Period is longer than three months
at three-month intervals following the first day of such Interest Period,
except that interest payable at the Post-Default Rate or otherwise
accruing on past due amounts shall be payable from time to time on demand
and interest on any Eurodollar Loan or Fixed Rate Loan that is converted
into a Base Rate Loan (pursuant to Section 5.04) shall be payable on the
date of conversion (but only to the extent so converted).
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Promptly after the determination of any interest rate provided for herein
or any change therein, the Administrative Agent or the Auction Agent shall
notify the Lenders to which such interest is payable and the Company
thereof. Each determination by the Administrative Agent or the Auction
Agent of an interest rate or fee hereunder shall, except in cases of
manifest error, be final, conclusive and binding on the parties.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made
by each Obligor under this Agreement and the Notes shall be made in
Dollars, in immediately available funds, to the Administrative Agent at
such account as the Administrative Agent shall specify by notice to the
Company on behalf of each Obligor from time to time, not later than 1:00
p.m. (Central time) on the date on which such payments shall become due
(each such payment made after such time on such due date to be deemed to
have been made on the next succeeding Business Day). Such payments shall
be made without (to the fullest extent permitted by applicable law)
defense, set-off or counterclaim. Each payment received by the
Administrative Agent under this Agreement or any Note for the account of
a Lender shall be paid promptly to such Lender in immediately available
funds. If the due date of any payment under this Agreement or any Note
would otherwise fall on a day which is not a Business Day such date shall
be extended to the next succeeding Business Day and interest shall be
payable for any principal so extended for the period of such extension.
At the time of each payment to the Administrative Agent of any principal
of or interest on any Borrowing, the Company on behalf of the Obligors
shall notify the Administrative Agent of the Loans to which such payment
shall apply. In the absence of such notice the Administrative Agent may
specify the Loans to which such payment shall apply, but to the extent
possible such payment or prepayment will be applied first to the Loans
comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein each Lender agrees that: (i) each Borrowing from the
Lenders under Section 2.01 shall be made from the Lenders pro rata in
accordance with their Percentage Share, each payment of facility fees
under Section 2.04(a) shall be made for the account of the Lenders pro
rata in accordance with their Percentage Share, and each termination or
reduction of the amount of the Aggregate Commitments under Section 2.03(a)
shall be applied to the Commitment of each Lender, pro rata according to
the amounts of its respective Commitment; (ii) each payment of principal
of Loans by the Company on behalf of an Obligor shall be made for the
account of the Lenders pro rata in accordance with the respective unpaid
principal amount of the Loans held by the Lenders due or past due on such
date or intended to be prepaid by the Company on behalf of such Obligor;
and (iii) each payment of interest on Loans by the Company on behalf of an
Obligor shall be
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made for the account of the Lenders pro rata in accordance with the
amounts of interest due and payable to the respective Lenders.
Section 4.03 Computations. Interest on Eurodollar Loans and Fixed
Rate Loans shall be computed on the basis of a year of 360 days and actual
days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable, unless such
calculation would exceed the Highest Lawful Rate, in which case interest
shall be calculated on the per annum basis of a year of 365 or 366 days,
as the case may be. Interest on Base Rate Loans and fees shall be
computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last
day) occurring in the period for which such interest or fee is payable.
Section 4.04 Non-receipt of Funds by the Administrative Agent. Unless
the Administrative Agent shall have been notified by a Lender or the
Company on behalf of an Obligor prior to the date on which such notifying
party is scheduled to make payment to the Administrative Agent (in the
case of a Lender) of the proceeds of a Loan to be made by it hereunder or
(in the case of an Obligor) a payment to the Administrative Agent for the
account of one or more of the Lenders hereunder (such payment being herein
called the "Required Payment"), which notice shall be effective upon
receipt, that it does not intend to make the Required Payment to the
Administrative Agent, the Administrative Agent may assume that the
Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date and, if such Lender or the Company on
behalf of an Obligor (as the case may be) has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such
payment shall, on demand, repay to the Administrative Agent the amount so
made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available
by the Administrative Agent until but excluding the date the
Administrative Agent recovers such amount at a rate per annum which, for
any Lender as recipient, will be equal to the Federal Funds Rate, and for
an Obligor as recipient, will be equal to the Post-Default Rate.
Section 4.05 Sharing of Payments, Etc. If after an Event of Default
and during its continuance any Lender shall obtain payment of any
principal of or interest on any Loan made by it to an Obligor under this
Agreement through whatever means other than an assignment pursuant to
Section 12.06(b), and, as a result of such payment, such Lender shall have
received a greater percentage of the principal or interest then due
hereunder by such Obligor to such Lender than the percentage received by
any other Lenders, it shall promptly (i) notify the Administrative Agent
and each other Lender thereof and (ii) purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender,
direct interests in) the Loans made by such other Lenders (or in interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all
the Lenders shall share the benefit of such excess payment (net of any
expenses which may be incurred by such Lender in obtaining or preserving
such excess payment) pro rata in accordance with
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the unpaid principal and/or interest on the Loans to such Obligor held by
each of the Lenders. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or
otherwise) if such payment is rescinded or must otherwise be restored.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by an Obligor
hereunder shall be made, in accordance with Section 4.01, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the
Administrative Agent, taxes imposed on its income, and franchise or
similar taxes imposed on it, by (i) any jurisdiction (or political
subdivision thereof) of which the Administrative Agent or such Lender, as
the case may be, is a citizen or resident or in which such Lender has an
Applicable Lending Office, (ii) the jurisdiction (or any political
subdivision thereof) in which the Administrative Agent or such Lender is
organized, or (iii) any jurisdiction (or political subdivision thereof) in
which such Lender or the Administrative Agent is presently doing business
which taxes are imposed solely as a result of doing business in such
jurisdiction (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes"). If an Obligor shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder to the Lenders or the
Administrative Agent (i) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 4.06)
such Lender or the Administrative Agent (as the case may be) shall receive
an amount equal to the sum it would have received had no such deductions
been made, (ii) such Obligor shall make such deductions and (iii) such
Obligor shall pay the full amount deducted to the relevant taxing
authority or other Governmental Authority in accordance with applicable
law.
(b) Other Taxes. In addition, to the fullest extent permitted by
applicable law, each Obligor agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, any Assignment or any other Loan Document (hereinafter referred
to as "Other Taxes").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, EACH OBLIGOR WILL INDEMNIFY EACH LENDER AND THE AGENTS FOR THE FULL
AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES
OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE
UNDER THIS SECTION 4.06) PAID BY SUCH LENDER OR ANY AGENT (ON THEIR BEHALF
OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH
RESPECT
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THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR
LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR
LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES
WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT
PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS
AFTER THE DATE ANY LENDER OR ANY AGENT, AS THE CASE MAY BE, MAKES WRITTEN
DEMAND THEREFOR. IF ANY LENDER OR ANY AGENT RECEIVES A REFUND OR CREDIT
IN RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER OR SUCH AGENT
HAS RECEIVED PAYMENT FROM AN OBLIGOR IT SHALL PROMPTLY NOTIFY THE COMPANY
ON BEHALF OF SUCH OBLIGOR OF SUCH REFUND OR CREDIT AND SHALL, IF NO
DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER
RECEIPT OF A REQUEST BY THE COMPANY ON BEHALF OF SUCH OBLIGOR (OR PROMPTLY
UPON RECEIPT, IF THE COMPANY ON BEHALF OF SUCH OBLIGOR HAS REQUESTED
APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT
EQUAL TO SUCH REFUND OR CREDIT TO THE COMPANY ON BEHALF OF SUCH OBLIGOR
WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED
THAT SUCH OBLIGOR, UPON THE REQUEST OF SUCH LENDER OR SUCH AGENT, AGREES
TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER
CHARGES) TO SUCH LENDER OR SUCH AGENT IN THE EVENT SUCH LENDER OR SUCH
AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (i) a corporation
organized under the laws of the United States of America or any state
thereof or (ii) it is entitled to complete exemption from United States
withholding tax imposed on or with respect to any payments, including
fees, to be made to it pursuant to this Agreement (A) under an applicable
provision of a tax convention to which the United States of America is a
party or (B) because it is acting through a branch, agency or office in
the United States of America and any payment to be received by it
hereunder is effectively connected with a trade or business in the United
States of America. Each Lender that is not a corporation organized under
the laws of the United States of America or any state thereof agrees to
provide to the Company and the Administrative Agent on the Closing Date,
or on the date of its delivery of the Assignment pursuant to which it
becomes a Lender, and at such other times as required by United States law
or as the Company or the Administrative Agent shall reasonably request,
two accurate and complete original signed copies of either (A) Internal
Revenue Service Form 4224 (or successor form) certifying that all payments
to be made to it hereunder will be effectively connected to a United
States trade or business (the "Form 4224 Certification") or (B) Internal
Revenue Service Form 1001 (or successor form) certifying that it is
entitled to the benefit of a provision of a tax convention to which the
United States of America is a party which completely exempts from United
States withholding tax all payments to be made to it hereunder (the "Form
1001
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Certification"). In addition, each Lender agrees that if it
previously filed a Form 4224 Certification, it will deliver to the Company
and the Administrative Agent a new Form 4224 Certification prior to the
first payment date occurring in each of its subsequent taxable years; and
if it previously filed a Form 1001 Certification, it will deliver to the
Company and the Administrative Agent a new certification prior to the
first payment date falling in the third year following the previous filing
of such certification. Each Lender also agrees to deliver to the Company
and the Administrative Agent such other or supplemental forms as may at
any time be required as a result of changes in applicable law or
regulation in order to confirm or maintain in effect its entitlement to
exemption from United States withholding tax on any payments hereunder,
provided that the circumstances of such Lender at the relevant time and
applicable laws permit it to do so. If a Lender determines, as a result
of any change in either (i) a Governmental Requirement or (ii) its
circumstances, that it is unable to submit any form or certificate that it
is obligated to submit pursuant to this Section 4.06, or that it is
required to withdraw or cancel any such form or certificate previously
submitted, it shall promptly notify the Company and the Administrative
Agent of such fact. If a Lender is organized under the laws of a
jurisdiction outside the United States of America, unless the Company and
the Administrative Agent have received a Form 1001 Certification or Form
4224 Certification satisfactory to them indicating that all payments to be
made to such Lender hereunder are not subject to United States withholding
tax, the Company on behalf of each Obligor shall withhold taxes from such
payments at the applicable statutory rate. Each Lender agrees to indemnify
and hold harmless from any United States taxes, penalties, interest and
other expenses, costs and losses incurred or payable by (i) the
Administrative Agent as a result of such Lender's failure to submit any
form or certificate that it is required to provide pursuant to this
Section 4.06 or (ii) the Company or the Administrative Agent as a result
of their reliance on any such form or certificate which such Lender has
provided to them pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender required to do so
has failed to provide the Company with the form required pursuant to this
Section 4.06, if any (other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be entitled
to indemnification under Section 4.06 with respect to taxes imposed by the
United States which taxes would not have been imposed but for such failure
to provide such forms; provided, however, that should a Lender, which is
otherwise exempt from or subject to a reduced rate of withholding tax,
becomes subject to taxes because of its failure to deliver a form required
hereunder, the Company on behalf of each Obligor shall take such steps as
such Lender shall reasonably request to assist such Lender to recover such
taxes.
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(iii) Any Lender claiming any additional amounts payable pursuant to this
Section 4.06 shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document requested by
the Company or the Administrative Agent or to change the jurisdiction of
its Applicable Lending Office or to contest any tax imposed if the making
of such a filing or change or contesting such tax would avoid the need for
or reduce the amount of any such additional amounts that may thereafter
accrue and would not, in the sole determination of such Lender, be
otherwise disadvantageous to such Lender.
ARTICLE V
CAPITAL ADEQUACY, ADDITIONAL COSTS, ETC.
Section 5.01 Additional Costs.
(a) Regulatory Changes. In the event of any introduction of and/or
any change in any applicable law, rule, regulation (including Regulation
D), official interpretation thereof or official directive after the date
of this Agreement (whether or not having the force of law) which will
result in an increase in the cost to any Lender of making or maintaining
the Loans by reason of reserve or similar requirements, or which will
result in a reduction of amounts otherwise receivable by any Lender from
any Obligor of principal, interest or other fees and charges thereunder by
reason of a tax, levy, impost, fee, charge, withholding or similar
requirements of any kind, or modifies any capital adequacy or similar
requirement (including, without limitation, a requirement which affects
any Lender's or its parent's or its holding company's allocation of
capital resources to its obligations or commitments) and, as a result, the
cost to such Lender or its parent or holding company of making or
maintaining amounts available under this Agreement is increased or the
Lender's or its parent's or holding company's return under this Agreement
or on all or any of its capital is reduced, the Obligors will pay to the
Administrative Agent for such Lender upon notice as provided in Section
5.01(b) an amount equal to such actual increased cost or reduction of
yield allocable to this facility.
(b) Compensation Procedure. Any Lender notifying the Company of the
incurrence of additional costs under this Section 5.01 shall in such
notice to the Company and the Administrative Agent set forth in reasonable
detail the basis and amount of its request for compensation.
Determinations and allocations by each Lender for purposes of this Section
5.01 of the effect of any Regulatory Change pursuant to Section 5.01(a) on
its costs or rate of return of maintaining Loans or its obligation to make
Loans, or on amounts receivable by it in respect of Loans, and of the
amounts required to compensate such Lender under this Section 5.01, shall
be conclusive and binding for all purposes, provided that such
determinations and
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allocations are made on a reasonable basis. Any request for additional
compensation under this Section 5.01 shall be paid by each Obligor to the
Administrative Agent for the applicable Lender within thirty (30) days of
the receipt by the Company of the notice described in this Section
5.01(b).
Section 5.02 Limitation on Eurodollar Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate for any Interest Period:
(i) the Administrative Agent determines (which determination shall be
conclusive, absent manifest error) that quotations of interest rates for
the relevant deposits referred to in the definition of "Eurodollar Rate"
in Section 1.02 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for
Eurodollar Loans as provided herein; or
(ii) the Administrative Agent determines (which determination shall be
conclusive, absent manifest error) that the relevant rates of interest
referred to in the definition of "Eurodollar Rate" in Section 1.02 upon
the basis of which the rate of interest for Eurodollar Loans for such
Interest Period is to be determined are not sufficient to adequately cover
the cost to the Lenders of making or maintaining Eurodollar Loans;
then the Administrative Agent shall give the Company prompt notice
thereof, and so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans or
continue or convert into Eurodollar Loans.
Section 5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful or legally restricted for
any Lender or its Applicable Lending Office to honor its obligation to
make or maintain, continue or convert into Eurodollar Loans or Fixed Rate
Loans hereunder, then such Lender shall promptly notify the Company
thereof and such Lender's obligation to make, continue or convert into
Eurodollar Loans or Fixed Rate Loans shall be suspended until such time as
such Lender may again make and maintain, continue or convert into
Eurodollar Loans or Fixed Rate Loans (in which case the provisions of
Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.02 and 5.03. If
the obligation of any Lender to make, continue or convert into Eurodollar
Loans or Fixed Rate Loans shall be suspended pursuant to Sections 5.02 or
5.03 ("Affected Loans"), all Affected Loans which would otherwise be made
by such Lender shall be made instead as Base Rate Loans (and, if an event
referred to in Section 5.03 has occurred and such Lender so requests by
notice to the Administrative Agent and the Company, all Affected Loans of
such Lender then outstanding shall be automatically converted into Base
Rate Loans on the date specified by such Lender in such notice) and, to
the extent that Affected Loans are so made as (or converted into) Base
Rate Loans, all payments of principal which would
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otherwise be applied to such Lender's Affected Loans shall be applied
instead to its Base Rate Loans.
Section 5.05 Compensation. Each Obligor shall pay to the
Administrative Agent for each Lender within thirty (30) days of receipt of
written request of such Lender to the Administrative Agent and the Company
(which request shall set forth, in reasonable detail, the basis for
requesting such amounts and which shall be conclusive and binding for all
purposes provided that such determinations are made on a reasonable
basis), such amount or amounts as shall compensate it for any loss, cost,
expense or liability which such Lender determines are attributable to:
(i) any payment, prepayment or conversion of a Eurodollar Loan or
Fixed Rate Loan properly made by such Lender or such Obligor for any
reason (including, without limitation, the acceleration of the Loans
pursuant to Section 10.01) on a date other than the last day of the
Interest Period for such Loan; or
(ii) any failure by such Obligor for any reason (including but not
limited to, the failure of any of the conditions precedent specified in
Article VI to be satisfied) to borrow, continue or convert into a
Eurodollar Loan that is a Committed Loan or to borrow a Competitive Loan
from such Lender on the date for such Borrowing, continuation or
conversion specified in the relevant notice given pursuant to Section 2.02
or Section 2.09.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding.
The obligation of the Lenders to make the Initial Funding is subject
to the receipt by the Administrative Agent and the Lenders of all fees
payable pursuant to Section 2.04 on or before the Closing Date and the
receipt by the Administrative Agent of the following documents and
satisfaction of the other conditions provided in this Section 6.01:
(a) A certificate of the Secretary or an Assistant Secretary of the
Company setting forth (i) resolutions of its board of directors with
respect to the authorization of the Company to execute and deliver the
Loan Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of the Company (y) who
are authorized to sign the Loan Documents to which the Company is a party
and (z) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in
connection with this Agreement and the transactions contemplated hereby,
(iii) specimen signatures of
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the authorized officers, and (iv) the articles or certificate of
incorporation and bylaws of the Company, certified as being true and
complete. The Administrative Agent and the Lenders may conclusively rely
on such certificate until the Administrative Agent receives notice in
writing from the Company to the contrary.
(b) Certificates of the appropriate state agencies with respect to the
existence, qualification and good standing of the Company in the State of
Texas.
(c) A compliance certificate which shall be substantially in the form
of Exhibit H, duly and properly executed by a Responsible Officer and
dated as of the date of the Initial Funding.
(d) The Notes of the Company, duly completed and executed.
(e) The Parent Guaranty Agreement, duly completed and executed.
(f) An opinion of W. T. Satterwhite, counsel to the Company,
substantially in the form of Exhibit I hereto.
(g) A certificate of insurance for the Company and its Subsidiaries.
Section 6.02 Initial and Subsequent Loans. The obligation of the
Lenders to make Loans to any Obligor upon the occasion of each Borrowing
hereunder (including the Initial Funding) is subject to the further
conditions precedent that, as of the date of such Borrowing and after
giving effect thereto: (i) no Default shall have occurred and be
continuing and (ii) the representations and warranties made by the Company
in Article VII and by each Designated Subsidiary in its respective Notice
of Designation of a Designated Subsidiary shall be true on and as of the
date of the making of such Borrowing with the same force and effect as if
made on and as of such date and following such new Borrowing, except to
the extent such representations and warranties are expressly limited to an
earlier date or the Majority Lenders have expressly consented in writing
to the contrary. Each request for a borrowing by the Company hereunder
shall constitute a certification by the Company to the effect set forth in
the preceding sentence (both as of the date of such notice and, unless the
Company otherwise notifies the Administrative Agent prior to the date of
and immediately following such Borrowing as of the date thereof).
Section 6.03 Loans to Designated Subsidiaries. The obligation of the
Lenders to make Loans to a Designated Subsidiary is subject to receipt by
the Administrative Agent of the following documents and satisfaction of
the conditions set forth in this Section 6.03 as well as the conditions
set forth in Sections 6.01 and 6.02, each of which shall be satisfactory
to the Administrative Agent in form and substance:
(a) A Notice of Designation of Designated Subsidiary executed by the
Company and such Designated Subsidiary.
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(b) A certificate of the Secretary or an Assistant Secretary of such
Designated Subsidiary setting forth (i) resolutions of its board of
directors with respect to the authorization of such Subsidiary to execute
and deliver the Loan Documents to which it is a party and to enter into
the transactions contemplated in those documents, (ii) the officers of
such Subsidiary (y) who are authorized to sign the Loan Documents to which
such Subsidiary is a party and (z) who will, until replaced by another
officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices
and other communications in connection with this Agreement and the
transactions contemplated hereby, (iii) specimen signatures of the
authorized officers, and (iv) the articles or certificate of incorporation
and bylaws of such Subsidiary, certified as being true and complete. The
Agents and the Lenders may conclusively rely on such certificate until the
Administrative Agent receives notice in writing from the Company to the
contrary.
(c) The Notes of such Designated Subsidiary, duly completed and
executed.
(d) An opinion of counsel to such Designated Subsidiary, substantially
in the form of Exhibit J.
(e) Such Designated Subsidiary shall be a Subsidiary.
(f) The most recent unaudited balance sheet of such Designated
Subsidiary certified by a Responsible Officer.
(g) Such other documents as the Administrative Agent may reasonably
request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative Agent and the
Lenders that (each representation and warranty herein is given as of the
Closing Date and shall be deemed repeated and reaffirmed on the dates of
each Borrowing as provided in Section 6.02):
Section 7.01 Corporate Existence. Each of the Company and each
Designated Subsidiary and each Subsidiary Guarantor: (i) is a corporation
duly organized, legally existing and in good standing under the laws of
the jurisdiction of its incorporation; (ii) has all requisite corporate
power, and has all material governmental licenses, authorizations,
consents and approvals necessary to own its assets and carry on its
business as now being or as proposed to be conducted; and (iii) is
qualified to do business in all
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jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify would have a
Material Adverse Effect.
Section 7.02 Financial Condition. The audited balance sheet of the
Company as at December 31, 1994 and the related statements of operations,
cash flows and changes in partners' capital and common shareholders'
equity of the Company and its predecessor for each of the three years in
the period ended on said date, with the opinion thereon of Deloitte &
Touche LLP heretofore furnished to each of the Lenders, are complete and
correct and fairly present the financial condition of the Company as at
said date and the results of operations and cash flows of the Company and
its predecessor for the stated periods then ended, all in accordance with
GAAP. Neither the Company nor any Subsidiary has on the Closing Date any
material Debt, contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from
any unfavorable commitments, except as referred to or reflected or
provided for in the Financial Statements or in Schedule 7.02. Since
December 31, 1994 to the Closing Date, there has been no change or event
having a Material Adverse Effect. Since the date of the Financial
Statements to the Closing Date, neither the business nor the Properties of
the Company or any Subsidiary have been materially and adversely affected
as a result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or
taking of Property or cancellation of contracts, permits or concessions by
any Governmental Authority, riot, activities of armed forces or acts of
God or of any public enemy.
Section 7.03 Litigation. As of the Closing Date, except as disclosed
to the Lenders in Schedule 7.03, there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of
any nature pending or, to the knowledge of the Company threatened against
or affecting the Company or any Subsidiary which involves the possibility
of any judgment or liability against the Company or any Subsidiary not
fully covered by insurance (except for normal deductibles), and which
would have a Material Adverse Effect.
Section 7.04 No Breach. Neither the execution and delivery of the
Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has
not been obtained as of the Closing Date under, the respective charter or
by-laws of the Company or any Subsidiary, or any Governmental Requirement
or any agreement or instrument for borrowed money to which the Company or
any Subsidiary is a party or by which it is bound or to which it or its
Properties are subject, or constitute a default under any such agreement
or instrument, or result in the creation or imposition of any Lien upon
any of the revenues or assets of the Company or any Subsidiary pursuant to
the terms of any such agreement or instrument other than the Liens created
by the Loan Documents.
Section 7.05 Authority. The Company and each Subsidiary have all
necessary corporate power and authority to execute, deliver and perform
its obligations under the Loan Documents to which it is a party; and the
execution, delivery and performance by the
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Company and each Subsidiary of the Loan Documents to which it is a party,
have been duly authorized by all necessary corporate action on its part;
and the Loan Documents constitute the legal, valid and binding obligations
of the Company and each Subsidiary, enforceable in accordance with their
terms, except to the extent that enforcement may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditor's rights
generally.
Section 7.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are
necessary for the execution, delivery or performance by the Company or any
Subsidiary of the Loan Documents or for the validity or enforceability
thereof.
Section 7.07 Use of Loans. The proceeds of the Loans shall be used
for acquisition funding, working capital or general corporate purposes of
the Company. Neither the Company nor any Designated Subsidiary is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of
Regulation G, U or X of the Board of Governors of the Federal Reserve
System). Following application of the proceeds of each Borrowing, not
more than 25 percent of the value of the assets (either of each Obligor
only or of the Company and its Subsidiaries on a consolidated basis),
which are subject to any arrangement with the Administrative Agent or any
Lender (herein or otherwise) whereby the Company's or any Subsidiary's
right or ability to sell, pledge or otherwise dispose of assets is in any
way restricted, will be margin stock (within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System).
Section 7.08 ERISA. As of the Closing Date, except as would not have
a Material Adverse Effect:
(a) The Company, the Subsidiaries and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.
(b) No act, omission or transaction has occurred which could result in
imposition on the Company, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a material civil penalty assessed
pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax
imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of
fiduciary duty liability damages under section 409 of ERISA.
(c) No liability to the PBGC (other than for the payment of current
premiums which are not past due) by the Company, any Subsidiary or any
ERISA Affiliate has been or is expected by the Company, any Subsidiary or
any ERISA Affiliate to be incurred with respect to any Plan. No ERISA
Event with respect to any Plan has occurred which could result in a
liability of the Company, any Subsidiary or any ERISA Affiliate.
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(d) Full payment when due has been made of all amounts which the
Company, the Subsidiaries or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as contributions to such
Plan as of the date hereof, and no accumulated funding deficiency (as
defined in section 302 of ERISA and section 412 of the Code), whether or
not waived, exists with respect to any Benefit Plan.
(e) The actuarial present value of the benefit liabilities under each
Benefit Plan which is subject to Title IV of ERISA does not, as of the end
of the Company's most recently ended fiscal year, exceed the current value
of the assets (computed on a plan termination basis in accordance with
Title IV of ERISA) of such Benefit Plan allocable to such benefit
liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of ERISA.
(f) Neither the Company, the Subsidiaries nor any ERISA Affiliate has
received any notification (or has knowledge of any reason to expect) that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, within the meaning of Title IV of ERISA.
(g) Neither the Company, the Subsidiaries nor any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to
a Plan amendment that results in an increase in current liability for the
Plan.
Section 7.09 Taxes. Except as set out in Schedule 7.09, each of the
Company and its Subsidiaries has filed all United States Federal income
tax returns and all other tax returns which are required to be filed by
them and has paid all material taxes due pursuant to such returns or
pursuant to any assessment received by the Company or any Subsidiary
except for any such tax, assessment, charge or levy the payment of which
is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained. The charges, accruals and
reserves on the books of the Company and its Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the Company,
adequate. No tax lien has been filed and, to the knowledge of the
Company, no claim is being asserted with respect to any such tax, fee or
other charge.
Section 7.10 Titles, etc. To the best of the Company's knowledge:
(a) Except as set out in Schedule 7.10, each of the Company and the
Designated Subsidiaries and Subsidiary Guarantors has good and defensible
title to its material (individually or in the aggregate) Properties in all
material respects, free and clear of all Liens except Liens permitted by
Section 9.02.
(b) All leases and agreements necessary for the conduct of the
business of the Company and the Designated Subsidiaries and Subsidiary
Guarantors are valid and subsisting, in full force and effect and there
exists no default or event or circumstance which with the giving of notice
or the passage of time or both would
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give rise to a default under any such lease or leases, which would affect
in any material respect the conduct of the business of the Company and the
Designated Subsidiaries and Subsidiary Guarantors.
(c) The rights, properties and other assets presently owned, leased or
licensed by the Company and the Designated Subsidiaries and Subsidiary
Guarantors including, without limitation, all easements and rights of way,
include all rights, Properties and other assets necessary to permit the
Company and the Designated Subsidiaries and Subsidiary Guarantors to
conduct their business in all material respects in the same manner as its
business has been conducted prior to the Closing Date.
Section 7.11 No Material Misstatements. No information, exhibit or
report furnished to the Agents or the Lenders by or on behalf of the
Company or any Subsidiary in connection with the negotiation and
administration of this Agreement contains any material misstatement of
fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading.
Section 7.12 Investment Company Act. Neither the Company nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended.
Section 7.13 Public Utility Holding Company Act. Neither the Company
nor any Subsidiary is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," or a "public utility" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries and Partnerships. On the Closing Date,
except as set forth on Schedule 7.14, the Company has no Subsidiaries and
neither the Company nor any Subsidiary has any interest in any general or
limited partnerships, but excluding solely tax partnerships and oil and
gas joint ventures under joint operating agreements.
Section 7.15 Location of Business and Offices. On the Closing Date,
the Company's chief executive offices are located at the address stated on
the signature page of this Agreement. On the Closing Date, the chief
executive office of each Subsidiary is located at the addresses stated on
Schedule 7.14.
Section 7.16 Defaults.
(a) As of the Closing Date, neither the Company nor any Subsidiary is
in default nor has any event or circumstance occurred which, but for the
expiration of any applicable grace period or the giving of notice, or
both, would constitute a default under any agreement or instrument for
borrowed money to which the
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Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound.
(b) No Default has occurred and is continuing.
Section 7.17 Environmental Matters. As of the Closing Date except
(i) as provided in Schedule 7.17 or (ii) as would not have a Material
Adverse Effect (or with respect to (c), (d) and (e) below, where the
failure to take such actions would not have a Material Adverse Effect):
(a) Neither any Property of the Company or any Subsidiary nor the
operations conducted thereon violate any order or requirement of any court
or Governmental Authority or any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of the Company
or any Subsidiary nor the operations currently conducted thereon or, to
the best knowledge of the Company, by any prior owner or operator of such
Property or operation, are in violation of or subject to any existing,
pending or threatened action, suit, investigation, inquiry or proceeding
by or before any court or Governmental Authority or to any remedial
obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if any,
required to be obtained or filed in connection with the operation or use
of any and all Property of the Company and each Subsidiary, including
without limitation past or present treatment, storage, disposal or release
of a hazardous substance or solid waste into the environment, have been
duly obtained or filed, and the Company and each Subsidiary are in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas exploration
and production wastes, if any, generated at any and all Property of the
Company or any Subsidiary have in the past been transported, treated and
disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of the Company, all such transport
carriers and treatment and disposal facilities have been and are operating
in compliance with Environmental Laws and so as not to pose an imminent
and substantial endangerment to public health or welfare or the
environment, and are not the subject of any existing, pending or
threatened action, investigation or inquiry by any Governmental Authority
in connection with any Environmental Laws;
(e) The Company has taken all steps reasonably necessary to determine
and has determined that no hazardous substances, solid waste, or oil and
gas exploration and production wastes, have been disposed of or otherwise
released and there has been no threatened release of any hazardous
substances on or to any
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Property of the Company or any Subsidiary except in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment;
(f) To the extent applicable, all Property of the Company and each
Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA or scheduled as of the Closing Date to be
imposed by OPA during the term of this Agreement, and the Company does not
have any reason to believe that such Property, to the extent subject to
OPA, will not be able to maintain compliance with the OPA requirements
during the term of this Agreement; and
(g) Neither the Company nor any Subsidiary has any known contingent
liability in connection with any release or threatened release of any oil,
hazardous substance or solid waste into the environment.
Section 7.18 Compliance with Laws. As of the Closing Date, neither
the Company nor any Subsidiary has violated any Governmental Requirement
or failed to obtain any license, permit, franchise or other governmental
authorization necessary for the ownership of any of its Properties or the
conduct of its business, which violation or failure would have (in the
event such violation or failure were asserted by any Person through
appropriate action) a Material Adverse Effect.
Section 7.19 Pari Passu. The Indebtedness ranks and will rank at
least pari passu in priority with all other senior debt of each Obligor,
except for secured debt permitted by Section 9.02.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of all Loans hereunder, all
interest thereon and all other amounts payable by the Obligors hereunder:
Section 8.01 Financial Statements. The Company shall deliver, or
shall cause to be delivered, to the Administrative Agent with sufficient
copies of each for the Lenders:
(a) As soon as available and in any event within one hundred twenty
(120) days after the end of each fiscal year of the Company, (i) the
Company's Form 10-K filed with the SEC or (ii) the audited consolidated
statements of income, shareholders' equity, and cash flows of the Company
and its Consolidated Subsidiaries for such fiscal year, and the related
consolidated balance sheet of the Company and its Consolidated
Subsidiaries as at the end of such fiscal year, and setting forth in each
case in comparative form the corresponding figures as of the
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end of and for the preceding fiscal year, and accompanied by the related
opinion of independent public accountants of recognized national standing
acceptable to the Administrative Agent which opinion shall state that said
financial statements fairly present the consolidated financial condition,
results of operations and cash flows of the Company and its Consolidated
Subsidiaries as at the end of, and for, such fiscal year and that such
financial statements have been prepared in accordance with GAAP except for
such changes in such principles with which the independent public
accountants shall have concurred and such opinion shall not contain a
"going concern" or like qualification or exception, and a certificate of
such accountants stating that, in making the examination necessary for
their opinion, they obtained no knowledge, except as specifically stated,
of any Default.
(b) As soon as available and in any event within sixty (60) days after
the end of each of the first three fiscal quarterly periods of each fiscal
year of the Company, (i) the Company's Form 10-Q filed with the SEC or
(ii) unaudited consolidated statements of income, shareholders' equity,
and cash flows of the Company and its Consolidated Subsidiaries for such
period and for the period from the beginning of the respective fiscal year
to the end of such period, and the related consolidated balance sheets as
at the end of such period, and setting forth in each case in comparative
form the corresponding figures as of the end of and for the corresponding
period in the preceding fiscal year, accompanied by the certificate of a
Responsible Officer, which certificate shall state that said financial
statements fairly present the consolidated financial condition, results of
operations and cash flows of the Company and its Consolidated Subsidiaries
in accordance with GAAP, as at the end of, and for, such period (subject
to normal year-end adjustments).
(c) Promptly after a Responsible Officer of the Company knows that any
Default has occurred, a notice of such Default, describing the same in
reasonable detail and the action the Company proposes to take with respect
thereto.
(d) Promptly upon its becoming available, each financial statement,
report, notice or proxy statement sent by the Company to stockholders
generally and each regular or periodic report and any registration
statement or prospectus in respect thereof filed by the Company with or
received by the Company in connection therewith from any securities
exchange or the SEC or any successor agency, including without limitation,
Form 10-K's and Form 10-Q's.
(e) As soon as available and in any event within one hundred twenty
(120) days after the end of the fiscal year of the Company, the unaudited
balance sheet of each Designated Subsidiary as at the end of the Company's
fiscal year, certified by a Responsible Officer, which certificate shall
state that said balance sheet fairly presents the financial condition of
the respective Designated Subsidiary.
The Company will furnish to the Administrative Agent, with sufficient
copies for the Lenders, at the time it furnishes each set of financial
statements pursuant to paragraph (a)
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or (b) above, a certificate substantially in the form of Exhibit H
executed by a Responsible Officer (i) certifying as to the matters set
forth therein and stating that no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail), (ii) setting forth in reasonable detail the
computations necessary to determine whether the Company is in compliance
with Section 9.01 as of the end of the respective fiscal quarter or fiscal
year and (iii) certifying that the Company is in compliance with Section
8.08 or will be in compliance within the next 30 days and listing the
Subsidiaries and Special Entities, if any, that will be executing Guaranty
Agreements.
Section 8.02 Litigation. The Company shall promptly give to the
Administrative Agent, with sufficient copies for the Lenders, notice of
all legal or arbitral proceedings, and of all proceedings before any
Governmental Authority affecting the Company or any Subsidiary, except
proceedings which, if adversely determined, would not have a Material
Adverse Effect.
Section 8.03 Maintenance, Etc.
(a) The Company shall and shall cause each Subsidiary Guarantor and
Designated Subsidiary to: preserve and maintain the Company's corporate
existence and all of its material rights, privileges and franchises; keep
books of record and account in which full, true and correct entries will
be made of all dealings or transactions in relation to its business and
activities; comply with all Governmental Requirements if failure to comply
with such requirements will have a Material Adverse Effect; pay and
discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its Property prior
to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good
faith and by proper proceedings and against which adequate reserves are
being maintained; during the continuance of an Event of Default and upon
reasonable notice, permit representatives of the Administrative Agent,
during normal business hours, to examine its books and records, to inspect
its Properties, and to discuss its business and affairs with its financial
officers, all to the extent reasonably requested by the Administrative
Agent and to the extent requested by the President of the Administrative
Agent, copy and make extracts of its books and records; and keep, or cause
to be kept, insured by financially sound and reputable insurers all
Property of a character usually insured by Persons engaged in the same or
similar business similarly situated against loss or damage of the kinds
and in the amounts customarily insured against by such Persons and carry
such other insurance as is usually carried by such Persons including,
without limitation, pollution liability insurance to the extent reasonably
available.
(b) Contemporaneously with the delivery of the financial statements
required by Section 8.01(a) to be delivered for each year, the Company
will furnish or cause to be furnished to the Administrative Agent a
certificate of insurance coverage from the insurer in substantially the
form provided at the closing of this
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Agreement and, if requested, will furnish the Administrative Agent copies
of the applicable policies.
Section 8.04 Environmental Matters.
(a) The Company will and will cause each Subsidiary to establish and
implement such procedures as may be reasonably necessary to continuously
determine and assure that any failure of the following does not have a
Material Adverse Effect: (i) all Property of the Company and its
Subsidiaries and the operations conducted thereon and other activities of
the Company and its Subsidiaries are in compliance with and do not violate
the requirements of any Environmental Laws, (ii) no oil, hazardous
substances or solid wastes are disposed of or otherwise released on or to
any Property owned by any such party except in compliance with
Environmental Laws, (iii) no hazardous substance will be released on or to
any such Property in a quantity equal to or exceeding that quantity which
requires reporting pursuant to Section 103 of CERCLA, and (iv) no oil, oil
and gas exploration and production wastes or hazardous substance is
released on or to any such Property so as to pose an imminent and
substantial endangerment to public health or welfare or the environment.
(b) The Company will promptly notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by
any Governmental Authority of which the Company has knowledge in
connection with any Environmental Laws which may have a Material Adverse
Effect.
Section 8.05 Further Assurances. The Company will and will cause
each Subsidiary to cure promptly any defects in the creation and issuance
of the Notes and the execution and delivery of the other Loan Documents
and this Agreement. The Company at its expense will and will cause each
Subsidiary to promptly execute and deliver to the Administrative Agent
upon request all such other documents, agreements and instruments to
comply with or accomplish the covenants and agreements of the Company or
any Subsidiary, as the case may be, in the other Loan Documents and this
Agreement, or to further evidence and more fully describe the collateral
intended as security for the Notes, or to correct any omissions in the
other Loan Documents, or to perfect, protect or preserve any Liens created
pursuant to any of the other Loan Documents, or to make any recordings, to
file any notices or obtain any consents, all as may be necessary or
appropriate in connection therewith.
Section 8.06 ERISA Information and Compliance. The Company will
promptly furnish and will cause the Subsidiaries and any ERISA Affiliate
to promptly furnish to the Administrative Agent (i) immediately upon
becoming aware of the occurrence of any ERISA Event which could result in
a liability of the Company, any Subsidiary or any ERISA Affiliate having
a Material Adverse Effect (individually or in the aggregate with respect
to all ERISA Events), a written notice signed by the President or the
principal financial officer of the Company, the Subsidiary or the ERISA
Affiliate, as the case may be,
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specifying the nature thereof, what action the Company, the Subsidiary or
the ERISA Affiliate is taking or proposes to take with respect thereto,
and, when known, any action taken or proposed by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto, (ii)
promptly after request by the Administrative Agent, a true and correct
copy of each actuarial report for any Plan and each annual report for any
Multiemployer Plan, (iii) immediately upon receipt of a notice from a
Multiemployer Plan regarding the imposition of Withdrawal Liability having
a Material Adverse Effect, a true and complete copy of such notice, (iv)
immediately upon becoming aware that a Multiemployer Plan has been
terminated, that the administrator or plan sponsor of a Multiemployer Plan
intends to terminate a Multiemployer Plan, or that the PBGC has instituted
or intends to institute proceedings under section 4042 of ERISA to
terminate a Multiemployer Plan which occurrence would have a Material
Adverse Effect, a written notice signed by the President or the principal
financial officer of the Company, the Subsidiary or the ERISA Affiliate,
as the case may be, specifying the nature of such occurrence and any other
information relating thereto requested by the Administrative Agent, and
(v) immediately upon receipt thereof, copies of any notice of the PBGC's
intention to terminate or to have a trustee appointed to administer any
Benefit Plan which occurrence would have a Material Adverse Effect.
Section 8.07 Lease Payments. The Company will cause its obligations
to Enserch Exploration Holdings, Inc. to be subordinated to the
Indebtedness on terms substantially similar to the terms set forth on
Exhibit M or on terms and subject to documentation satisfactory to the
Administrative Agent.
Section 8.08 Subsidiary Guaranty Agreements. The Company will cause
each of its Subsidiaries and Special Entities to execute a Subsidiary
Guaranty Agreement, except for such Subsidiaries and Special Entities that
in the aggregate do not have assets at book value in excess of 15% of the
total consolidated assets at book value of the Company. The Company shall
have 30 days from the date of delivery of each Compliance Certificate to
comply with this covenant. At the time that a Subsidiary or Special
Entity executes and delivers a Subsidiary Guaranty Agreement to the
Administrative Agent it shall also deliver to the Administrative Agent the
following in form and substance acceptable to the Administrative Agent:
(a) A certificate of the Secretary or an Assistant Secretary of each
Subsidiary Guarantor setting forth (i) resolutions of its board of
directors or appropriate Persons with respect to the authorization of such
Subsidiary Guarantor to execute and deliver the Loan Documents to which it
is a party and to enter into the transactions contemplated in those
documents, (ii) the officers of such Subsidiary Guarantor (y) who are
authorized to sign the Loan Documents to which such Subsidiary Guarantor
is a party and (z) who will, until replaced by another officer or officers
duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other communications
in connection with this Agreement and the transactions contemplated
hereby, (iii) specimen signatures of the authorized officers, and (iv) the
articles or certificate of
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incorporation and bylaws or appropriate document of governance of such
Subsidiary Guarantor, certified as being true and complete. The Agents
and the Lenders may conclusively rely on such certificate until they
receive notice in writing from the Company to the contrary.
(b) An opinion of counsel to the Subsidiary Guarantor, substantially
in the form of Exhibit N.
ARTICLE IX
NEGATIVE COVENANTS
The Company covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of Loans hereunder and all
interest thereon without the prior written consent of the Majority
Lenders:
Section 9.01 Debt to Capital Ratio. The Company will not permit its
ratio ("Debt to Capital Ratio") expressed as a percentage of (i) Debt of
the Company and its Consolidated Subsidiaries on a consolidated basis
("Consolidated Debt") to (ii) the sum of Consolidated Debt plus Net Worth
to exceed 60% at any time; provided that in no event will Consolidated
Debt ever exceed $750,000,000.
Section 9.02 Liens. Except as expressly permitted in this Section
9.02, the Company will not at any time, directly or indirectly, create,
assume or suffer to exist, and will not cause, suffer or permit any
Designated Subsidiary or Subsidiary Guarantor as long as it remains a
Designated Subsidiary or Subsidiary Guarantor, directly or indirectly, to
create, assume or suffer to exist, except in favor of the Company, any
Lien upon any of its Properties (now owned or hereafter acquired), without
making effective provision (and the Company covenants that in any such
case it will make or cause to be made effective provision) whereby the
Indebtedness and any other Debt of the Company or any Designated
Subsidiary or Subsidiary Guarantor then entitled thereto shall be secured
by such Lien equally and ratably with any and all other obligations and
indebtedness thereby secured, so long as any such other obligations or
indebtedness shall be so secured. Nothing in this Agreement shall be
construed to prevent the Company or any Designated Subsidiary or
Subsidiary Guarantor without so securing the amounts outstanding
hereunder, from creating, assuming or suffering to exist the following
Liens, to which the provisions of this paragraph shall not be applicable:
(a) Liens upon any Property presently owned or hereafter acquired,
created at the time of acquisition to secure a portion of the purchase
price thereof, or existing thereon at the date of acquisition, whether or
not assumed by the Company or one of its Designated Subsidiaries or
Subsidiary Guarantors, provided that every such Lien shall apply only to
the Property so acquired and fixed improvements thereon;
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(b) any extension, renewal, or refunding of any Lien permitted by
Section 9.02(a), if limited to the same Property subject to, and securing
not more than the amount secured by, the Lien extended, renewed or
refunded;
(c) the pledge of current assets in the ordinary course of business,
to secure current liabilities;
(d) Liens upon (i) Property, to secure obligations to pay all or a
part of the purchase price of such Property only out of or measured by the
production, or the proceeds of such production, from such Property of oil
or gas or products or by-products thereof, or (ii) the production from
Property of oil or gas or products or by-products thereof, or the proceeds
of such production, to secure obligations to pay all or a part of the
expenses of exploration, drilling or development of such Property only out
of such production or the proceeds of such production;
(e) mechanics' or materialmen's liens, good faith deposits in
connection with tenders, leases of real estate, bids or contracts (other
than contracts for the payment of money), deposits to secure public or
statutory obligations, deposits to secure, or in lieu of, surety, stay or
appeal bonds, and deposits as security for the payment of taxes or
assessments or similar charges, Liens given in connection with bid or
completion bonds; provided that such obligations secured are not yet due
or are being contested in good faith by appropriate action and against
which an adequate reserve has been established;
(f) any Lien arising by reason of deposits with, or the giving of any
form of security to, any governmental agency or any body created or
approved by law or governmental regulation for any purposes at any time as
required by law or governmental regulation as a condition to the
transaction of any business or the exercise of any privilege or license,
or to enable the Company or a Subsidiary to maintain self-insurance or to
participate in any funds established to cover any insurance risks or in
connection with workmen's compensation, unemployment insurance, old age
pensions or other social security, or to share in the privileges or
benefits required for companies participating in such arrangements;
provided that such obligations secured are not yet due or are being
contested in good faith by appropriate action and against which an
adequate reserve has been established;
(g) the pledge or assignment of accounts receivable, including
customers' installment paper, to banks or others made in the ordinary
course of business (including to or by a Subsidiary which is principally
engaged in the business of financing the business of the Company and its
Subsidiaries);
(h) the Liens of taxes or assessments for the then current year or not
at the time due, or the Liens of taxes or assessments already due but the
validity of which is being contested in good faith by appropriate action
and against which an adequate reserve has been established;
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(i) any judgment or Lien against the Company or a Designated
Subsidiary or Subsidiary Guarantor, so long as the finality of such
judgment is being contested in good faith by appropriate action and the
execution thereon is stayed;
(j) assessments or similar encumbrances, the existence of which does
not impair the value or the use of the Property subject thereto for the
purposes for which it was acquired;
(k) landlords' liens on fixtures and movable Property located on
premises leased by the Company or a Designated Subsidiary or Subsidiary
Guarantor in the ordinary course of business so long as the rent secured
thereby is not in default;
(l) Liens on the assets of any limited liability company organized
under a limited liability company act of any state in which a limited
liability company is treated as a partnership for federal income tax
purposes; provided that neither the Company nor any Designated Subsidiary
or Subsidiary Guarantor is liable for the Debt of such limited liability
company; and
(m) other Liens on any Properties of the Company or any Subsidiary
with an aggregate value not exceeding 1% of the book value of the total
assets of the Company on a consolidated basis.
Section 9.03 Investments, Loans and Advances. So long as any Loans
are outstanding, neither the Company nor any Subsidiary will make any
loans or advances to ENSERCH Corporation or any of its subsidiaries (but
excluding the Company and its Subsidiaries) after the occurrence and
during the continuance of an Event of Default or in excess of $50,000,000
in the aggregate outstanding at any one time for greater than a 90 day
period.
Section 9.04 Dividends, Distributions and Redemptions. The Company
will not declare or pay any dividend, purchase, redeem or otherwise
acquire for value any of its stock now or hereafter outstanding, return
any capital to its stockholders or make any distribution of its assets to
its stockholders after the occurrence and during the continuance of an
Event of Default.
Section 9.05 Nature of Business. The Company will not allow any
material change to be made in the character of its business as an
independent oil and gas exploration and production company.
Section 9.06 Mergers, Etc. Neither the Company nor any Subsidiary
will merge into or with or consolidate with any other Person, or sell,
lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its Property or assets to any
other Person ("Disposition") unless (i) no Default exists or would result
from such merger or Disposition and (ii) for any merger the Company is the
survivor, or for any merger or Disposition, if the surviving Person or
acquiring Person is not the Company, such surviving Person or acquiring
Person assumes the Indebtedness and all other
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obligations of the Company under the Loan Documents and is approved by the
Majority Lenders.
Section 9.07 Proceeds of Notes. The Company will not permit the
proceeds of the Notes to be used for any purpose other than those
permitted by Section 7.07. Neither the Company nor any Person acting on
behalf of the Company has taken or will take any action which might cause
any of the Loan Documents to violate Regulation G, U or X or any other
regulation of the Board of Governors of the Federal Reserve System or to
violate Section 7 of the Securities Exchange Act of 1934, as amended, or
any rule or regulation thereunder, in each case as now in effect or as the
same may hereafter be in effect.
Section 9.08 ERISA Compliance. The Company and the Subsidiaries will
not at any time:
(a) Engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Company, a Subsidiary or any
ERISA Affiliate could be subjected to either a civil penalty assessed
pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax
imposed by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any ERISA Affiliate to terminate, any Benefit
Plan in a manner, or take any other action with respect to any Benefit
Plan, which could result in any liability of the Company, a Subsidiary or
any ERISA Affiliate to the PBGC;
(c) Fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Company, a Subsidiary or
any ERISA Affiliate is required to pay as contributions thereto;
(d) Permit to exist, or allow any ERISA Affiliate to permit to exist,
any accumulated funding deficiency within the meaning of section 302 of
ERISA or section 412 of the Code, whether or not waived, with respect to
any Benefit Plan;
(e) Permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Benefit Plan maintained
by the Company, a Subsidiary or any ERISA Affiliate which is regulated
under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of
ERISA) of such Benefit Plan allocable to such benefit liabilities. The
term "actuarial present value of the benefit liabilities" shall have the
meaning specified in section 4041 of ERISA;
(f) Incur, or permit any ERISA Affiliate to incur, a liability to or
on account of a Plan under sections 4062, 4063, or 4064 of ERISA;
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(g) Amend, or permit any ERISA Affiliate to amend, a Plan resulting in
an increase in current liability such that the Company, a Subsidiary or
any ERISA Affiliate is required to provide security to such Plan under
section 401(a)(29) of the Code; or
(h) Incur or permit Withdrawal Liability and liability in connection
with a reorganization or termination of a Multiemployer Plan of the
Company, the Subsidiaries and the ERISA Affiliates;
provided, however, that the transactions, events and occurrences described
in this Section 9.08 shall be permitted so long as such transactions,
events and occurrences (individually and in the aggregate) will not result
in a Material Adverse Effect.
Section 9.09 Environmental Matters. Neither the Company nor any
Subsidiary will cause or permit any of its Property to be in violation of,
or do anything or permit anything to be done which will subject any such
Property to any remedial obligations under, any Environmental Laws,
assuming disclosure to the applicable Governmental Authority of all
relevant facts, conditions and circumstances, if any, pertaining to such
Property where such violations or remedial obligations would have a
Material Adverse Effect.
Section 9.10 Transactions with Affiliates. Neither the Company nor
any Designated Subsidiary nor any Subsidiary Guarantor will enter into
any material transaction, including, without limitation, any purchase,
sale, lease or exchange of Property including the purchase or sale of oil
and gas properties and hydrocarbons or the rendering of any service, with
any Affiliate unless such transactions are in the ordinary course of its
business and are upon fair and reasonable terms no less favorable to it
than it would obtain in a comparable arm's length transaction with a
Person not an Affiliate.
Section 9.11 Restrictive Dividend Agreements. Neither the Company
nor any Designated Subsidiary nor any Subsidiary Guarantor will create,
incur, assume or suffer to exist any financing agreement (other than this
Agreement and the other Loan Documents) which in any way restricts any
Designated Subsidiary or Subsidiary Guarantor from paying dividends to the
Company.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events
shall constitute an "Event of Default":
(a) (i) any Obligor shall default in the payment or prepayment of any
principal on any Loan when due or (ii) any Obligor shall default in the
payment of any interest on any Loan or any facility fees payable by it
hereunder and such default, other than a default of a payment or
prepayment of principal, shall continue
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unremedied for a period of five (5) days or (iii) any Obligor shall
default in the payment of any other amount payable by it hereunder or
under any other Loan Document and such default shall continue unremedied
for a period of thirty (30) days after notice of such default by the
Administrative Agent to the Company; or
(b) the Company or any Subsidiary shall default in the payment when
due of any principal of or interest on any of its other Debt of
$25,000,000 or more, or any event specified in any note, agreement,
indenture or other document evidencing or relating to any Debt of
$25,000,000 or more shall occur if the effect of such event causes, or
after the giving of any notice or the lapse of time or both, if
applicable, permits the holder or holders of such Debt (or a trustee or
agent on behalf of such holder or holders) to cause, such Debt to become
due prior to its stated maturity; or
(c) any representation, warranty or certification made or deemed made
herein or in any other Loan Documents by the Company, any Designated
Subsidiary or any Subsidiary Guarantor, or any certificate furnished to
any Lender or the Administrative Agent pursuant to the provisions hereof
or any other Loan Documents, shall prove to have been false or misleading
as of the time made, deemed made or furnished in any material adverse
respect; or
(d) the Company shall default in the performance of any of its
obligations under Article IX; or
(e) the Company shall default in the performance of any of its
obligations under Article VIII or any other Loan Document or any other
Article of this Agreement other than under Article IX (other than the
payment of amounts due which shall be governed by Section 10.01(a)) and
such default shall continue unremedied for a period of thirty (30) days
after the earlier to occur of (i) notice thereof to the Company by the
Administrative Agent or any Lender (through the Administrative Agent), or
(ii) a Responsible Officer of the Company otherwise becoming aware of such
default; or
(f) the Company, any Designated Subsidiary or any Subsidiary Guarantor
shall admit in writing its inability to, or be generally unable to, pay
its debts as such debts become due; or
(g) the Company, any Designated Subsidiary or any Subsidiary Guarantor
shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or
of all or a substantial part of its Property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect),
(iv) file a petition seeking to take advantage of any other law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or
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acquiesce in writing to, any petition filed against it in an involuntary
case under the Federal Bankruptcy Code, or (vi) take any corporate or
partnership action for the purpose of effecting any of the foregoing; or
(h) a proceeding or case shall be commenced, without the application
or consent of the Company, any Designated Subsidiary or any Subsidiary
Guarantor, in any court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution or winding-up, or the composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company, any Designated
Subsidiary or any Subsidiary Guarantor of all or any substantial part of
its Property, or (iii) similar relief in respect of the Company, any
Designated Subsidiary or any Subsidiary Guarantor under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 90 days; or (iv) an order for relief against the Company, any
Designated Subsidiary or any Subsidiary Guarantor shall be entered in an
involuntary case under the Federal Bankruptcy Code; or
(i) a judgment or judgments for the payment of money in excess of
$25,000,000 in the aggregate shall be rendered by a court against the
Company or any Subsidiary Guarantor or Designated Subsidiaries and the
same shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within
thirty (30) days from the date of entry thereof and the Company or such
Subsidiary shall not, within said period of 30 days, or such longer period
during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal;
or
(j) the Guaranty Agreements after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be
in full force and effect and valid, binding and enforceable in accordance
with their terms, except to the extent permitted by the terms of this
Agreement, or the Company or any Subsidiary Guarantor shall so state in
writing; or
(k) ENSERCH Corporation shall cease to own, directly or indirectly, at
least 50% of the outstanding voting stock of the Company.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one referred to in
clauses (f), (g), or (h) of Section 10.01, the Administrative Agent may
and, upon request of the Majority Lenders, shall, by notice to the
Company, cancel the Commitments and/or declare the principal amount then
outstanding of, and the accrued interest on, the Loans and all other
amounts payable by the Company hereunder and under the Notes to be
forthwith due and payable, whereupon such amounts shall be
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immediately due and payable without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or other formalities of
any kind, all of which are hereby expressly waived by the Company.
(b) In the case of the occurrence of an Event of Default referred to
in clauses (f), (g), or (h) of Section 10.01, the Commitments shall be
automatically cancelled and the principal amount then outstanding of, and
the accrued interest on, the Loans and all other amounts payable by the
Company hereunder and under the Notes shall become automatically
immediately due and payable without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or other formalities of
any kind, all of which are hereby expressly waived by the Company.
(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in this Agreement and the other Loan
Documents; second to accrued interest on the Notes; third to fees; fourth
pro rata to principal outstanding on the Notes and other Indebtedness; and
any excess shall be paid to the Company or as otherwise required by any
Governmental Requirement.
ARTICLE XI
THE ADMINISTRATIVE AGENT
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes Texas Commerce Bank National
Association, as the Administrative Agent, and Chemical Bank, as the
Auction Agent, each to act as its agent hereunder and under the other Loan
Documents with such powers as are specifically delegated to the
Administrative Agent and Auction Agent respectively by the terms of this
Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. The Syndication Agent, in such
capacity, shall have no duties or responsibilities and shall incur no
liabilities under the Loan Documents. Each Agent (which term as used in
this sentence and in Section 11.05 and the first sentence of Section 11.06
shall include reference to its Affiliates and its and its Affiliates'
officers, directors, employees, attorneys, accountants, experts and
agents): (i) shall have no duties or responsibilities except those
expressly set forth in this Agreement, and shall not by reason of this
Agreement be a trustee or fiduciary for any Lender; (ii) makes no
representation or warranty to any Lender and shall not be responsible to
the Lenders for any recitals, statements, representations or warranties
contained in this Agreement, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement, or for the value, validity, effectiveness, genuineness,
execution, effectiveness, legality, enforceability or sufficiency of this
Agreement, any Note or any other document referred to or provided for
herein or for any failure by the Company or any other Person (other than
such Agent) to perform any of its obligations hereunder or thereunder or
for the existence, value, perfection or priority of any collateral
security or the financial or other
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condition of the Company, its Subsidiaries or any other obligor or
guarantor; (iii) except pursuant to Section 11.07 shall not be required to
initiate or conduct any litigation or collection proceedings hereunder;
and (iv) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other document or instrument referred
to or provided for herein or in connection herewith including its own
ordinary negligence, except for its own gross negligence or willful
misconduct. The Administrative Agent may employ agents, accountants,
attorneys and experts and shall not be responsible for the negligence or
misconduct of any such agents, accountants, attorneys or experts selected
by it in good faith or any action taken or omitted to be taken in good
faith by it in accordance with the advice of such agents, accountants,
attorneys or experts. Each Agent may deem and treat the payee of any Note
as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof permitted hereunder shall
have been filed with the Administrative Agent.
Section 11.02 Reliance by Agent. Each Agent shall be entitled to
rely upon any certification, notice or other communication (including any
thereof by telephone, telex, telecopier, telegram or cable) believed by it
to be genuine and correct and to have been signed or sent by or on behalf
of the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by such Agent.
Section 11.03 Defaults. No Agent shall be deemed to have knowledge
of the occurrence of a Default (other than the Administrative Agent's
notice of the non-payment of principal of or interest on Loans or of
fees). In the event that the Administrative Agent receives a notice of
the occurrence of a Default specifying such Default and stating that such
notice is a "Notice of Default", the Administrative Agent shall give
prompt notice thereof to the Lenders. In the event of a payment Default,
the Administrative Agent shall give each Lender prompt notice of each such
payment Default.
Section 11.04 Rights as a Lender. With respect to its Commitments
and the Loans made by it, each Agent (and any successor acting as an
Agent) in its capacity as a Lender hereunder shall have the same rights
and powers hereunder as any other Lender and may exercise the same as
though it were not acting as an Agent, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include each Agent in its
individual capacity. Each Agent (and any successor acting as an Agent)
and its Affiliates may (without having to account therefor to any Lender)
accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Company (any and of its
Affiliates) as if it were not acting as an Agent, and each Agent and its
Affiliates may accept fees and other consideration from the Company for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY EACH
AGENT RATABLY IN ACCORDANCE WITH ITS PERCENTAGE SHARES FOR THE INDEMNITY
MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR
REIMBURSED
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BY THE COMPANY UNDER SECTION 12.03, BUT WITHOUT LIMITING THE OBLIGATIONS
OF THE COMPANY UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER
WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST SUCH AGENT IN ANY
WAY RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS OR ANY OTHER DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR
THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS
OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES
INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE
ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT, OTHER LOAN DOCUMENTS OR
OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED
IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF
SUCH AGENT, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE
FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH AGENT.
Section 11.06 Non-Reliance on the Agents and other Lenders. Each
Lender acknowledges and agrees that it has, independently and without
reliance on any Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
the Company and its decision to enter into this Agreement, and that it
will, independently and without reliance upon any Agent or any other
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions
in taking or not taking action under this Agreement. The Agents shall not
be required to keep themselves informed as to the performance or
observance by the Company of this Agreement, the Notes, the other Loan
Documents or any other document referred to or provided for herein or to
inspect the properties or books of the Company. Except for notices,
reports and other documents and information expressly required to be
furnished to the Lenders by the Administrative Agent or Auction Agent
hereunder, the Agents shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the affairs,
financial condition or business of the Company (or any of its Affiliates)
which may come into the possession of any Agent, or any of its Affiliates.
Section 11.07 Action by Agent. Except for action or other matters
expressly required of the Administrative Agent or Auction Agent hereunder,
the Administrative Agent or Auction Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall (i)
receive written instructions from the Majority Lenders (or if this
Agreement requires, all of the Lenders) specifying the action to be taken,
and (ii) be indemnified to its satisfaction by the Lenders against any and
all liability and expenses which may be incurred by it by reason of taking
or continuing to take any such action except for gross negligence or
wilful misconduct. The instructions of the Majority Lenders (or if this
Agreement requires, all of the Lenders) and any action taken or failure to
act pursuant thereto by the Administrative Agent or Auction Agent shall be
binding on all of the Lenders. If a Default has occurred and is
continuing, the Administrative Agent or Auction Agent shall take such
action with respect to such Default as shall be directed by the
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Majority Lenders (or if this Agreement requires, all of the Lenders) in
the written instructions (with indemnities) described in this Section
11.07, provided that, unless and until the Administrative Agent or Auction
Agent shall have received such directions, the Administrative Agent or
Auction Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interests of the Lenders. In no event,
however, shall any Agent be required to take any action which exposes such
Agent to personal liability or which is contrary to this Agreement and the
other Loan Documents or applicable law.
Section 11.08 Resignation or Removal of the Agents. Subject to the
appointment and acceptance of a successor as provided below, the
Administrative Agent or Auction Agent may resign at any time by giving
notice thereof to the Lenders and the Company, and the Administrative
Agent or Auction Agent may be removed at any time with or without cause by
the Majority Lenders. Upon any such resignation or removal, the Majority
Lenders shall have the right to appoint a successor Administrative Agent
or Auction Agent as the case may be. If no successor Administrative Agent
or Auction Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within thirty (30) days after the
retiring Administrative Agent's or Auction Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring
Administrative Agent or Auction Agent, then the retiring Administrative
Agent or Auction Agent, as the case may be, may, on behalf of the Lenders,
appoint a respective successor Administrative Agent or Auction Agent.
Upon the acceptance of such appointment hereunder by a successor
Administrative Agent or Auction Agent, such successor Administrative Agent
or Auction Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent
or Auction Agent, as the case may be, and the retiring Administrative
Agent or Auction Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's or Auction Agent's
resignation or removal hereunder as Administrative Agent or Auction Agent,
the provisions of this Article XI and Section 12.03 shall continue in
effect for its benefit in respect of any actions taken or omitted to be
taken by it while it was acting as the Administrative Agent or Auction
Agent.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of any Agent or any
Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under any of the Loan
Documents preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
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Section 12.02 Notices. All notices and other communications provided
for herein and in the other Loan Documents (including, without limitation,
any modifications of, or waivers or consents under, this Agreement or the
other Loan Documents) shall be given or made by telex, telecopy,
telegraph, cable, courier or U.S. Mail or in writing and telexed,
telecopied, telegraphed, cabled, mailed or delivered to the intended
recipient at the "Address for Notices" specified below its name on the
signature pages hereof or in the other Loan Documents or, as to any party,
at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement or in
the other Loan Documents, all such communications shall be deemed to have
been duly given when transmitted by telex or telecopier, delivered to the
telegraph or cable office or personally delivered or, in the case of a
mailed notice, three (3) Business Days after the date deposited in the
mails, postage prepaid, in each case given or addressed as aforesaid. The
Company shall be the agent of each Designated Subsidiary for the receiving
and giving of any notices or other communications under the Loan
Documents.
Section 12.03 Payment of Expenses, Indemnities, etc. Each Obligor
agrees:
(a) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agents in the
administration (both before and after the execution hereof and including
advice of counsel as to the rights and duties of the Agents and the
Lenders with respect thereto) of, and in connection with the negotiation,
syndication, investigation, preparation, execution and delivery of,
recording or filing of, preservation of rights under, enforcement of, and
refinancing, renegotiation or restructuring of, the Loan Documents and any
amendment, waiver or consent relating thereto (including, without
limitation, travel, photocopy, mailing, courier, telephone and other
similar expenses of the Agents, the cost of environmental audits, surveys
and appraisals at reasonable intervals, the reasonable fees and
disbursements of counsel for the Agents and in the case of enforcement for
any of the Lenders); and promptly reimburse the Agents for the account of
the Agents and the Lenders for all amounts expended, advanced or incurred
by the Agents or the Lenders to satisfy any obligation of the Company
under this Agreement or any other Loan Document;
(b) TO INDEMNIFY EACH AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED
PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON
DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY
BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT
ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF
OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY ANY OBLIGOR OF
THE PROCEEDS OF ANY OF THE LOANS, (II) THE EXECUTION, DELIVERY AND
PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF
THE COMPANY AND ITS SUBSIDIARIES, (IV) THE FAILURE OF THE COMPANY OR ANY
SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, OR WITH ANY
GOVERNMENTAL
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REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF
ANY WARRANTY OF THE COMPANY SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI)
ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS
RECEIVED PURSUANT TO THE LOAN DOCUMENTS OR (VII) ANY OTHER ASPECT OF THE
LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN CONNECTION
WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION,
SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES)
OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE
ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY
MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY
LENDER AND ANY AGENT OR A LENDER'S SHAREHOLDERS AGAINST ANY AGENT OR
LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE
PART OF SUCH INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME EACH INDEMNIFIED
PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY
SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE
TO THE COMPANY OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING
WITHOUT LIMITATION THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES AND RESULTING FROM THE FACT THAT THE AGENTS OR
LENDERS ARE A PARTY TO ANY LOAN DOCUMENT, (II) AS A RESULT OF THE BREACH
OR NON- COMPLIANCE BY THE COMPANY OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL
LAW APPLICABLE TO THE COMPANY OR ANY SUBSIDIARY, (III) DUE TO PAST
OWNERSHIP BY THE COMPANY OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR
PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY
PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (IV) THE
PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS
SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE COMPANY
OR ANY SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY
CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, PROVIDED, HOWEVER, NO
INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(C) IN RESPECT OF ANY
PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF ANY
AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS
SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY
(WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS
MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be unreasonably
withheld; provided, that the indemnitor may not reasonably withhold
consent to any settlement that an Indemnified Party proposes, if the
indemnitor does not have the financial ability to pay all its obligations
outstanding and asserted against the indemnitor at
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that time, including the maximum potential claims against the Indemnified
Party to be indemnified pursuant to this Section 12.03.
(e) In the case of any indemnification hereunder, the Administrative
Agent or a Lender, as appropriate shall give notice to the Company of any
such claim or demand being made against such Indemnified Party and the
Company shall have the non-exclusive right to join in the defense against
any such claim or demand provided that if the Company provides a defense,
such Indemnified Party shall bear its own cost of defense unless there is
a conflict between the Company and such Indemnified Party.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER,
WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION,
INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN
THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED
PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE
OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE
BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE
OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE INDEMNIFIED PARTY.
(g) Each Obligor's obligation under this Section 12.03 shall survive
any termination of this Agreement and the payment of the Notes and shall
continue thereafter in full force and effect.
(h) The Obligors shall pay any amounts due under this Section 12.03
within thirty (30) days of the receipt by the Company of notice of the
amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement or
any other Loan Document may be amended, modified or waived with the
Company's and the Majority Lenders' prior written consent; provided that
(i) no amendment, modification or waiver which extends the maturity of the
Loans, or the interest or fee payment dates, increases the Aggregate
Commitments, forgives the principal amount of any Indebtedness outstanding
under this Agreement, reduces the interest rate applicable to the Loans or
the fees payable to the Lenders generally, affects this Section 12.04 or
Section 12.06(a) or modifies the definition of "Majority Lenders" or any
provision which by its terms requires the consent or approval of all of
the Lenders shall be effective without consent of all Lenders; (ii) no
amendment, modification or waiver which increases or extends the
Commitment of any Lender shall be effective without the consent of such
Lender; and (iii) no amendment, modification or waiver which modifies the
rights, duties or obligations of the Administrative Agent, Auction Agent
or the Syndication Agent shall be effective without the consent of such
Agent.
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Section 12.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
Section 12.06 Assignments and Participations.
(a) No Obligor may assign its rights or obligations hereunder or under
the Notes without the prior consent of all of the Lenders and the Agents.
(b) Any Lender may, upon the written consent of the Company (which
consent shall not be unreasonably withheld) assign to one or more
assignees all or a portion of its rights and obligations under this
Agreement and the other Loan Documents pursuant to an Assignment Agreement
substantially in the form of Exhibit K (an "Assignment") provided,
however, that (i) any such assignment shall be in the amount of at least
$10,000,000 or such lesser amount to which the Company has consented and
(ii) the assignor or assignee shall pay to the Administrative Agent a
processing and recordation fee of $2500 for each assignment. Any such
assignment will become effective upon the execution and delivery to the
Administrative Agent of the Assignment and the written consent of the
Company. Promptly after receipt of an executed Assignment, the
Administrative Agent shall send to the Company a copy of such executed
Assignment. Upon receipt of such executed Assignment, the Company, will,
at its own expense, execute and deliver new Notes to the assignor and/or
assignee, as appropriate, in accordance with their respective interests as
they appear. Upon the effectiveness of any assignment pursuant to this
Section 12.06(b), the assignee will become a "Lender," if not already a
"Lender," for all purposes of this Agreement and the other Loan Documents.
The assignor shall be relieved of its obligations hereunder to the extent
of such assignment (and if the assigning Lender no longer holds any rights
or obligations under this Agreement, such assigning Lender shall cease to
be a "Lender" hereunder except that its rights under Sections 4.06, 5.01,
5.05 and 12.03 shall not be affected). The Administrative Agent will
prepare on the last Business Day of each month during which an assignment
has become effective pursuant to this Section 12.06(b), a new Annex 1
giving effect to all such assignments effected during such month, and will
promptly provide the same to the Company and each of the Lenders.
(c) Each Lender may transfer, grant or assign participations in all or
any part of such Lender's interests, rights and obligations hereunder
pursuant to this Section 12.06(c) to any Person, provided that: (i) such
Lender shall remain a "Lender" for all purposes of this Agreement and the
transferee of such participation shall not constitute a "Lender"
hereunder; and (ii) no participant under any such participation shall have
rights to approve any amendment to or waiver of any of the Loan Documents
except to the extent such amendment or waiver would (x) extend the
Revolving Credit Termination Date, (y) reduce the interest rate (other
than as a result of waiving the applicability of any post-default
increases in interest rates) or fees applicable to any of the Commitments
or Loans in which such participant is
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participating, or postpone the payment of any thereof, or (z) release all
or substantially all of the collateral (except as expressly provided in
the other Loan Documents) supporting any of the Commitments or Loans in
which such participant is participating. In the case of any such
participation, the participant shall not have any rights under this
Agreement or any of the other Loan Documents (the participant's rights
against the granting Lender in respect of such participation to be those
set forth in the agreement with such Lender creating such participation),
and all amounts payable by the Company hereunder shall be determined as if
such Lender had not sold such participation, provided that such
participant shall be entitled to receive additional amounts under Article
V on the same basis as if it were a Lender and be indemnified under
Section 12.03 as if it were a Lender. In addition, each agreement
creating any participation must include an agreement by the participant to
be bound by the provisions of Section 12.15.
(d) The Lenders may furnish any information concerning the Company in
the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided
such Persons agree in writing to be bound by the provisions of Section
12.15.
(e) Notwithstanding anything in this Section 12.06 to the contrary,
any Lender may assign and pledge its Note to any Federal Reserve Bank or
the United States Treasury as collateral security pursuant to Regulation
A of the Board of Governors of the Federal Reserve System and any
operating circular issued by such Federal Reserve System and/or such
Federal Reserve Bank. No such assignment and/or pledge shall release the
assigning and/or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of any Lender or
any grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Company to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws
of any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents shall, for any reason,
be held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of the
Notes, this Agreement or any other Loan Document.
Section 12.08 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute this
Agreement by signing any such counterpart.
Section 12.09 References. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to
this Agreement as a whole, and not to any particular article, section or
subsection. Any reference herein to a
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Section shall be deemed to refer to the applicable Section of this
Agreement unless otherwise stated herein. Any reference herein to an
exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 Survival. The obligations of the parties under Section
4.06, Article V, and Sections 11.05 and 12.03 shall survive the repayment
of the Loans and the termination of the Commitments. To the extent that
any payments on the Indebtedness or proceeds of any collateral are
subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, debtor in possession,
receiver or other Person under any bankruptcy law, common law or equitable
cause, then to such extent, the Indebtedness so satisfied shall be revived
and continue as if such payment or proceeds had not been received and the
Administrative Agent's and the Lenders' Liens, security interests, rights,
powers and remedies under this Agreement and each other Loan Document
shall continue in full force and effect. In such event, each Loan
Document shall be automatically reinstated and the Company shall take such
action as may be reasonably requested by the Administrative Agent and the
Lenders to effect such reinstatement.
Section 12.11 Captions. Captions and section headings appearing
herein and the table of contents hereto are included solely for
convenience of reference and are not intended to affect the interpretation
of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL
OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(A) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT
THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CHARGE INTEREST AT
THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED.
TEX. REV. CIV. STAT. ANN. ART. 5069, CH. 15 (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT
APPLY TO THIS AGREEMENT OR THE NOTES.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND (TO
THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
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THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES
NOT PRECLUDE THE ADMINISTRATIVE AGENT OR ANY LENDER FROM OBTAINING
JURISDICTION OVER THE COMPANY IN ANY COURT OTHERWISE HAVING JURISDICTION.
(C) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT
OR ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
(D) EACH OF THE COMPANY AND EACH LENDER HEREBY (I) IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION
TO, ACTUAL DAMAGES; (III) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties hereto
that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as
to any Lender under laws applicable to it (including the laws of the
United States of America and the State of Texas or any other jurisdiction
whose laws may be mandatorily applicable to such Lender notwithstanding
the other provisions of this Agreement), then, in that event,
notwithstanding anything to the contrary in any of the Loan Documents or
any agreement entered into in connection with or as security for the
Notes, it is agreed as follows: (i) the aggregate of all consideration
which constitutes interest under law applicable to any Lender that is
contracted for, taken, reserved, charged or received by such Lender under
any of the Loan Documents or agreements or otherwise in connection with
the Notes shall under no circumstances exceed the maximum amount allowed
by such applicable law, and any excess shall be cancelled automatically
and if theretofore paid shall be credited by such Lender on the principal
amount of the Indebtedness (or, to the extent that the principal amount of
the Indebtedness shall have been or would thereby be paid in full,
refunded by such Lender to the Company);
62
<PAGE>
and (ii) in the event that the maturity of the Notes is accelerated by
reason of an election of the holder thereof resulting from any Event of
Default or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for
in this Agreement or otherwise shall be cancelled automatically by such
Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount
of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by
such Lender to the Company). All sums paid or agreed to be paid to any
Lender for the use, forbearance or detention of sums due hereunder shall,
to the extent permitted by law applicable to such Lender, be amortized,
prorated, allocated and spread throughout the full term of the Loans
evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum
amount allowed by such applicable law. If at any time and from time to
time (i) the amount of interest payable to any Lender on any date shall be
computed at the Highest Lawful Rate applicable to such Lender pursuant to
this Section 12.14 and (ii) in respect of any subsequent interest
computation period the amount of interest otherwise payable to such Lender
would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful
Rate applicable to such Lender until the total amount of interest payable
to such Lender shall equal the total amount of interest which would have
been payable to such Lender if the total amount of interest had been
computed without giving effect to this Section 12.14. To the extent that
Article 5069-1.04 of the Texas Revised Civil Statutes is relevant for the
purpose of determining the Highest Lawful Rate, such Lender elects to
determine the applicable rate ceiling under such Article by the indicated
weekly rate ceiling from time to time in effect.
Section 12.15 Confidentiality. In the event that the Company
provides to the Agents or the Lenders written confidential information
belonging to the Company, if the Company shall denominate such information
in writing as "confidential", the Agents and the Lenders shall thereafter
maintain such information in confidence in accordance with the standards
of care and diligence that each utilizes in maintaining its own
confidential information. This obligation of confidence shall not apply
to such portions of the information which (i) are in the public domain,
(ii) hereafter become part of the public domain without the Agents or the
Lenders breaching their obligation of confidence to the Company, (iii) are
previously known by the Agents or the Lenders from some source other than
the Company, (iv) are hereafter developed by the Agents or the Lenders
without using the Company's information, (v) are hereafter obtained by or
available to the Agents or the Lenders from a third party who owes no
obligation of confidence to the Company with respect to such information
or through any other means other than through disclosure by the Company,
(vi) are disclosed with the Company's consent, (vii) must be disclosed
either pursuant to any Governmental Requirement or to Persons regulating
the activities of the Agents or the Lenders, or (viii) as may be required
by law or regulation or order of any
63
<PAGE>
Governmental Authority in any judicial, arbitration or governmental
proceeding. Further, an Agent or a Lender may disclose any such
information to any other Lender, any Affiliate of such Agent or Lender,
any independent petroleum engineers or consultants, any independent
certified public accountants, any legal counsel employed by such Person in
connection with this Agreement or any other Loan Document, including
without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective
assignees and participants) in the Loans; provided, however, that such
Agent or Lender imposes on the Person to whom such information is
disclosed the same obligation to maintain the confidentiality of such
information as is imposed upon it hereunder. Notwithstanding anything to
the contrary provided herein, this obligation of confidence shall cease
three (3) years from the date the information was furnished, unless the
Company requests in writing at least thirty (30) days prior to the
expiration of such three year period, to maintain the confidentiality of
such information for an additional three year period. The Company waives
any and all other rights it may have to confidentiality as against the
Agents and the Lenders arising by contract, agreement, statute or law
except as expressly stated in this Section 12.15.
Section 12.16 Effectiveness. This Agreement shall not be effective
until executed by all parties hereto and delivered to and accepted by the
Administrative Agent, and the other conditions listed in the definition of
"Effective Date" have occurred.
Section 12.17 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND
KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS;
THAT IT HAS IN FACT READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND
IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS
PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS;
AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT
CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT
IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE
TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH
LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT
CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY
HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT SUCH PROVISION IS NOT
"CONSPICUOUS."
The parties hereto have caused this Agreement to be duly executed as
of the day and year first above written.
64
<PAGE>
ENSERCH EXPLORATION, INC.
ATTEST:
/s/ By: /s/ A. E. Gallatin
------------------------------ --------------------------------
Assistant Corporate Secretary Name: A. E. Gallatin
Title: Vice President and Treasurer
<PAGE>
LENDER AND TEXAS COMMERCE BANK NATIONAL ADMINISTRATIVE AGENT:
ASSOCIATION
By: /s/ Dale S. Hurd
------------------------------ Name: Dale S. Hurd
Title: Senior Vice President
Lending Office for Base Rate Loans:
2200 Ross Avenue
Dallas, TX 75201
Lending Office for Eurodollar Loans:
2200 Ross Avenue
Dallas, TX 75201
Address for Notices:
2200 Ross Avenue
Dallas, TX 75201
Telecopier No.: (214) 922-2389 Telephone No.: (214) 922-2583
Attention: Dale Hurd
<PAGE>
SYNDICATION AGENT
AND LENDER: THE CHASE MANHATTAN BANK, N.A.
By: /s/ Bettylou J. Robert
--------------------------------- Name: Bettylou J.Robert
Title: Vice President
Lending Office for Base Rate Loans:
The Chase Manhattan Bank, N.A. 1 Chase Manhattan Plaza
New York, New York 10005
Lending Office for Eurodollar Loans:
The Chase Manhattan Bank, N.A. 1 Chase Manhattan Plaza
New York, New York 10005
Address for Notices:
The Chase Manhattan Bank, N.A. 2 Chase Manhattan Plaza, 5th Floor New
York, New York 10005
Telecopier No.: (212) 552-4455 Telephone No.: (212) 552-3017
Attention: Joselin Fernandes
[With copy to:]
Chase National Corporate Services, Inc. One Houston Center
1221 McKinney, Suite 3000
Houston, Texas 77010
Telecopier No.: (713) 751-9122 Telephone No.: (713) 751-5657
Attention: Scott Porter
<PAGE>
LENDER: CITIBANK, N.A.
By: /s/ Mark J. Lyons
-------------------------------- Name: Mark. J. Lyons
Title: Vice President
Lending Office for Base Rate Loans:
Citibank, N.A.
399 Park Avenue
New York, NY 10043
Lending Office for Eurodollar Loans:
Same as above
Address for Notices:
One Court Square -- 7th Floor
Long Island City, NY 11120
Telecopier No.: (718) 248-4844 Telephone No.: (718) 248-5762
Attention: Leena Hiranandani
<PAGE>
LENDER: THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/ Satoru Otsubo
-------------------------------- Name: Satoru Otsubo
Title: Joint General Manager
Lending Office for Base Rate Loans:
The Long-Term Credit Bank of Japan, Ltd. 165 Broadway, 48th Floor
New York, NY 10006
Lending Office for Eurodollar Loans:
The Long-Term Credit Bank of Japan, Ltd. 165 Broadway, 48th Floor
New York, NY 10006
Addresses for Notices:
The Long-Term Credit Bank of Japan, Ltd. 165 Broadway, 48th Floor
New York, NY 10006
Telecopier No.: (212) 608-3452 Telephone No.: (212) 335-4801
Attention: Bob Pacifici
[With copy to:]
<PAGE>
LENDER: BANKERS TRUST COMPANY
By: /s/ Mary Jo Jolly
-------------------------------- Name: Mary Jo Jolly
Title: Assistant Vice President
Lending Office for Base Rate Loans:
130 Liberty Street
New York, NY 10006
Lending Office for Eurodollar Loans:
130 Liberty Street
New York, NY 10006
Addresses for Notices:
130 Liberty Street
Loan Division, 14th Floor
New York, NY 10006
Telecopier No.: (212) 250-6029 Telephone No.: (212) 250-7561
Attention: Stephen Snizek
[With copy to:]
Roberta K. Bohn
Bankers Trust Company
909 Fannin, Suite 3000
Houston, Texas 77010
Telecopier No.: (713) 759-6708 Telephone No.: (713) 759-6731
<PAGE>
LENDER: THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. ASHBY
-------------------------------- Name: F.C.H. ASHBY
Title: SENIOR MANAGER LOAN OPERATIONS
Lending Office for Base Rate Loans:
600 PEACHTREE STREET N.E.
SUITE 2700
ATLANTA, GA 30308
Lending Office for Eurodollar Loans:
600 PEACHTREE STREET N.E.
SUITE 2700
ATLANTA, GA 30308
Addresses for Notices:
600 PEACHTREE STREET N.E.
SUITE 2700
ATLANTA, GA 30308
Telecopier No.: 404-888-8998 Telephone No.: 404-877-1549 Attention:
JEFREY JONES
[With copy to:] (DOCUMENTS)
1100 LOUISIANA STREET
SUITE 3000
HOUSTON, TX 77002
ATTN: D. MATT HARRIS
<PAGE>
LENDER: CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ GARY C. GASKILL
-------------------------------- Name: GARY C. GASKILL
Title: AUTHORIZED SIGNATORY
Lending Office for Base Rate Loans:
TWO PACES WEST
2727 PACES FERRY ROAD, SUITE 1200 ATLANTA, GA 30339
Lending Office for Eurodollar Loans:
TWO PACES WEST
2727 PACES FERRY ROAD, SUITE 1200 ATLANTA, GA 30339
Addresses for Notices:
TWO PACES WEST
2727 PACES FERRY ROAD, SUITE 1200 ATLANTA, GA 30339
Telecopier No.: (404) 319-4950 Telephone No.: (404) 319-4835
Attention: MS. ADRIENNE BURCH
[With copy to:]
<PAGE>
National Westminster Bank Plc
New York Branch By: /s/ Stephen R. Parker
-------------------------------- Name: Stephen R. Parker
Title: Vice President
National Westminster Bank Plc
Nassau Branch By: /s/ Stephen R. Parker
-------------------------------- Name: Stephen R. Parker
Title: Vice President
Lending Office for Base Rate Loans:
National Westminister Bank Plc New York Branch
Lending Office for Eurodollar Loans:
National Westminster Bank Plc
Nassau Branch
Addresses for Notices:
National Westminster Bank Plc
175 Water Street
New York, New York 10038
Telecopier No.: (212) 602-4118 Telephone No.: (212) 602-4180
Attention: Nadira Fauder
<PAGE>
LENDER: The First National Bank of Chicago
By: /s/ Dixon P. Schultz
-------------------------------- Name: Dixon P. Schultz
Title: Vice President
Lending Office for Base Rate Loans:
The First National Bank of Chicago 1 First National Plaza, Suite 0634,
Floor Chicago, Illinois 60670
Lending Office for Eurodollar Loans:
The First National Bank of Chicago 1 First National Plaza, Suite 0634,
Floor Chicago, Illinois 60670
Addresses for Notices:
The First National Bank of Chicago 1 First National Plaza, Suite 0634,
Floor Chicago, Illinois 60670
Telecopier No.: (312) 732-4840 Telephone No.: (312) 732-8705
Attention: Lynn Pozsgay
[With copy to:]
<PAGE>
LENDER: THE BANK OF NEW YORK
By: /s/ Raymond J. Palmer
-------------------------------- Name: Raymond J. Palmer
Title: Vice President
Lending Office for Base Rate Loans:
The Bank of New York
One Wall Street, 19th Fl.
New York, New York 10286
Lending Office for Eurodollar Loans:
The Bank of New York
One Wall Street, 19th Fl.
New York, New York 10286
Addresses for Notices:
The Bank of New York
One Wall Street, 19th Fl.
New York, New York 10286
Telecopier No.: (212) 635-7923 Telephone No.: (212) 635-7921
Attention: Nina Russo-Valdes
[With copy to:]
<PAGE>
LENDER: NationsBank of Texas, N.A.
By: /s/ Denise Ashford Smith
-------------------------------- Name: Denise Ashford Smith
Title: Senior Vice President
Lending Office for Base Rate Loans:
901 Main Street, 64th Floor
Dallas, TX 75202
Attn: Denise Ashford Smith
Lending Office for Eurodollar Loans:
901 Main Street, 64th Floor
Dallas, TX 75202
Attn: Denise Ashford Smith
Addresses for Notices:
Corporate Credit Services
901 Main Street, 14th Floor
Dallas, TX 75202
Telecopier No.: 214/508-1215 Telephone No.: 214/508-1225 Attention:
Betty Canales
[With copy to:]
<PAGE>
LENDER: THE BANK OF TOKYO, LTD.
DALLAS AGENCY
By: /s/ John M. McIntyre
-------------------------------- Name: John M. McIntyre
Title: Vice President
Lending Office for Base Rate Loans:
The Bank of Tokyo, Ltd.
2001 Ross Avenue, Suite 3150
Dallas, Texas 75201
Lending Office for Eurodollar Loans:
The Bank of Tokyo, Ltd.
2001 Ross Avenue, Suite 3150
Dallas, Texas 75201
Addresses for Notices:
The Bank of Tokyo, Ltd.
909 Fannin, 2 Houston Center, Ste. 1104 Dallas, Texas 77010
Telecopier No.: (713) 658-8341 Telephone No.: (713) 658-1021
Attention: Nadra H. Breir
<PAGE>
LENDER: The Fuji Bank, Ltd.
By: /s/ Soichi Yoshida
-------------------------------- Name: Soichi Yoshida
Title: Vice President and Senior Manager
Lending Office for Base Rate Loans:
The Fuji Bank, Ltd.
Houston Agency
1221 McKinney St. Suite 4100
Houston, TX 77010
Lending Office for Eurodollar Loans:
The Fuji Bank, Ltd.
Houston Agency
1221 McKinney St. Suite 4100
Houston, TX 77010
Addresses for Notices:
The Fuji Bank, Ltd.
Houston Agency
1221 McKinney St. Suite 4100
Houston, TX 77010
Telecopier No.: (713) 759-0048 Telephone No.: (713) 650-7826
Attention: Teri McPherson
<PAGE>
LENDER: Union Bank of Switzerland
Houston Agency
By: /s/ Evans Swann
-------------------------------- Name: Evans Swann
Title: Managing Director
By: /s/ Alfred Imholz
-------------------------------- Name: Alfred Imholz
Title: Managing Director
Lending Office for Base Rate Loans:
1100 Louisiana, Suite 4500
Houston, TX 77002
Lending Office for Eurodollar Loans:
1100 Louisiana, Suite 4500
Houston, TX 77002
Addresses for Notices:
1100 Louisiana, Suite 4500
Houston, TX 77002
Telecopier No.: (713) 655-6555 Telephone No.: (713) 655-6500
Attention: Alfred Imholz Managing Director
With copy to: James Broadus
Telecopier No.: (212) 821-3269 Telephone No.: (212) 821-3227 <PAGE>
LENDER: Dresdner Bank AG New York
and Grand Cayman Branches
By: /s/ J. Curtin Beaudouin
-------------------------------- Name: J. Curtin Beaudouin
Title: Vice President
By: /s/ Ernest C. Fung
-------------------------------- Name: Ernest C. Fung
Title: Vice President
Lending Office for Base Rate Loans:
Dresdner Bank AG, Grand Cayman Branch 75 Wall Street
New York, New York 10005-2889
Lending Office for Eurodollar Loans:
Dresdner Bank AG, Grand Cayman Branch 75 Wall Street
New York, New York 10005-2889
Addresses for Notices:
Dresdner Bank AG, Grand Cayman Branch 75 Wall Street
New York, New York 10005-2889
Telecopier No.: (212) 898-0524 Telephone No.: (212) 574-0183
Attention: Craig Erickson
With copy to:
Credit Department
Dresdner Bank AG, New York
Attn: Ms. Yunie Shin-Thomas
75 Wall Street
New York, NY 10005-2889
<PAGE>
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ Xavier Ratouis
-------------------------------- Name: Xavier Ratouis
Title: Authorized Signature
Lending Office for Base Rate Loans:
Credit Lyonnais Cayman Island Branch 1301 Avenue of the Americas
New York, New York 10019
Attention: Loan Servicing
Lending Office for Eurodollar Loans:
Credit Lyonnais Cayman Island Branch 1301 Avenue of the Americas
New York, New York 10019
Attention: Loan Servicing
Addresses for Notices:
c/o Credit Lyonnais Representative Office 1000 Louisiana, Suite 5360
Houston, TX 77002
Telecopier No.: (713) 751-0307 Telephone No.: (713) 751-0500
Attention: Mr. A. David Dodd
<PAGE>
LENDER: The Industrial Bank of Japan Trust Company
By: /s/ Robert W. Ramage, Jr.
-------------------------------- Name: Robert W. Ramage, Jr.
Title: Senior Vice President
Lending Office for Base Rate Loans:
The Industrial Bank of Japan Trust Company 245 Park Avenue
New York, NY 10167
Lending Office for Eurodollar Loans:
The Industrial Bank of Japan Trust Company 245 Park Avenue
New York, NY 10167
Addresses for Notices:
The Industrial Bank of Japan Trust Company 245 Park Avenue
New York, NY 10167
Telecopier No.: (212) 949-0134 Telephone No.: (212) 309-6521
Attention: Credit Administration
[With copy to:]
<PAGE>
LENDER: Royal Bank of Canada
By: /s/ Gil J. Benard
-------------------------------- Name: Gil J. Benard
Title: Senior Manager
Lending Office for Base Rate Loans:
Royal Bank of Canada
1 Financial Square, 24th Floor
New York, New York 10005-3531
Lending Office for Eurodollar Loans:
Royal Bank of Canada
1 Financial Square, 24th Floor
New York, New York 10005-3531
Addresses for Notices:
Royal Bank of Canada
600 Wilshire Blvd., Suite 800
Los Angeles, CA 90017
Telecopier No.: (213) 955-5350 Telephone No.: (213) 955-5321
Attention: Gil J. Benard
[With copy to:]
<PAGE>
LENDER: Westdeutsche Landesbank Girozentrale
By: /s/ Richard R. Newman
-------------------------------- Name: Richard R. Newman
Title: Vice President
By: /s/ Sal Battinelli
-------------------------------- Name: Sal Battinelli
Title: Vice President
Lending Office for Base Rate Loans:
Westdeutsche Landesbank Girozentrale 1211 Avenue of the Americas
New York, New York 10036
Lending Office for Eurodollar Loans:
Westdeutsche Landesbank Girozentrale 1211 Avenue of the Americas
New York, New York 10036
Addresses for Notices:
Westdeutsche Landesbank Girozentrale 1211 Avenue of the Americas
New York, New York 10036
Telecopier No.: (212) 852-6307 Telephone No.: (212) 852-6120
Attention: Richard R. Newman
<PAGE>
LENDER: Caisse Nationale de Credit Agricole
By: /s/ David Bouhl
-------------------------------- Name: David Bouhl
Title: First Vice President and Head of Corporate Banking -- Chicago
Lending Office for Base Rate Loans:
Caisse Nationale de Credit Agricole 55 East Monroe Street
Chicago, Illinois 60603-5702
Lending Office for Eurodollar Loans:
Caisse Nationale de Credit Agricole 55 East Monroe Street
Chicago, Illinois 60603-5702
Addresses for Notices:
Caisse Nationale de Credit Agricole 55 East Monroe Street
Chicago, Illinois 60603-5702
Telecopier No.: 312/372-3724 Telephone No.: 312/917-7560 Attention:
Stacey Mannion
[With copy to:] Brian D. Knezeak Telephone: 312/917-7546
<PAGE>
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
among: ENSERCH EXPLORATION, INC., a corporation formed under the laws of
the State of Texas (the "Company"); each of the Lenders (as defined in the
Credit Agreement as hereafter defined) that is a signatory hereto; THE
CHASE MANHATTAN BANK, a New York banking corporation (in its individual
capacity, "Chase"), as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the
"Administrative Agent"); as auction agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Auction
Agent"); and as syndication agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Syndication Agent")
and Citibank, N.A. a national banking association (in its individual
capacity, "Citibank") and as documentation agent for the Lenders (in such
capacity, together with its successors in such capacity, the
"Documentation Agent") .
R E C I T A L S
A. The Company, the Agents, and the Lenders have entered into that
certain Credit Agreement dated as of May 1, 1995 (the "Credit Agreement"),
pursuant to which the Lenders have agreed to make certain loans and
extensions of credit to the Company upon the terms and conditions as
provided therein; and
B. The Company, the Agents, and the Lenders now desire to make
certain amendments to the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration and the mutual benefits, covenants and agreements
herein expressed, the parties hereto now agree as follows:
1. All capitalized terms used in this Amendment and not otherwise
defined herein shall have the meanings ascribed to such terms in the
Credit Agreement.
2. As used in the Agreement, the terms "Administrative Agent,"
"Auction Agent," "Citibank," "Documentation Agent" and Syndication Agent"
shall have the meaning indicated above.
3. The definitions of "Agents", "Debt" and "Principal Office" in
Section 1.02 of the Credit Agreement are hereby amended to read as
follows:
"Agents" shall mean the Administrative Agent, the
Auction Agent, the Documentation Agent and the
Syndication Agent.
"Debt" shall mean, for the Company or any Subsidiary
the sum of the following (without duplication): (i)
all obligations for borrowed money or evidenced by
bonds, debentures, mandatorily redeemable preferred
stock (including such stock of Affiliates) with
maturities before the Revolving Credit Termination
Date, notes or other similar instruments (excluding
interest, fees and charges); (ii) all obligations in
respect of bankers' acceptances, unreimbursed
drawings on letters of credit, surety or other
bonds; (iii) all Capital Lease Obligations; (iv) all
Operating Lease Obligations; (v) all financial
guaranties in respect of Debt of unconsolidated
Affiliates and unrelated Persons; (vi) all
obligations secured by a Lien on any asset, whether
or not such Debt is assumed, but excluding
obligations secured by Liens permitted by Sections
9.02(c), (e), (f), (h), (i), (j), (k) and (l); (vii)
all production payments in connection with oil and
gas properties; and (viii) all Debt of Special
Entities to the extent the Company or any Subsidiary
is liable for such Debt under GAAP or such Debt is
reflected on the consolidated balance sheet of the
Company or any Subsidiary. "Debt" shall not include
Permitted Subordinated Debt."
"Principal Office" shall mean 270 Park Avenue, New
York, New York 10017.
4. The definition "Revolving Credit Termination Date" in Section
1.02 of the Credit Agreement is hereby amended to read as follows:
"Revolving Credit Termination Date" shall mean, unless the
Commitments are sooner terminated pursuant to Sections 2.03(a)
or 10.02, August 1, 2001".
5. Section 1.02 of the Credit Agreement is hereby supplemented,
where alphabetically appropriate, with the addition of the following
definition:
"First Amendment" shall mean that certain First Amendment
to Credit Agreement dated as of September 16, 1996, among the
Company, the Lenders and the Agents."
6. Section 8.07 of the Credit Agreement is hereby amended to read
as follows:
"Section 8.07 Lease Payments. The Company, at its
option, may cause its obligations to Enserch Exploration
Holdings, Inc. to be subordinated to the Indebtedness on terms
substantially similar to the terms set forth on Exhibit M or on
terms and subject to documentation satisfactory to the
Administrative Agent.
7. Section 9.01 of the Credit Agreement is hereby amended to read
as follows:
"Section 9.01 Debt to Capital Ratio. The Company will
not permit its ratio ("Debt to Capital Ratio") expressed as a
percentage of (i) Debt of the Company and its Consolidated
Subsidiaries on a consolidated basis ("Consolidated Debt") to
(ii) the sum of Consolidated Debt plus Net Worth to exceed 60%
at any time; provided that in no event will Consolidated Debt
ever exceed $900,000,000."
8. Section 9.03 of the Credit Agreement is hereby amended by adding
the following sentence at the end of such Section:
"From and after the date that the Company ceases to be an
Affiliate of ENSERCH Corporation, neither the Company nor any
Subsidiary may make loans or advances to ENSERCH Corporation or
any of its subsidiaries, and any outstanding loans and advances
to ENSERCH Corporation and its subsidiaries from the Company and
its Subsidiaries on such date of disaffiliation shall be
immediately repaid."
9. Section 10.01(k) of the Credit Agreement is hereby amended to
read as follows:
"(k) any Change of Control shall occur. For purposes of
this Section 10.01(k), "Change of Control" shall mean other than
Enserch Corporation's ownership, the acquisition by any Person,
or two or more Persons acting in concert, of beneficial
ownership (within the meaning of the Securities Exchange Act of
1934) of 35% or more of the outstanding share of voting stock of
the Company."
10. The first two sentences of Section 11.01 of the Credit Agreement
are hereby amended to read as follows:
"Each Lender hereby irrevocably appoints and authorizes Chase as
the Administrative Agent and the Auction Agent to act as its
agents hereunder and under the other Loan Documents with such
powers as are specifically delegated to the Administrative Agent
and the Auction Agent respectively by the terms of this
Agreement and the other Loan Documents, together with such
powers as reasonably incidental thereto. The Syndication Agent
and Documentation Agent, in such capacities, shall have no
duties or responsibilities and shall incur no liabilities under
the Loan Documents."
11. Attached to this Amendment is a new Annex 1 to the Credit
Agreement.
12. This Amendment shall become binding on the Lenders when, and only
when, the Administrative Agent shall have received each of the following
in form and substance satisfactory to the Administrative Agent or its
counsel:
(a) counterparts of this Amendment executed by the Company, the
Agents and the Lenders;
(b) prepayment by the Company of all outstanding Loans, accrued
interest, accrued fees and other expenses due under the Credit
Agreement to September 16, 1996, including without
limitation, payment of breakage costs under Section 5.05
of the Credit Agreement in connection with this prepayment
of the Loans within 10 days of presentation of a bill by
each Lender;
(c) refunding of the Loans prepaid in clause (b) above by the
Lenders set forth on Annex 1 attached hereto in proportion to their
respective Percentage Shares, with the Administrative Agent netting
such prepayments and fundings to the extent administratively
convenient;
(d) issuance of new Notes to the Lenders on Annex 1 attached
hereto, duly completed and executed;
(e) a certificate of the Secretary or an Assistant Secretary
of the Company setting forth resolutions of its board of directors with
respect to the authorization of the Company to execute, deliver and
perform this Amendment; and
(f) such other documents as it or its counsel may reasonably
request.
13. The parties hereto hereby acknowledge and agree that, except as
specifically supplemented and amended, changed or modified hereby, the
Credit Agreement shall remain in full force and effect in accordance with
its terms.
14. The Company hereby reaffirms that as of the date of this
Amendment, the representations and warranties contained in Article VII of
the Credit Agreement are true and correct on the date hereof as though
made on and as of the date of this Amendment, except as such
representations and warranties are expressly limited to an earlier date.
15. THIS AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND
ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF LAWS
RULES THEREOF.
16. This Amendment may be executed in two or more counterparts, and
it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof; each counterpart shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
17. The Lenders listed on Annex 1 attached hereto are for all
purposes Lenders under the Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of September 16, 1996.
COMPANY: ENSERCH EXPLORATION, INC.
By:_____________________________
Name:
Title:
LENDER AND ADMINISTRATIVE AGENT, THE CHASE MANHATTAN BANK
SYNDICATION AGENT AND
AUCTION AGENT:
By:_____________________________
Name:
Title:
LENDER AND DOCUMENTATION CITIBANK, N.A.
AGENT:
By:_____________________________
Name:
Title:
LENDERS: THE BANK OF NOVA SCOTIA
By:_____________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By:_____________________________
Name:
Title:
ROYAL BANK OF CANADA
By:_____________________________
Name:
Title:
BANKERS TRUST COMPANY
By:_____________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE
By:_____________________________
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
By:_____________________________
Name:
Title:
THE BANK OF NEW YORK
By:_____________________________
Name:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By:_____________________________
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:_____________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:_____________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By:_____________________________
Name:
Title:
THE SANWA BANK, LIMITED
By:_____________________________
Name:
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:_____________________________
Name:
Title:
THE FUJI BANK, LTD.
By:_____________________________
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By:_____________________________
Name:
Title:
UNION BANK OF SWITZERLAND
HOUSTON AGENCY
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
DRESDNER BANK AG NEW YORK
AND GRAND CAYMAN BRANCHES
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
<PAGE>
BANKS THAT WILL NO LONGER BE LENDERS AS OF SEPTEMBER 16, 1996.
NATIONAL WESTMINSTER BANK PLC
NEW YORK BRANCH
By:_____________________________
Name:
Title:
NATIONAL WESTMINSTER BANK PLC
NASSAU BRANCH
By:_____________________________
Name:
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By:_____________________________
Name:
Title:
<PAGE>
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
among: ENSERCH EXPLORATION, INC., a corporation formed under the laws of
the State of Texas (the "Company"); each of the Lenders (as defined in the
Credit Agreement as hereafter defined) that is a signatory hereto; THE
CHASE MANHATTAN BANK, a New York banking corporation (in its individual
capacity, "Chase"), as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the
"Administrative Agent"); as auction agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Auction
Agent"); and as syndication agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Syndication Agent");
Citibank, N.A. a national banking association (in its individual
capacity, "Citibank") and as documentation agent for the Lenders (in such
capacity, together with its successors in such capacity, the
"Documentation Agent") and The Bank of New York, The Bank of Nova Scotia,
Bankers Trust Company, Canadian Imperial Bank of Commerce, The First
National Bank of Chicago, NationsBank of Texas, N.A. and Royal Bank of
Canada as co-agents (in such capacity, together with their successors in
such capacity, the Co-Agents").
R E C I T A L S
A. The Company, the Agents, and the Lenders have entered into that
certain Credit Agreement dated as of May 1, 1995 as amended by First
Amendment to Credit Agreement dated as of September 16, 1996
(collectively, the "Credit Agreement"), pursuant to which the Lenders have
agreed to make certain loans and extensions of credit to the Company upon
the terms and conditions as provided therein; and
B. The Company, the Agents, and the Lenders now desire to make
certain amendments to the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration and the mutual benefits, covenants and agreements
herein expressed, the parties hereto now agree as follows:
1. All capitalized terms used in this Amendment and not otherwise
defined herein shall have the meanings ascribed to such terms in the
Credit Agreement.
2. As used in the Agreement, the terms "Administrative Agent,"
"Auction Agent," "Citibank," "Co-Agents," "Documentation Agent" and
Syndication Agent" shall have the meaning indicated above.
3. The definitions of "Agent", "Agreement", "Applicable Margin" and
"Revolving Credit Termination Date" in Section 1.02 of the Credit
Agreement are hereby amended to read as follows:
"Agents" shall mean the Administrative Agent, the
Syndication Agent and/or the Auction Agent and the Co-Agents.
"Agreement" shall mean this Credit Agreement as amended by
First Amendment and Second Amendment, as the same may from time
to time be amended or supplemented.
"Applicable Margin" shall mean the following rates per
annum as are applicable based upon the Debt to Capital Ratio
calculated as of the last day of a fiscal quarter of the Company
to be effective for any Committed Loan outstanding or for the
facility fee during the period from the Financial Statement
Delivery Date following such fiscal quarter to but not including
the next succeeding Financial Statement Delivery Date:
Debt to Capital Ratio
Greater than
or equal to 25% 35% 45% Over
but less than 25% 35% 45% 55% 55%
Facility Fee .090% .110% .125% .150% .200%
Eurodollar Loans .210% .240% .275% .325% .450%
Base Rate Loans 0% 0% 0% 0% 0%
"Revolving Credit Termination Date" shall mean, unless the
Commitments are sooner terminated pursuant to Sections 2.03(a)
or 10.02, June 27, 2002.
4. Section 1.02 of the Credit Agreement is hereby supplemented,
where alphabetically appropriate, with the addition of the following
definitions:
"First Amendment" shall mean that certain First Amendment
to Credit Agreement dated as of September 16, 1996, among the
Company, the Lenders and the Agents."
"Second Amendment" shall mean that certain Second
Amendment to Credit Agreement dated as of June 27, 1997, among
the Company, the Lenders and the Agents."
5. Section 2.02(b) of the Credit Agreement is hereby amended to read
as follows:
"(b) Minimum Amounts. All Borrowings of Base Rate Loans
shall be in amounts of at least $5,000,000 or the remaining
balance of the Aggregate Commitments, if less, or any whole
multiple of $1,000,000 in excess thereof, and all Borrowings in
the form of Eurodollar Loans shall be in amounts of at least
$5,000,000 or any whole multiple of $1,000,000 in excess
thereof."
6. Section 2.09(h) of the Credit Agreement is hereby deleted in its
entirety.
7. Section 8.08 of the Credit Agreement is hereby amended by
substituting "25%" for "15%" in the first sentence of such section.
8. Section 9.01 of the Credit Agreement is hereby amended to read
as follows:
"Section 9.01 Debt to Capital Ratio. The Company will
not permit its ratio ("Debt to Capital Ratio") expressed as a
percentage of (i) Debt of the Company and its Consolidated
Subsidiaries on a consolidated basis ("Consolidated Debt") to
(ii) the sum of Consolidated Debt plus Net Worth to exceed 60%
at any time; provided that in no event will Consolidated Debt
ever exceed $1,000,000,000."
9. The second sentence of Section 11.01 of the Credit Agreement is
hereby amended to read as follows:
"The Syndication Agent, Documentation Agent and Co-Agents,
in such capacities, shall have no duties or responsibilities and
shall incur no liabilities under the Loan Documents."
10. Attached to this Amendment is a new Annex 1 to the Credit
Agreement.
11. This Amendment shall become binding on the Lenders when, and only
when, the Administrative Agent shall have received each of the following
in form and substance satisfactory to the Administrative Agent or its
counsel:
(a) counterparts of this Amendment executed by the Company, the
Agents and the Lenders;
(b) prepayment by the Company of all outstanding Loans and
accrued interest, and the Company will pay accrued fees on June 30,
1997 and, within 30 days of presentation of a bill by each Lender,
other expenses due under the Credit Agreement, including without
limitation, payment of breakage costs under Section 5.05 of the Credit
Agreement in connection with this prepayment of the Loans;
(c) refunding of the Loans prepaid in clause (b) above by the
Lenders set forth on Annex 1 attached hereto in proportion to their
respective Percentage Shares, with the Administrative Agent netting
such prepayments and fundings to the extent administratively
convenient;
(d) issuance of new Notes to the extent necessary to the
Lenders on Annex 1 attached hereto, duly completed and executed;
(e) a certificate of the Secretary or an Assistant Secretary
of the Company setting forth resolutions of its board of directors with
respect to the authorization of the Company to execute, deliver and
perform this Amendment; and
(f) such other documents as it or its counsel may reasonably
request.
12. The parties hereto hereby acknowledge and agree that, except as
specifically supplemented and amended, changed or modified hereby, the
Credit Agreement shall remain in full force and effect in accordance with
its terms.
13. The Company hereby reaffirms that as of the date of this
Amendment, the representations and warranties contained in Article VII of
the Credit Agreement are true and correct on the date hereof as though
made on and as of the date of this Amendment, except as such
representations and warranties are expressly limited to an earlier date.
14. THIS AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND
ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF LAWS
RULES THEREOF.
15. This Amendment may be executed in two or more counterparts, and
it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof; each counterpart shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
16. The Lenders listed on Annex 1 attached hereto are for all
purposes Lenders under the Loan Documents.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of June 27, 1997.
COMPANY: ENSERCH EXPLORATION, INC.
By:_____________________________
Name:
Title:
LENDER AND ADMINISTRATIVE AGENT, THE CHASE MANHATTAN BANK
SYNDICATION AGENT AND
AUCTION AGENT:
By:_____________________________
Name:
Title:
LENDER AND DOCUMENTATION CITIBANK, N.A.
AGENT:
By:_____________________________
Name:
Title:
LENDERS: THE BANK OF NEW YORK
By:_____________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By:_____________________________
Name:
Title:
BANKERS TRUST COMPANY
By:_____________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE
By:_____________________________
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
By:_____________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By:_____________________________
Name:
Title:
ROYAL BANK OF CANADA
By:_____________________________
Name:
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:_____________________________
Name:
Title:
THE FUJI BANK, LTD.
By:_____________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By:_____________________________
Name:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By:_____________________________
Name:
Title:
MELLON BANK, N.A.
By:_____________________________
Name:
Title:
THE SANWA BANK, LIMITED
By:_____________________________
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By:_____________________________
Name:
Title:
UNION BANK OF SWITZERLAND
HOUSTON AGENCY
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:_____________________________
Name:
Title:
DRESDNER BANK AG NEW YORK
AND GRAND CAYMAN BRANCHES
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:_____________________________
Name:
Title:
<PAGE>
<PAGE>
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this
"Amendment") is among: ENSERCH EXPLORATION, INC., a
corporation formed under the laws of the State of Texas (the
"Company"); each of the Lenders (as defined in the Credit
Agreement as hereafter defined) that is a signatory hereto;
THE CHASE MANHATTAN BANK, a New York banking corporation (in
its individual capacity, "Chase"), as administrative agent
for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent"); as
auction agent for the Lenders (in such capacity, together
with its successors in such capacity, the "Auction Agent");
and as syndication agent for the Lenders (in such capacity,
together with its successors in such capacity, the
"Syndication Agent"); CITIBANK, N.A., a national banking
association (in its individual capacity, "Citibank") and as
documentation agent for the Lenders (in such capacity,
together with its successors in such capacity, the
"Documentation Agent"); and the Bank of New York, The Bank
of Nova Scotia, Bankers Trust Company, Canadian Imperial
Bank of Commerce, The First National Bank of Chicago,
NationsBank of Texas, N.A. and Royal Bank of Canada as co-
agents (in such capacity, together with their successors in
such capacity, the "Co-Agents").
RECITALS
A. The Company, the Agents, and the Lenders have
entered into the certain Credit Agreement dated as of May 1,
1995 (the "Original Credit Agreement"), as amended by the
First Amendment to the Credit Agreement dated as of
September 16, 1996 (the "First Amendment") and further
amended by the Second Amendment to Credit Agreement dated as
of June 27, 1997 (the "Second Amendment"), pursuant to which
the Lenders have agreed to make certain loans and extensions
of credit to the Company upon the terms and conditions as
provided therein (the Original Credit Agreement, the First
Amendment and the Second Amendment are collectively
hereinafter referred to as the "Credit Agreement"); and
B. The Company, the Agents, and the Lenders now
desire to make certain amendments to the Credit Agreement.
NOW, THREFORE, in consideration of the premises and
other good and valuable consideration and the mutual
benefits, covenants and agreements herein expressed, the
parties hereto now agree as follows:
1. All capitalized terms used in this Amendment and
not otherwise defined herein shall have the meaning ascribed
to such terms in the Credit Agreement.
2. Section 9.06 of the Credit Agreement is deleted in
its entirety and replaced with the following:
Section 9.06 Mergers, Etc. Neither the Company
nor any Subsidiary will merge into or with or consolidate
with any other Person, or sell, lease or otherwise dispose
of (whether in one transaction or in a series of
transactions) all or substantially all of its Property or
assets to any other Person ("Disposition") unless (i) no
Default exists or would result from such merger or
Disposition and (ii) for any merger, the Company (if a party
to such merger) or a Subsidiary (if the Company is not a
party to such merger) is the survivor, or for any merger or
Disposition, if the surviving Person or acquiring Person is
not the Company or a Subsidiary, such surviving Person or
acquiring Person assumes the Indebtedness and all other
obligations of the Company or such Subsidiary under the Loan
Documents and is approved by the Majority Lenders.
3. Section 1.02 of the Credit Agreement is
hereby supplemented, where alphabetically
appropriate, with the addition of the following:
"Third Amendment" shall mean that certain Third
Amendment to Credit Agreement as of September 25, 1997,
among the Company, the Lenders, and the Agents.
4. This Amendment shall become binding on
the Lenders when , and only when, the
Administrative Agent shall have received each of
the following in form and substance satisfactory
to the Administrative Agent or its counsel:
(a) counterparts of this Amendment executed by
the Company, the Agents and the Majority Lenders;
(b) a certificate of the Secretary or an
Assistant Secretary of the Company setting forth
resolutions of its board of directors with respect to
the authorization of the Company to execute, deliver
and perform this Amendment; and
(c) such other documents as it or its
counsel may reasonably request.
5. The parties hereto hereby acknowledge
and agree that, except as specifically supplemented and
amended, changed or modified hereby, the Credit
Agreement shall remain in full force and effect in
accordance with its terms.
6. THIS AMENDMENT (INCLUDING, BUT NOT LIMITED
TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE
GOVERNED BY , AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF LAWS RULES
THEREOF.
7. This Amendment may be executed in two or more
counterparts, and it shall not be necessary that the
signatures of all parties hereto be contained on any one
counterpart hereof; each counterpart shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
[SIGNATURES BEGIN ON NEXT PAGE]
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of September 25, 1997.
COMPANY: ENSERCH EXPLORATION, INC.
By:___________________________
Name: ________________________
Title: _________________________
LENDER ADN ADMINISTRATIVE AGENT, THE CHASE MANHATAN BANK
SYNDICATION AGENT AND
AUCTION AGENT:
By:___________________________
Name: ________________________
Title:_________________________
LENDER AND DOCUMENTATION CITIBANK, N.A.
AGENT:
By:___________________________
Name: ________________________
Title:_________________________
LENDERS: THE BANK OF NEW YORK
By:___________________________
Name: ________________________
Title:_________________________
THE BANK OF NOVA SCOTIA
By:___________________________
Name: ________________________
Title:_________________________
<PAGE>
<PAGE>
BANKERS TRUST COMPANY
By:___________________________
Name: ________________________
Title:_________________________
CANADIAN IMPERIAL BANK OF
COMMERCE
By:___________________________
Name: ________________________
Title:_________________________
THE FIRST NATIONAL BANK OF
CHICAGO
By:___________________________
Name: ________________________
Title:_________________________
NATIONSBANK OF TEXAS, N.A.
By:___________________________
Name: ________________________
Title:_________________________
ROYAL BANK OF CANADA
By:___________________________
Name: ________________________
Title:_________________________
CAISSE NATIONALE DE CREDIT
AGRICOLE
By:___________________________
Name: ________________________
Title:_________________________
<PAGE>
<PAGE>
THE FUJI BANK, LTD.
By:___________________________
Name: ________________________
Title:_________________________
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By:___________________________
Name: ________________________
Title:_________________________
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By:___________________________
Name: ________________________
Title:_________________________
MELLON BANK, N.A.
By:___________________________
Name: ________________________
Title:_________________________
THE SANWA BANK, LIMITED
By:___________________________
Name: ________________________
Title:_________________________
TORONTO DOMINION (TEXAS), INC.
By:___________________________
Name: ________________________
Title:_________________________
<PAGE>
<PAGE>
UNION BANK OF SWITZERLAND
HOUSTON AGENCY
By:___________________________
Name: ________________________
Title:_________________________
By:___________________________
Name: ________________________
Title:_________________________
THE BANK OF TOKYO-MITSUBISHI, LTD.
By:___________________________
Name: ________________________
Title:_________________________
DRESDNER BANK AG NEW YORK AND
GRAND CAYMAN BRANCHES
By:___________________________
Name: ________________________
Title:_________________________
CREDIT LYONNAIS NEW YORK
BRANCH
By:___________________________
Name: ________________________
Title:_________________________
<PAGE>
<PAGE>
EHXIBIT 10.12
APPENDIX G
ENSERCH EXPLORATION, INC.
DEFERRED COMPENSATION PLAN
THIS PLAN, made and executed at Dallas, Texas by
Enserch Exploration, Inc., a Texas corporation (the
"Company"), is being established primarily for the purpose
of providing deferred compensation for a select group of
management or highly compensated employees of the Company
and its participating affiliates.
ARTICLE I.
DEFINITIONS
Section 1.1 Definitions. Unless the context
clearly indicates otherwise, when used in this Plan:
(a) "Account" means a Participant's Deferral
Account and/or Employer Account, as the case may be.
(b) "Adjustment Date" means the last day of each
calendar quarter and such other dates as the
Administrative Committee in its discretion may
prescribe.
(c) "Affiliated Company" means any corporation or
organization which together with the Company would be
treated as a single employer under Section 414 of the
Code.
(d) "Administrative Committee" means the
committee designated pursuant to Section 2.1 to
administer this Plan.
(e) "Change of Control" means a change in control
of the Company after the Transaction Date of a nature
that would be required to be reported in response to
Item l(a) of the Securities and Exchange Commission
Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended ("Exchange Act"), or would have been
required to be so reported but for the fact that such
event had been "previously reported" as that term is
defined Rule 12b-2 of Regulation 12B under the Exchange
Act; provided that, without limitation, such a change
in control shall be deemed to have occurred if (i) any
Person is or becomes the beneficial owner (as defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing
20% or more of the combined voting power of the
Company's then outstanding securities ordinarily (apart
from rights accruing under special circumstances)
having the right to vote at elections of directors,
("Voting Securities"), or (ii) individuals who
constitute the Board of Directors of the Company on the
date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by
a vote of at least three-quarters of the directors
comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for
director, without objection to such nomination) shall
be, for purposes of this clause (ii), considered as
though such person were a member of the Incumbent
Board, or (iii) a recapitalization of the Company
occurs which results in either a decrease by 33% or
more in the aggregate percentage ownership of Voting
Securities held by Independent Shareholders (on a
primary basis or on a fully diluted basis after giving
effect to the exercise of stock options and warrants)
or an increase in the aggregate percentage ownership of
Voting Securities held by non-Independent Shareholders
(on a primary basis or on a fully diluted basis after
giving effect to the exercise of stock options and
warrants) to greater than 50%, or (iv) the shareholders
of the Company have approved an agreement to merge or
consolidate with or into another Person or an agreement
to sell or otherwise dispose of all or substantially
all of the Company's assets (including a plan of
liquidation) to a Person. For purposes of this
subsection (e), the term "Person" shall mean and
include any individual, corporation, partnership,
group, association or other "person", as such term is
used in Section 14(d) of the Exchange Act, other than
the Company, a subsidiary of the Company or any
employee benefit plan(s) sponsored or maintained by the
Company or any subsidiary thereof, and the term
"Independent Shareholder" shall mean any shareholder of
the Company except any employee(s) or director(s) of
the Company or any employee benefit plan(s) sponsored
or maintained by the Company or any subsidiary thereof.
(f) "Code" means the Internal Revenue Code of
1986, as amended from time to time.
(g) "Company" means Enserch Exploration, Inc., a
Texas corporation, and its successors.
(h) "Compensation Committee" means the
Compensation Committee of the Board of Directors of the
Company.
(i) "Deferral Account" means the account
established and maintained on the books of an Employer
to record a Participant's interest under this Plan
attributable to amounts credited to such Participant
pursuant to Sections 3.1, 3.2, and 3.3.
(j) "Disability" means total and permanent
disability of the Participant as determined under the
provisions of his or her Employer's group long-term
disability plan.
(k) "Effective Date" means July 1, 1997.
(l) "Election Period" means such period
immediately prior to the beginning of a Plan Year (or,
with respect to the Short Plan Year, the period
immediately prior to the Effective Date) specified by
the Administrative Committee for the making of deferral
elections for such Plan Year pursuant to Sections 3.1
and 3.2.
(m) "Eligible Employee" means any employee of an
Employer who is one of a select group of management or
highly compensated employees and (i) whose annual base
salary equals or exceeds $125,000 or (ii) whose annual
base salary equals or exceeds $100,000 and whose
position is of significant impact on the operations of
his or her Employer as determined by the Administrative
Committee in its absolute discretion.
(n) "Employer" includes the Company and any
Affiliated Company which adopts this Plan with the
consent of the Compensation Committee in accordance
with Section 6.4.
(o) "Employer Account" means the account
established and maintained on the books of an Employer
to record a Participant's interest under this Plan
attributable to amounts credited to such Participant
pursuant to Section 3.4.
(p) "Net Amount Payable" means the amount that
otherwise would be payable in cash to a Participant
absent a deferral election under Section 3.2.
(q) "Participant" means an Eligible Employee or
former Eligible Employee for whom an Account is being
maintained under this Plan.
(r) "Plan" means this Enserch Exploration, Inc.
Deferred Compensation Plan, as in effect from time to
time on and after the Effective Date.
(s) "Plan Year" means each calendar year
commencing after the Short Plan Year.
(t) "Retirement Age" means the age used as the
retirement age for the Participant under Section 216(l)
of the Social Security Act.
(u) "Short Plan Year" means the period commencing
on the Effective Date and ending on December 31, 1997.
(v) "Transaction Date" means the date of the
distribution of all shares of stock of the Company
owned by ENSERCH Corporation to the shareholders of
ENSERCH Corporation.
ARTICLE II.
PLAN ADMINISTRATION
Section 2.1 Administrative Committee. This Plan
shall be administered by an Administrative Committee
composed of at least three individuals appointed by the
Compensation Committee. Each member of the Administrative
Committee so appointed shall serve in such office until his
or her death, resignation or removal by the Compensation
Committee. The Compensation Committee may remove any member
of the Administrative Committee at any time by giving
written notice thereof to the members of the Administrative
Committee. Vacancies shall likewise be filled from time to
time by the Compensation Committee. The Administrative
Committee shall have discretionary and final authority to
interpret and implement the provisions of the Plan,
including without limitation, authority to determine
eligibility for benefits under the Plan. The Administrative
Committee shall act by a majority of its members at the time
in office and such action may be taken either by a vote at a
meeting or in writing without a meeting. The Administrative
Committee may adopt such rules and procedures for the
administration of the Plan as are consistent with the terms
hereof and shall keep adequate records of its proceedings
and acts. Every interpretation, choice, determination or
other exercise by the Administrative Committee of any power
or discretion given either expressly or by implication to it
shall be conclusive and binding upon all parties having or
claiming to have an interest under the Plan or otherwise
directly or indirectly affected by such action, without
restriction, however, on the right of the Administrative
Committee to reconsider and redetermine such action.
Section 2.2 Independent Committee. Any provision of
this Plan to the contrary notwithstanding, on and after the
date of a Change of Control, the Independent Committee
appointed by the Compensation Committee pursuant to the
provisions of the Enserch Exploration, Inc. Deferred
Compensation Trust shall be responsible for the
administration of this Plan and shall have all of the
powers, duties, responsibilities and obligations of the
Administrative Committee as provided hereunder.
ARTICLE III.
DEFERRED COMPENSATION PROVISIONS
Section 3.1 Compensation Deferral Election. During
the Election Period prior to the beginning of each Plan Year
(and the Short Plan Year), an Eligible Employee may elect to
have the payment of an amount of up to 50% of the annual
base salary otherwise payable by an Employer to such
Eligible Employee for such Plan Year (or the Short Plan
Year) deferred for payment in the manner and at the time
specified in Article IV; provided, however, that the minimum
amount that may be deferred by an Eligible Employee for a
Plan Year pursuant to this Section 3.1 is $5,000 (or such
other amount as shall be determined by the Administrative
Committee in its discretion. The amount of annual base
salary a Participant elects to defer pursuant to this
Section 3.1 shall be deducted from the Participant's pay in
substantially equal amounts over all pay periods during the
Plan Year (or Short Plan Year). All elections made pursuant
to this Section 3.1 shall be made in writing on a form
prescribed by and filed with the Administrative Committee
and shall be irrevocable; provided, however, that effective
as of the first day of any calendar quarter during a Plan
Year, an Eligible Employee may revoke his or her deferral
election and thereby suspend further salary deferrals for
the remainder of such Plan Year by providing written notice
thereof to the Administrative Committee no later than 15
days prior to the effective date of such suspension. Any
Eligible Employee who so suspends his or her salary
deferrals pursuant to this Section shall not be permitted to
elect future salary deferrals pursuant to this Section to be
effective earlier than the first day of the next Plan Year.
Section 3.2 Bonus Deferral Election. During the
Election Period prior to the beginning of the Short Plan
Year, an Eligible Employee may elect to have the payment of
an amount up to 100% of the cash portion of any future bonus
otherwise payable by an Employer during such Plan Year and
any future bonus otherwise payable with respect to services
to be performed by such Eligible Employee during such Plan
Year deferred for payment in the manner and at the time
specified in Article IV. During the Election Period prior
to the beginning of each Plan Year, an Eligible Employee may
elect to have the payment of an amount up to 100% of the
cash portion of any future bonus otherwise payable by an
Employer with respect to services to be performed by such
Eligible Employee during such Plan Year deferred for payment
in the manner and at the time specified in Article IV. Any
provision of this Plan to the contrary notwithstanding, (i)
the minimum amount that maybe deferred by an Eligible
Employee for a Plan Year (or Short Plan Year) pursuant to
this Section 3.2 shall be $5,000 (or such other amount as
shall be determined by the Administrative Committee in its
discretion) unless such Eligible Employee elects to defer in
the same Plan Year (or Short Plan Year) at least $5,000 (or
such other amount as shall be determined by the
Administrative Committee in its discretion) pursuant to
Section 3. 1, and (ii) in no event shall the amount deferred
by a Participant pursuant to this Section 3.2 exceed the Net
Amount Payable to such Participant. All elections made
pursuant to this Section 3.2 shall be made in writing on a
form prescribed by and filed with the Administrative
Committee and shall be irrevocable.
Section 3.3 Deferred Compensation Awards. The
President of the Company may enter into A Deferred
Compensation Award Agreements' with such Eligible Employees
as may from time to time be approved by the Compensation
Committee. Such Agreements shall provide for the grant of a
deferred compensation award, either fixed as to amount or
determinable pursuant to a formula, to the Eligible Employee
subject to such vesting requirements, including performance
criteria, as shall be approved by the Compensation
Committee.
Section 3.4 Employer Contributions. For each Plan
Year (and the Short Plan Year) each Employer shall credit to
the Employer Accounts as an Employer contribution such
amount, if any, to be determined by the Compensation
Committee. Any Employer contribution so determined for a
Plan Year shall be credited to Participants' Employer
Accounts at the time and in the manner described in Section
3.5.
Section 3.5 Accounts and Allocations.
(a) An Employer shall establish and maintain on its
books a Deferral Account and an Employer Account for each
Eligible Employee employed by such Employer who elects to
participate in this Plan. Each such Account shall be
designated by the name of the Participant for whom it is
established. The Administrative Committee may require
separate subaccounts to be maintained within a Participant's
Deferral Account and Employer Account.
(b) Any amount deferred for a Participant pursuant to
Section 3.1 and/or 3.2 shall be credited by the Employer to
such Participant's Deferral Account as of the date such
amount would otherwise have been paid to such Participant by
such Employer. In addition, the amount of any deferred
compensation award pursuant to Section 3.3 hereof which
vests pursuant to the terms of a Deferred Compensation Award
Agreement entered into with an Eligible Employee shall be
credited to such Participant's Deferral Account as of the
date of such vesting, if such individual is an Eligible
Employee as of the date of vesting.
(c) Any Employer contribution declared for a Plan Year
pursuant to Section 3.4 shall be credited to the Employer
Accounts of those Participants specified by the Compensation
Committee at the time and in the manner determined by the
Compensation Committee in its absolute discretion.
(d) An Employer shall continue maintaining a
Participant's Accounts as long as a positive balance remains
credited to such Accounts.
Section 3.6 Account Adjustments. As of each
Adjustment Date, the amount credited to a Participant's
Accounts as of the preceding Adjustment Date shall be
adjusted by the net investment experience of such Accounts
taking into account gain, loss and/or expenses incurred
based on the experience of the investments selected by the
Participant at the time and in the manner prescribed by the
Administrative Committee for the investment of his or her
Accounts, and then such amount shall be increased or
decreased to take into account additional deferrals and
contributions credited to and distributions made from such
Accounts since such preceding Adjustment Date. The
Administrative Committee shall have sole and absolute
discretion with respect to the number and type of investment
choices made available for selection by Participants
pursuant to this Section, the timing of Participant
elections and the method by which adjustments are made. The
designation of investment choices by the Administrative
Committee shall be for the sole purpose of adjusting
Accounts pursuant to this Section and this provision shall
not obligate the Employers to invest or set aside any assets
for the payment of benefits hereunder; provided, however,
that an Employer may invest a portion of its general assets
in investments, including investments which are the same as
or similar to the investment choices designated by the
Administrative Committee and selected by Participants, but
any such investments shall remain part of the general assets
of such Employer and shall not be deemed or construed to
grant a property interest of any kind to any Participant,
designated beneficiary or estate. The Administrative
Committee shall notify the Participants of the investment
choices available and the procedures for making and changing
investment elections.
Section 3.7 Vesting. Subject to Section 4.5, all
amounts credited to a Participant's Deferral Account shall
be fully vested and nonforfeitable at all times. Any
amounts attributable to Employer contributions made for a
Plan Year pursuant to Section 3.4 which are credited to
Participants' Employer Accounts shall be subject to such
vesting schedule as the Compensation Committee shall
establish for such contributions in its sole and absolute
discretion; provided, however, that all amounts credited to
Participants' Employer Accounts shall be 100% vested and
nonforfeitable on and after the date of a Change of Control.
ARTICLE IV.
BENEFITS
Section 4.1 Source of Benefit Payments. Benefit
payments to be made with respect to a Participant's Accounts
maintained pursuant to the Plan will be paid in cash and
will be the obligation solely of the Employer maintaining
such Accounts.
Section 4.2 Amount of Benefit Payments. The amount
payable from a Participant's Accounts shall be determined
based upon the vested amount credited to such Accounts as of
the Adjustment Date last preceding the date of payment plus
any contributions and deferrals credited to and less any
distributions or withdrawals made from such Accounts since
such Adjustment Date. The amount of each payment made with
respect to a Participant's Accounts and any forfeiture
amounts applied pursuant to Section 4.5 shall be deducted
from the balance credited to such Accounts at the time of
payment or forfeiture.
Section 4.3 Termination. Upon a Participant's
termination of employment with an Employer or Affiliated
Company for any reason other than death or transfer to
employment with another Employer or Affiliated Company, the
amount payable from such Participant's Accounts, as
determined in accordance with Section 4.2, shall be paid by
the Employer to such Participant (or, in the event of his or
her subsequent death, to the beneficiary or beneficiaries
designated by such Participant pursuant to Plan Section 4.6)
in one of the following forms as elected by the Participant
during the Participant's initial Election Period:
(a) a single lump sum to be paid as soon as
practicable following the Participant's termination of
employment or Retirement Age, as elected by the
Participant; or
(b) if the amount payable from a Participant's
Accounts is $50,000 or more as of the date of the
Participant's termination of employment, annual
installments over the period certain selected by the
Participant not to exceed 15 years commencing in
payment as soon as practicable following the
Participant's termination of employment or Retirement
Age, as elected by the Participant, with each annual
installment equal to the Account balance multiplied by
a fraction the numerator of which is one and the
denominator of which is the number of payments
remaining;
provided, however, that if a Participant who is entitled to
a delayed lump sum or installment payments hereunder
encounters an unforeseeable emergency (as determined in
accordance with Section 4.7 hereof), the Administrative
Committee, in its absolute discretion, may direct the
Employer to accelerate such portion of the delayed lump sum
or installment payments as the Administrative Committee
shall determine to be necessary to alleviate the severe
financial hardship of the Participant caused by such
unforeseeable emergency.
Section 4.4 Death. Upon a Participant's termination
of employment by reason of death, the amount payable from
such Participant's Accounts, as determined in accordance
with Section 4.2, shall be paid by the Employer to the
beneficiary or beneficiaries designated by such Participant
pursuant to Section 4.6 in one of the following forms as
elected by the Participant during the Participant's initial
Election Period:
(c) a single lump sum to be paid as soon as
practicable following the Participant's death; or
(d) if the amount payable from the Participant's
Accounts is $50,000 or more as of the date of the
Participant's death, annual installments over the
period certain selected by the Participant not to
exceed 15 years commencing in payment as soon as
practicable following the Participant's death with each
annual installment equal to the Account balance
multiplied by a fraction the numerator of which is one
and the denominator of which is the number of payments
remaining;
provided, however, that if a beneficiary of a deceased
Participant who is entitled to installment payments
hereunder encounters an unforeseeable emergency (as
determined in accordance with Section 4.7 hereof), the
Administrative Committee, in its absolute discretion, may
direct the Employer to accelerate such portion of the
installment payments as the Administrative Committee shall
determine to be necessary to alleviate the severe financial
hardship of the beneficiary caused by such unforeseeable
emergency.
Section 4.5 Option to Request Immediate Payout. In
lieu of any other benefits or payments to be made pursuant
to this Plan, each Participant (or beneficiary in the case
of a deceased Participant) shall have the right at any time
to elect a lump sum payment in an amount equal to:
(a) the amount payable from the Participant's
Accounts, determined in accordance with Section 4.2,
minus
(b) a forfeiture amount equal to 20% of (a)
above, provided, however, that if the election is made
on or within two years following the date a Change of
Control occurs, such forfeiture amount shall be
determined substituting 10% for 20%.
A Participant's election for an immediate payout pursuant to
this Section must be in the form of a written notice
provided to the Administrative Committee. The
Administrative Committee shall notify any Employer
maintaining a Participant's Accounts with respect to such
Participant of the election and the amount so determined
shall be paid to the Participant (or, in the case of a
deceased Participant, to the beneficiary or beneficiaries
designated by such Participant pursuant to Section 4.6) by
the Employers no later than fifteen days following receipt
of notice by the Administrative Committee. Any amount
remaining credited to the Participant's Accounts shall be
forfeited at the time payment is made.
Section 4.6 Designation of Beneficiaries. Any
amount payable under this Plan on account of the death of a
Participant shall be paid when otherwise due hereunder to
the beneficiary or beneficiaries designated by such
Participant. Such designation of beneficiary or
beneficiaries shall be made in writing on a form prescribed
by and filed with the Administrative Committee and shall
remain in effect until changed by such Participant by the
filing of a new beneficiary designation form with the
Administrative Committee. If a Participant fails to so
designate a beneficiary, or in the event all of the
designated beneficiaries are individuals who either
predecease the Participant or survive the Participant but
die prior to receiving the full amount payable under this
Plan, any remaining amount payable under this Plan shall be
paid to such Participant's estate when otherwise due
hereunder.
Section 4.7 Hardship Distributions. If a
Participant encounters an unforeseeable emergency, the
Administrative Committee in its absolute discretion may
direct the Employer maintaining such Participant's Accounts
to pay to such Participant and deduct from such Accounts
such portion of the amount then credited to such Accounts
(including, if appropriate, the entire amount determined in
accordance with Section 4.2) as the Administrative Committee
shall determine to be necessary to alleviate the severe
financial hardship of such Participant caused by such
unforeseeable emergency. For this purpose, an
"unforeseeable emergency" shall be a severe financial
hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a
dependent of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events
beyond the control of the Participant. The circumstances
that will constitute an unforeseeable emergency will depend
upon the facts of each case, but in any case, payment may
not be made to the extent that such hardship is or may be
relieved (i) through reimbursement or compensation by
insurance or otherwise, (ii) by liquidation of the
Participant's assets, to the extent liquidation of such
assets would not itself cause severe financial hardship, or
(iii) by cessation of deferrals under the Plan. No
distribution shall be made to a Participant pursuant to this
Section 4.7 unless such Participant requests such a
distribution in writing and provides to the Administrative
Committee such information and documentation with respect to
his or her unforeseeable emergency as may be requested by
the Administrative Committee.
Section 4.8 Change of Distribution Form. Each
Participant may elect at any time after a Participant's
initial Election Period, but no more often than once during
each calendar year, to change the distribution forms elected
with respect to all amounts credited to such Participant's
Accounts; provided, however, that such election shall not be
effective unless made at least twelve months preceding the
date of the Participant's termination of employment.
Section 4.9 Accelerated Distribution of Reclassified
Amounts. In the event that the Internal Revenue Service
formally assesses a deficiency against a Participant on the
grounds that an amount credited to such Participant's
Accounts under this Plan is subject to federal income tax
(the "Reclassified Amount") earlier than the time payment
otherwise would be made to the Participant pursuant to this
Plan, then the Administrative Committee shall direct the
Employer maintaining such Participant's Accounts to pay to
such Participant and deduct from such Accounts the
Reclassified Amount. No payment made to a Participant
pursuant to this Section 4.9 shall be subject to forfeiture
as provided in Section 4.5 hereof.
ARTICLE V.
AMENDMENT AND TERMINATION
Section 5.1 Amendment and Termination. The
Compensation Committee shall have the right and power at any
time and from time to time to amend this Plan, in whole or
in part, on behalf of all Employers, and to terminate this
Plan or any Employer's participation hereunder. Any
amendment to or termination of this Plan shall be made by or
pursuant to a resolution duly adopted by the Compensation
Committee and shall be evidenced by such resolution or by a
written instrument executed by such person as the
Compensation Committee shall authorize for such purpose.
Any provision of this Plan to the contrary notwithstanding,
no amendment to or termination of this Plan shall reduce the
amounts actually credited to a Participant's Accounts as of
the date of such amendment or termination, or further defer
the dates for the payment of such amounts, without the
consent of the affected Participant. Upon termination of
this Plan, the Compensation Committee, in its sole
discretion, may require the Administrative Committee to
calculate final Account balances as of such Adjustment Date
as it may prescribe, and direct each Employer to make
immediate lump sum payments to each Participant (or
beneficiary in the case of a deceased Participant) with
respect to which such Employer maintains an Account in the
amount determined to be credited to such Participant's
Accounts as of such final Adjustment Date.
Section 5.2 Change of Control. The preceding
provisions of this Article to the contrary notwithstanding,
no action taken on or after a Change of Control to amend or
terminate this Plan shall be effective unless written
consent thereto is obtained from a majority of the
Participants.
ARTICLE VI.
MISCELLANEOUS PROVISIONS
Section 6.1 Nature of Plan and Rights. This Plan is
unfunded and maintained by the Employers primarily for the
purpose of providing deferred compensation for a select
group of management or highly compensated employees of the
Employers. The Accounts established and maintained under
this Plan by an Employer are for its accounting purposes
only and shall not be deemed or construed to create a trust
fund or security interest of any kind for or to grant a
property interest of any kind to any Participant, designated
beneficiary or estate. The amounts credited by an Employer
to Accounts maintained under this Plan are and for all
purposes shall continue to be a part of the general assets
and liabilities of such Employer, and to the extent that a
Participant, designated beneficiary or estate acquires a
right to receive a payment from such Employer pursuant to
this Plan, such right shall be no greater than the right of
any unsecured general creditor of such Employer.
Section 6.2 Spendthrift Provision. No Account
balance or other right or interest under this Plan of a
Participant, designated beneficiary or estate may be
assigned, transferred or alienated, in whole or in part,
either directly or by operation of law, and no such balance,
right or interest shall be liable for or subject to any
debt, obligation or liability of such Participant,
designated beneficiary or estate.
Section 6.3 Employment Noncontractual. The
establishment of this Plan shall not enlarge or otherwise
affect the terms of any Participant's employment with an
Employer, and such Employer may terminate the employment of
such Participant as freely and with the same effect as if
this Plan had not been established.
Section 6.4 Adoption by Other Employers. With the
consent of the Compensation Committee, this Plan may be
adopted by any Affiliated Company, such adoption to be
effective as of the date specified by such Affiliated
Company at the time of adoption.
Section 6.5 Claims Procedure. If any person
(hereinafter called the "Claimant") feels that he or she is
being denied a benefit to which he or she is entitled under
this Plan, such Claimant may file a written claim for said
benefit with the Administrative Committee. Within sixty
days following the receipt of such claim the Administrative
Committee shall determine and notify the Claimant as to
whether he or she is entitled to such benefit. Such
notification shall be in writing and, if denying the claim
for benefit, shall set forth the specific reason or reasons
for the denial, make specific reference to the pertinent
provisions of this Plan, and advise the Claimant that he or
she may, within sixty days following the receipt of such
notice, in writing request to appear before the
Administrative Committee or its designated representative
for a hearing to review such denial. Any such hearing shall
be scheduled at the mutual convenience of the Administrative
Committee or its designated representative and the Claimant,
and at any such hearing the Claimant and/or his or her duly
authorized representative may examine any relevant documents
and present evidence and arguments to support the granting
of the benefit being claimed. The final decision of the
Administrative Committee with respect to the claim being
reviewed shall be made within sixty days following the
hearing thereon, and Administrative Committee shall in
writing notify the Claimant of said final decision, again
specifying the reasons therefor and the pertinent provisions
of this Plan upon which said final decision is based. The
final decision of the Administrative Committee shall be
conclusive and binding upon all parties having or claiming
to have an interest in the matter being reviewed.
Section 6.6 Reimbursement of Expenses. In the event
that a dispute arises between a Participant or beneficiary
and the Participant's Employer with respect to the payment
of benefits hereunder and the Participant or beneficiary is
successful in pursuing a benefit to which he or she is
entitled under the terms of the Plan against the
Participant's Employer or any other party in the course of
litigation or otherwise and incurs attorneys' fees, expenses
and costs in connection therewith, the Participant's
Employer shall reimburse the Participant or beneficiary for
the full amount of any such attorneys' fees, expenses and
costs.
Section 6.7 Withholding Tax. There shall be
deducted from all amounts paid under this Plan any taxes
required to be withheld by any Federal, state, local or
other government. The Participant and/or his or her
beneficiary (including his or her estate) shall bear all
taxes on amounts paid under this Plan to the extent that no
taxes are withheld, irrespective of whether withholding is
required. The Participant will be required to pay to his or
her Employer the amount of any federal, state or local taxes
required by law to be withheld in connection with the Plan
in the event that such Participant is not being paid by an
Employer or amounts being paid by an Employer to such
Participant are insufficient to satisfy any such withholding
obligation.
Section 6.8 Applicable Law. This Plan shall be
governed and construed in accordance with the internal laws
(and not the principles relating to conflicts of laws) of
the State of Texas, except where superseded by federal law.
IN WITNESS WHEREOF, this Plan has been executed on this
13th day of August, 1997, to be effective as of the
Effective Date.
Enserch Exploration, Inc.
By: /s/ T. M Hamilton
Title:Chairman, President and Chief
Executive Officer
<PAGE>
<PAGE>
EXHIBIT 10.13
ENSERCH EXPLORATION, INC.
DEFERRED COMPENSATION TRUST
This Trust Agreement made this 13th day of August, 1997, by
and between Enserch Exploration, Inc., a Texas corporation (the
"Company") and Texas Commerce Bank National Association, a
national banking association ( the "Trustee");
WHEREAS, the Company and certain Affiliated Companies
enumerated on the attached Appendix A (collectively referred to
as the "Employers") have adopted or may adopt nonqualified
deferred compensation plans known as the Enserch Exploration,
Inc. Deferred Compensation Plan (the "Executive Plan") and the
Enserch Exploration, Inc. Deferred Compensation Plan for
Directors (the "Directors' Plan") (each sometimes referred to
herein as a "Plan" and collectively referred to herein as the
"Plans"); and
WHEREAS, the Employers have incurred or expect to incur
liability under the terms of such Plans with respect to the
individuals participating in such Plans; and
WHEREAS, the Employers wish to establish a trust
(hereinafter called the "Trust"), pursuant to which each Employer
will contribute assets that shall be allocated to a Separate
Account, as herein defined, for such Employer's Plan Participants
and beneficiaries, subject to the claims of such Employer's
creditors in the event of the Employer's Insolvency, as herein
defined, until paid to Plan Participants and their beneficiaries
in such manner and at such times as specified in the Plans; and
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the
status of the Directors' Plan as an unfunded plan or the
Executive Plan as an unfunded plan maintained for the purpose of
providing deferred compensation for a select group of management
or highly compensated employees for purposes of Title I of the
Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Employers to make
contributions to the Trust to provide a source of funds to assist
them in the meeting of their liabilities under the Plans;
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and disposed of
as follows:
Section 1. Establishment Of Trust.
(a) The Employers hereby deposit with the Trustee in trust
$1,000.00, which shall become the principal of the Trust to be
held, administered and disposed of by the Trustee as provided in
this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which
each Employer is the grantor with respect to its Separate
Account, within the meaning of subpart E, part 1, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as
amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of the
Employers and shall be used exclusively for the uses and purposes
of Plan Participants and general creditors as herein set forth.
Plan Participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plans and this Trust
Agreement shall be mere unsecured contractual rights of Plan
Participants and their beneficiaries against the Employers. Any
amounts allocated to an Employer's Separate Account under the
Trust will be subject to the claims of such Employer's general
creditors under federal and state law in the event of Insolvency,
as defined in Section 4(a) herein.
(e) The Employers, in their sole discretion, may at any
time, or from time to time, make additional deposits of cash or
other property in trust with the Trustee to augment the principal
to be held, administered and disposed of by the Trustee as
provided in this Trust Agreement; provided, however, that each
Employer shall contribute to the Trust each calendar year an
amount of cash or property at least equal in value to the total
amount, of deferrals and contributions credited to the Deferral
Accounts and Employer Accounts of Participants employed by such
Employer pursuant to the Executive Plan and the Accounts of
Participants pursuant to the Directors' Plan during such calendar
year.
(f) Any provision of this Trust Agreement to the contrary
notwithstanding, upon a Change of Control, as defined in the
Plans, each Employer shall (i) as soon as possible, but in no
event more than 30 days following the date of such Change of
Control, make an irrevocable contribution to the Trust in an
amount, as determined by an Independent Committee, as defined
below, which when added to the total value of the assets
allocated to the Employer's Separate Account under the Trust at
such time equals the total amount credited to all Deferral
Accounts and Employer Accounts under the Executive Plan and all
Accounts under the Directors' Plan with respect to such
Employer's respective Plan Participants as of the date on which
the Change of Control occurred, and (ii) on and after the date of
the Change of Control, make monthly contributions to the Trust in
amounts sufficient, as determined by the Independent Committee,
to maintain the total value of the assets allocated to the
Employer's Separate Account at an amount equal to the total
amount credited to Deferral Accounts and Employer Accounts under
the Executive Plan and all Accounts under the Directors' Plan
with respect to such Employer's respective Plan Participants.
Any provision of this Trust Agreement to the contrary
notwithstanding, on and after the date of a Change of Control,
the assets allocated to each Employer's Separate Account under
this Trust, including any additional contributions made by such
Employer in accordance with this Section l(f) for the period
following such Change of Control and any earnings on such
Separate Account's proportionate share of the Trust's assets,
shall be held exclusively for the benefit of those Participants
in the Plans (or their beneficiaries) employed by such Employer
as of the date immediately prior to the date of such Change of
Control, subject to the claims of general creditors of such
Employer under federal and state law as set forth below.
Section 2. Payments to Plan Participants and their
Beneficiaries.
(a) The Administrative Committee of each Plan shall deliver
to the Trustee a schedule (the "Payment Schedule") that indicates
the amounts payable with respect to each Plan Participant (and
his or her beneficiaries) and the Separate Account of the
Employer from which such amounts are payable, that provides a
formula or other instructions acceptable to the Trustee for
determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plans), and
the time of commencement for payment of such amounts. An updated
Payment Schedule shall be provided by each Administrative
Committee to the Trustee periodically, but no less frequently
than once each calendar year. Except as otherwise provided
herein, the Trustee shall make payments to the Plan Participants
and their beneficiaries in accordance with such Payment Schedule.
The Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plans and shall pay amounts withheld
to the appropriate taxing authorities or determine that such
amounts have been reported, withheld and paid by an Employer
under the Executive Plan or by Company under the Directors' Plan.
(b) The entitlement of a Plan Participant or his or her
beneficiaries to benefits under a Plan shall be determined by
each Administrative Committee or such other party as may be
designated under the Plan, and any claim for such benefits shall
be considered and reviewed under the procedures set out in the
Plan.
(c) The Employers participating in the Executive Plan or
the Company with respect to the Directors' Plan may make payments
of benefits directly to Plan Participants or their beneficiaries
as they become due under the terms of each Plan in lieu of
payment from the Trust. The applicable Administrative Committee
shall notify the Trustee of an Employer's or the Company's
decision to make payments of benefits directly prior to the time
amounts are payable to Participants or their beneficiaries. In
addition, if the assets allocated to an Employer's Separate
Account under the Trust are not sufficient to make payments of
benefits to its respective Plan Participants and beneficiaries in
accordance with the terms of the Plans, such Employer shall make
the balance of each such payment as it falls due, and the
Separate Accounts of other Employers hereunder shall not be
liable for the payment of such benefits. The Trustee shall
notify the Company immediately when the assets allocated to an
Employer's Separate Account under the Trust are not sufficient to
satisfy all payments due.
(d) Any provision of this Section 2 to the contrary
notwithstanding, upon and after a Change of Control, the Trustee
shall make payments to Plan Participants or their beneficiaries
in accordance with the direction of the Independent Committee
rather than an Administrative Committee, regardless of whether
the Trustee has received a Payment Schedule or any other form of
direction from an Administrative Committee to make such payments.
Section 3. Appointment of Independent Committee.
(a) Any provision of this Trust Agreement to the contrary
notwithstanding, upon a Change of Control, an Independent
Committee consisting of at least three members shall be appointed
by the Compensation Committee subject to the written approval of
a majority of the Participants in the Plans on the date of such
Change of Control. The Independent Committee shall:
(i) determine the amount of the irrevocable
contributions to be made by each Employer pursuant to
Section l(f) hereof;
(ii) determine in accordance with the Plans the amounts
payable with respect to each Plan Participant (and his or
her beneficiaries), the form in which such amounts are to be
paid, and the time of commencement for payment of such
amounts pursuant to Section 2(a) hereof;
(iii) determine the entitlement of Plan
Participants and beneficiaries to benefits under the terms
of. the Plans pursuant to Section 2(b) hereof;
(iv) direct the Trustee to make payments to Plan
Participants and their beneficiaries pursuant to Section 2
hereof; and
(v) select a successor Trustee for the Trust if a
Trustee resigns or is removed on or after the date of a
Change of Control pursuant to Section 12.
(b) Each member of the Independent Committee so appointed
shall serve in such office until his or her death, resignation or
removal. The Compensation Committee may remove any member of the
Independent Committee effective upon the written approval of a
majority of the Plan Participants. Vacancies on the Independent
Committee shall be filled from time to time by the Compensation
Committee effective upon the written approval of a majority of
the Participants in the Plans on the date such vacancy is filled.
(c) The Independent Committee shall act by a majority of
its members at the time in office and such action may be taken
either by a vote at a meeting or in writing without a meeting.
The Independent Committee may by such majority action authorize
any one or more of its members to execute any document or
documents on behalf of the Independent Committee, in which event
the Independent Committee shall notify the Trustee in writing of
such action and the name or names of its member or members so
authorized to act. Every interpretation, choice, determination
or other exercise by the Independent Committee of any power or
discretion given either expressly or by implication to it shall
be conclusive and binding upon all parties having or claiming to
have an interest under the Trust or otherwise directly or
indirectly affected by such action, without restriction, however,
on the right of the Independent Committee to reconsider and
redetermine such action.
(d) Any provision of this Trust Agreement to the contrary
notwithstanding, in the event that (i) the Compensation Committee
shall not appoint an Independent Committee within 30 days
following a Change of Control or a majority of the Participants
in the Plans do not approve in writing at least three members
selected by the Compensation Committee to serve on an Independent
Committee within such 30-day period or (ii) the Compensation
Committee does not fill a vacancy on the Independent Committee
within 30 days of the date such office becomes vacant or a
majority of the Participants in the Plans do not approve in
writing the Compensation Committee's selection to fill a vacancy
on the Independent Committee within such 30-day period, then the
Participants in the Plans shall elect, by majority vote, up to
three individuals to the extent necessary to ensure that the
Independent Committee consists of three members.
Section 4. Trustee Responsibility Regarding Payments to
Trust Beneficiary when an Employer Is Insolvent.
(a) The Trustee shall cease payment of benefits to Plan
Participants and their beneficiaries if the Participants'
Employer is Insolvent. An Employer shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the
Employer is unable to pay its debts as they become due, or (ii)
the Employer is subject to a pending proceeding as a debtor under
the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section l(d) hereof, the principal and income of each
Employer's Separate Account under the Trust shall be subject to
claims of general creditors of the Employer under federal and
state law as set forth below.
(i) The Compensation Committee and the Chief Executive
Officer of an Employer shall have the duty to inform the
Trustee in writing of the Employer's Insolvency. If a
person claiming to be a creditor of an Employer alleges in
writing to the Trustee that the Employer has become
Insolvent, the Trustee shall determine whether the Employer
is Insolvent and, pending such determination, the Trustee
shall discontinue payment of benefits to the Employer's
respective Plan Participants or their beneficiaries.
(ii) Unless the Trustee has actual knowledge of an
Employer's Insolvency, or has received notice from the
Employer or a person claiming to be a creditor alleging that
the Employer is Insolvent, the Trustee shall have no duty to
inquire whether the Employer is Insolvent. The Trustee may
in all events rely on such evidence concerning the
Employer's solvency as may be furnished to the Trustee and
that provides the Trustee with a reasonable basis for making
a determination concerning the Employer's solvency.
(iii) If at any time the Trustee has determined
that an Employer is Insolvent, the Trustee shall discontinue
payments to the Employer's respective Plan Participants or
their beneficiaries and shall hold the assets allocated to
the Employer's Separate Account under the Trust for the
benefit of the Employer's general creditors. Nothing in
this Trust Agreement shall in any way diminish any rights of
Plan Participants or their beneficiaries to pursue their
rights as general creditors of an Employer with respect to
benefits due under the Plans or otherwise.
(iv) The Trustee shall resume the payment of benefits
to an Employer's respective Plan Participants or their
beneficiaries in accordance with Section 2 of this Trust
Agreement only after the Trustee has determined that the
Employer is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets allocated to
an Employer's Separate Account under the Trust, if the Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 4(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan Participants or
their beneficiaries under the terms of the Plans for the period
of such discontinuance, less the aggregate amount of any payments
made to Plan Participants or their beneficiaries by the Employers
participating in the Executive Plan or by the Company with
respect to the Directors' Plan in lieu of the payments provided
for hereunder during any such period of discontinuance.
Section 5. Payments to the Employers.
(a) Except as provided in Sections 4 and 5(b) hereof, the
Employers shall have no right or power to direct the Trustee to
return to the Employers or to divert to others any of the Trust
assets before payment of all benefits have been made to Plan
Participants and their beneficiaries pursuant to the terms of the
Plans.
(b) To the extent that an Administrative Committee
determines that the value of the assets allocated to an
Employer's Separate Account under the Trust based upon
information provided to the Administrative Committee by the
Trustee, at any time, exceeds 110% of the amounts credited to
Participants' Deferral Accounts or Employer Accounts under the
Executive Plan and Accounts under the Directors' Plan as of the
most recent Adjustment Date plus any deferrals or contributions
made since that date, the Trustee shall pay such excess to such
Employer upon receipt of written request therefor from the
Company; provided, however, that no such payment of excess assets
to an Employer shall be made on or after the date of a Change of
Control without the written approval of the Participants in the
Plans.
Section 6. Investment Authority.
(a) The Trustee shall establish and maintain a separate
account within the Trust for each Employer (the "Separate
Account"). All amounts deposited with the Trustee by an Employer
shall be allocated to such Employer's Separate Account. The
Separate Accounts shall be maintained for recordkeeping purposes
only, and the assets of the Trust may remain invested as a single
fund. At the end of each calendar year and at such other times
as the Company may determine, the Trustee shall determine the
fair market value of the assets of the Trust. On the basis of
such valuation, the Trustee shall adjust the Separate Account of
each Employer to reflect its proportionate share of the earnings,
losses and expenses of the Trust for the valuation period then
ended.
(b) The Trustee shall have full power and authority to
invest and reinvest the Trust assets, or any part thereof, in
such stocks (common or preferred), bonds, mortgages, notes,
interest-bearing deposits (including such deposits with any
corporate trustee acting hereunder), options and contracts for
the future or immediate receipt or delivery of property of any
kind, or other securities, producing or nonproducing oil and gas
royalties and payments and other producing and nonproducing
interests in minerals, or in commodities, life insurance
policies, annuity contracts or other property of any kind or
nature whatsoever, whether real, personal or mixed, as the
Trustee, in the Trustee's absolute discretion and judgment, deems
appropriate for the Trust, and to hold cash uninvested at any
time and from time to time in such amounts and to such extent as
the Trustee, in the Trustee's absolute discretion and judgment,
deems appropriate for the Trust. The Trustee shall have full
power and authority to manage, handle, invest, reinvest, sell for
cash or credit, or for part cash or part credit, exchange, hold,
dispose of, lease for any period of time (whether or not longer
than the life of the Trust), improve, repair, maintain, work,
develop, use, operate, mortgage, or pledge, all or any part of
the assets and property from time to time constituting any part
of the trust funds held in trust under the Trust; borrow or loan
money or securities; write options and sell securities or other
property short or for future delivery; engage in hedging
procedures; buy and sell futures contracts; execute obligations,
negotiable and nonnegotiable; vote shares of stock in person and
by proxy, with or without power of substitution; register
investments in the name of a nominee; sell, convey, lease and/or
otherwise deal with any producing or nonproducing oil, gas and
mineral leases or mineral rights, payments and royalties; pay all
reasonable expenses; execute and deliver any deeds, conveyances,
leases, contracts, or written instruments of any character
appropriate to any of the powers or duties of the Trustee, and
shall, in general, have as broad power respecting the management,
operation and handling of the Trust assets and property as if the
Trustee were the owner of such assets and property in the
Trustee's own right. The preceding provisions of this paragraph
to the contrary notwithstanding, the Company shall have the right
and power at any time and from time to time to give the Trustee
broad guidelines within which it shall invest the assets of the
Trust; provided, however, that on and after the date of a Change
of Control, the Independent Committee, rather than the Company,
shall have the sole authority to exercise such right.
(c) All rights associated with assets of the Trust shall be
exercised by the Trustee or the person designated by the Trustee,
and shall in no event be exercisable by or rest with Plan
Participants.
(d) Each Employer shall have the right, at any time, and
from time to time in its sole discretion, to substitute assets of
equal fair market value for any asset held by the Trust;
provided, however, that on and after the date of a Change of
Control, any assets transferred to the Trust in substitution for
assets held by the Trust must consist of cash or marketable
securities acceptable to the Independent Committee and the fair
market value of the respective assets shall be determined by the
Trustee. This right is exercisable by the Employer in a
nonfiduciary capacity without the approval or consent of any
person in a fiduciary capacity.
Section 7. Disposition of Income. During the term of
this Trust, all income received by the Trust, net of any
applicable expenses and taxes, shall be accumulated and
reinvested.
Section 8. Accounting by Trustee. The Trustee shall
keep accurate and detailed records of all investments, receipts,
disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in
writing between the Company and the Trustee. Within 30 days
following the close of each calendar year and within 30 days
after the removal or resignation of the Trustee, the Trustee
shall deliver to the Company a written account of its
administration of the Trust and to each Employer a written
account of its administration of the Employer's Separate Account
during such year or during the period from the close of the last
preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all
securities and investments purchased and sold with the cost or
net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash,
securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as
the case may be.
Section 9. Responsibility of the Trustee.
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims; provided, however, that the Trustee
shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by an Employer
which is contemplated by, and in conformity with, the terms of
the Plans or this Trust and is given in writing by the Employer.
In the event of a dispute between an Employer and a party, the
Trustee may apply to a court of competent jurisdiction to resolve
the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Employers agree to
indemnify the Trustee against the Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments. If the Employers do not pay such costs, expenses and
liabilities in a reasonably timely manner, the Trustee may obtain
payment from the Trust; provided, however, that in the event any
such costs, expenses and liabilities are paid from the Trust, the
Trustee shall notify the Employers in writing that such payment
has been made and the Employers shall reimburse the Trust for
such payment within 15 days from the date of such notice.
(c) The Trustee may consult with legal counsel (who may
also be counsel for the Employers generally) with respect to any
of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations
hereunder.
(e) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly
provided otherwise herein; provided, however, that except as
provided in Sections 5(b) and 6(d) hereof, if an insurance policy
is held as an asset of the Trust, the Trustee shall have no power
to name a beneficiary of the policy other than the Trust, to
assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or applicable law, the Trustee
shall not have any power that could give this Trust the objective
of carrying on a business and dividing the gains therefrom,
within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
Section 10. Compensation and Expenses of the Trustee.
The Trustee shall be paid such reasonable compensation
commensurate with the services and responsibilities involved
hereunder as shall from time to time be agreed upon by the
Trustee and the Company. The Employers shall pay all
administrative and the Trustee's fees and expenses, but, if not
so paid, such fees and expenses shall be paid from the Trust;
provided, however, that in the event any such fees and expenses
are paid from the Trust, the Trustee shall notify the Employers
in writing that such payment has been made and the Employers
shall reimburse the Trust for such payment within 15 days from
the date of such notice.
Section 11. Resignation and Removal of the Trustee.
(a) The Trustee may resign at any time by written notice to
the Company, which shall be effective 30 days after receipt of
such notice unless the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 30 days
notice or upon shorter notice accepted by the Trustee; provided,
however, that the Trustee may not be removed by the Company on or
after the date of a Change of Control except with the written
consent of a majority of the Plan Participants.
(c) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently
be transferred to the successor Trustee. The transfer shall be
completed within 30 days after receipt of notice of resignation,
removal or transfer, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor shall
be appointed, in accordance with Section 12 hereof, by the
effective date of resignation or removal under paragraph(s) (a)
or (b) of this section. If no such appointment has been made,
the Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of
the Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
Section 12. Appointment of Successor.
(a) If the Trustee resigns or is removed in accordance with
Section 11(a) or (b) hereof, the Company may appoint any third
party, such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor
to replace the Trustee upon resignation or removal; provided,
however, that if the Trustee resigns or is removed on or after
the date of a Change of Control, the Independent Committee shall
select a successor Trustee in accordance with this Section 12.
The appointment shall be effective when accepted in writing by
the new Trustee, who shall have all of the rights and powers of
the former Trustee, including ownership rights in the Trust
assets. The former Trustee shall execute any instrument
necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing
Trust assets, subject to Sections 8 and 9 hereof. The successor
Trustee shall not be responsible for and the Employers shall
indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing
at the time it becomes successor Trustee.
Section 13. Amendment or Termination.
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company.
Notwithstanding the foregoing, no such amendment shall conflict
with the terms of the Plans or shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which
Plan Participants and their beneficiaries are no longer entitled
to benefits pursuant to the terms of the Plans. Upon termination
of the Trust any assets that remain allocated to an Employer's
Separate Account under the Trust shall be returned to such
Employer.
(c) Upon written approval of at least two-thirds of the
Participants and beneficiaries entitled to payment of benefits
pursuant to the terms of the Plans, the Company may terminate
this Trust prior to the time all benefit payments under the Plans
have been made. All assets allocated to an Employer's Separate
Account under the Trust at termination shall be returned to such
Employer.
(d) The Company may terminate this Trust with respect to
the Separate Account of any Employer with the written approval of
at least two-thirds of the Employer's respective Plan
Participants and beneficiaries who are entitled to payment of
benefits pursuant to the terms of the Plans. All assets
allocated to an Employer's Separate Account under the Trust on
the date of such termination shall be returned to such Employer.
(e) Any provision of this Trust Agreement to the contrary
notwithstanding, this Trust Agreement may not be amended or
terminated by the Company on or after the date of a Change of
Control without the written consent of a majority of the
Participants in the Plans on the date of such Change of Control.
Section 14. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan Participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed and construed in
accordance with the internal laws (and not the principles
relating to conflicts of laws) of the State of Texas, except
where superseded by federal law.
(d) Unless the context clearly indicates otherwise, when
used in this Trust
Agreement:
(i) "Administrative Committee" shall mean the
"Administrative Committee" appointed to administer each of
the Plans.
(ii) "Participant" shall mean each "Participant" as
that term is defined in the Executive Plan and each Director
who has an amount credited to his or her Account under the
Directors' Plan or who has elected to have all or any
portion of his or her Annual Fee deferred under the terms of
that Plan.
(e) Except where otherwise defined, capitalized terms used
herein shall have the meaning given to them in the Plans.
(f) In the event that a dispute arises between a Plan
Participant or beneficiary and the Participant's Employer, the
Company or the Trustee with respect to the payment of amounts
from the Trust and the Participant or beneficiary is successful
in pursuing a benefit to which he or she is entitled under the
terms of the Plans and this Trust against the Participant's
Employer, the Company, the Trustee or any other party in the
course of litigation or otherwise and incurs attorneys' fees,
expenses and costs in connection therewith, the Participant's
Employer shall reimburse the Plan Participant or beneficiary for
the full amount of any such attorneys' fees, expenses and costs.
(g) Upon the written consent of the Company delivered to
the Trustee, any other affiliate of the Company which adopts the
Executive Plan may become a party to this Trust by delivering to
the Trustee a certified copy of a resolution of its board of
directors or other governing authority adopting this Trust. For
purposes of this Trust, any such affiliate which adopts this
Trust with the written consent of the Company shall be an
Employer hereunder.
IN WITNESS WHEREOF, this Agreement has been executed this
13th day of August, 1997, to be effective as of July 1, 1997.
Enserch Exploration, Inc.
By: /s/ T M. Hamilton
Title:Chairman, President and
Chief Executive Officer
Texas Commerce Bank National Association
By
Title:
<PAGE>
<PAGE>
THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared
______________________________________, known to me to be the
person whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said Enserch
Exploration, Inc., a Texas corporation, and that he/she executed
the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of
_____________________, 1997.
Notary Public, State of Texas
My Commission expires:
THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, a notary public in and
for said County and State, on this day personally appeared
______________________________________, known to me to be the
person whose name is subscribed to the foregoing instrument and
acknowledged to me that the same was the act of the said Texas
Commerce Bank National Association, a national banking
association, and that he/she executed the same as the act of such
banking association for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of
_____________________, 1997.
Notary Public, State of Texas
My Commission expires:
<PAGE>
<PAGE>
APPENDIX A
TO THE
ENSERCH EXPLORATION, INC.
DEFERRED COMPENSATION TRUST
Participating Affiliates
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001023060
<NAME> ENSERCH EXPLORATION, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1551
<SECURITIES> 0
<RECEIVABLES> 65407
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 87701
<PP&E> 1987752
<DEPRECIATION> (1221234)
<TOTAL-ASSETS> 895278
<CURRENT-LIABILITIES> 136201
<BONDS> 35000
0
0
<COMMON> 1269
<OTHER-SE> 292083
<TOTAL-LIABILITY-AND-EQUITY> 895278
<SALES> 0
<TOTAL-REVENUES> 240294
<CGS> 0
<TOTAL-COSTS> 496679
<OTHER-EXPENSES> 319
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25502
<INCOME-PRETAX> (281568)
<INCOME-TAX> (84303)
<INCOME-CONTINUING> (197338)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (197338)
<EPS-PRIMARY> (1.56)
<EPS-DILUTED> (1.56)
</TABLE>
