U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange
Act of 1934 for the Quarterly Period Ended September 30, 1998
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities
Exchange Act of 1934
Commission file number 0-8898
Midcoast Energy Resources, Inc.
(Exact name of Registrant as Specified in Its Charter)
Nevada 76-0378638
(State or Other Jurisdiction of (I.R.S.
Employer
Incorporation or Organization)
Identification No.)
1100 Louisiana, Suite 2950
Houston, Texas 77002
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code: (713) 650-
8900
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Exchange Act of 1934 during the preceding 12 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 _
On September 30, 1998, there were outstanding 5,719,665
shares of the Company's common stock, par value $.01 per share.
MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES
Quarterly Report on Form 10-Q for the
Quarter Ended September 30, 1998
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets as of December 31, 1997
and September 30, 1998. 3
Consolidated Statements of Operations for
the three months
and nine months ended September 30, 1997
and September 30, 1998. 4
Consolidated Statement of Shareholders'
Equity for
the nine months ended September 30, 1998. 5
Consolidated Statements of Cash Flows for
the three months
and nine months ended September 30, 1997
and September 30, 1998. 6
Notes to Consolidated Financial Statements. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 8
PART II. OTHER INFORMATION 15
SIGNATURE 16
MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES
<TABLE>
UNAUDITED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
DECEMBER SEPTEMBER
31, 1997 30, 1998
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 308 $ 596
Accounts receivable, no allowance for doubtful 27,524 18,181
Materials and supplies, at average cost 1,225 1,848
Total current assets 29,057 20,625
Property, Plant and Equipment, at cost:
Natural gas transmission facilities 90,859 135,969
Investment in transmission facilities 1,341 1,341
Natural gas processing facilities 4,626 4,785
Oil and gas properties, using the full-
cost method of accounting 1,344 1,359
Other property and equipment 2,411 2,618
100,581 146,072
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION (3,029) (5,390)
OTHER ASSETS, net of amortization 1,429 2,673
Total assets $128,038 $163,980
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued $25,779 $ 15,762
liabilities
Other current liabilities 491 147
Short-term borrowing from bank 700 1,762
Current portion of long-term debt payable to banks 199 181
Total current liabilities 27,169 17,852
long-term debt payable to banks 28,923 69,120
other liabilities 190 266
deferred income taxes 9,613 10,574
minority interest in consolidated subsidiaries 692 592
Commitments and Contingencies (Note 3).
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 25 million shares
authorized, 5,681,330 and 5,719,665 shares issued
and outstanding at December 31, 1997 and September 30,
1998, respectively (Note 2). 57 57
Paid in capital 80,695 80,969
Accumulated deficit (19,283) (14,541)
Unearned compensation (18) (18)
Less: Cost of 46,500 treasury shares - (891)
Total shareholders' equity 61,451 65,576
Total liabilities and shareholders'equity $128,038 $163,980
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<TABLE>
MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
(In thousands, except per share data)
For the Three For the Nine
Months Ended Months Ended
September September September September
30, 1997 30, 1998 30, 1997 30, 1998
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Sale of natural gas
and transportation fees $23,309 $49,427 $46,202 $163,880
Natural gas processing revenue 1,154 825 3,735 2,931
Other revenue 60 49 212 374
Total operating revenues 24,523 50,301 50,149 167,185
OPERATING EXPENSES:
Cost of natural gas
and transportation fees 20,939 44,821 40,750 149,222
Natural gas processing costs 889 624 2,789 2,089
Depreciation,depletion and amortization 414 813 983 2,202
General and administrative 522 1,437 1,477 4,353
Other expenses 11 17 39 46
Total operating expenses 22,775 47,712 46,038 157,912
OPERATING INCOME 1,748 2,589 4,111 9,273
NON-OPERATING ITEMS:
Interest expense (184) (807) (680) (2,043)
Minority interest in consolidated
subsidiaries (55) (15) (170) (31)
Other income (expense), net (42) 17 (39) 117
INCOME BEFORE INCOME TAXES 1,467 1,784 3,222 7,316
PROVISION FOR INCOME TAXES (285) (204) (285) (1,247)
NET INCOME $ 1,182 $ 1,580 $ 2,937 $ 6,069
EARNINGS PER COMMON SHARE:
BASIC $ 0.22 $ 0.28 $ 0.82 $ 1.07
DILUTED $ 0.22 $ 0.27 $ 0.80 $ 1.03
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
BASIC 5,268,820 5,704,295 3,598,832 5,696,035
DILUTED 5,409,455 5,875,518 3,680,303 5,886,272
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
MIDCOAST ENERGY RESOURCES INC., AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<CAPTION>
ACCUMULATED TOTAL
COMPREHENSIVE COMMON PAID-IN ACCUMULATED UNEARNED TREASURY SHAREHOLDERS
INCOME STOCK CAPITAL DEFICIT COMPENSATION STOCK EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,1996 $ - $ 25 $26,942 $(13,284) $ (90) $ - $13,593
Shares issued or
vested under various
stock-based compensation
arrangements. - - - - 72 - 72
Sale of 2,315,000 shares
of common stock. - 23 34,030 - - - 34,053
Common stock warrants
issued in conjunction
with the Midla
Acquisition. - 4 9,167 - - - 9,171
10% stock dividend
(516,300 shares). - 5 10,556 (10,565) - - (4)
Net income. - - - 5,764 - - 5,764
Other comprehensive
income, net of tax. - - - - - - -
Common stock
dividends,$.29 per share - - - (1,198) - - (1,198)
Balance,
December 31, 1997. $ - $ 57 $80,695 $(19,283) $ (18) $ - $61,451
Net income. - - - 6,069 - - 6,069
Warrants exercised - - 274 - - - 274
Other
comprehensive
income, net of tax. - - - - - - -
Treasury stock purchase - - - - - (891) (891)
Common stock
dividends,$.23 per share - - - (1,327) - - (1,327)
Balance,
September 30,1998
(Unaudited). $ - $ 57 $80,969 $(14,541) $(18) $ (891) $65,576
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<TABLE>
MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Three Months For the Nine Months
Ended Ended
September September September September
30, 1997 30, 1998 30, 1997 30, 1998
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,182 $ 1,580 $ 2,937 $ 6,069
Adjustments to arrive at net
cash provided (used) in
operating activities -
Depreciation, depletion and amortization 414 813 983 2,202
Increase in deferred tax liability 24 204 33 961
Minority interest in consolidated
subsidiaries 55 15 170 57
Other (24) (71) 138 -
Changes in working capital accounts -
(Increase) decrease in accounts
receivable (1,797) (1,196) (3,062) 9,343
Increase in other current assets (163) (160) (715) (623)
Increase (decrease) in accounts payable
and accrued liabilities 1,473 1,854 1,960 (10,535)
Net cash provided by operating activities 1,164 3,039 2,444 7,474
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (Note 4) - (37,600) (39,715) (41,025)
Capital expenditures (210) (1,321) (353) (4,341)
Other 917 (459) 278 (1,213)
Net cash provided (used) in
investing activities 707 (39,380) (39,790) (46,579)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Bank debt borrowings 1,567 45,955 41,242 64,694
Bank debt repayments (37,159) (9,006) (38,064) (23,453)
Net proceeds from equity offering 34,060 - 34,060 -
Purchase of treasury stock - (891) - ( 891)
Contributions from (distributions to)
joint venture partners - (480) (229) 370
Dividends on common stock (385) (456) (785) (1,327)
Net cash provided (used) in financing (1,917) 35,122 36,224 39,393
activities
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (46) (1,219) (1,122) 288
CASH AND CASH EQUIVALENTS, 91 1,815 1,167 308
beginning of period
CASH AND CASH EQUIVALENTS, end $ 45 $ 596 $ 45$ 596
of period
CASH PAID FOR INTEREST $ 198 $ 640 $ 409$ 2,053
CASH PAID FOR INCOME TAXES $ 89 $ 174 $ 142$ 311
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
MIDCOAST ENERGY RESOURCES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial information has been
prepared by Midcoast Energy Resources, Inc. ("Midcoast" or "the
Company") in accordance with the instructions to Form 10-Q.
The unaudited information furnished reflects all adjustments,
all of which were of a normal recurring nature, which are, in
the opinion of the Company, necessary for a fair presentation
of the results for the interim periods presented. Although the
Company believes that the disclosures are adequate to make the
information presented not misleading, certain information and
footnote disclosures, including significant accounting
policies, normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and
regulations. Certain reclassification entries were made with
regard to the Consolidated Financial Statements for the periods
presented in 1997 so that the presentation of the information
is consistent with reporting for the Consolidated Financial
Statements in 1998. It is suggested that the financial
information be read in conjunction with the financial
statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
2. CAPITAL STOCK
At the May 15, 1998, Annual Shareholder meeting, the Board of
Directors resolution to amend the Articles of Incorporation to
increase the number of authorized shares of common stock, par
value $.01 per share from Ten Million (10,000,000) to Twenty-
Five Million (25,000,000) shares and to authorize Five Million
(5,000,000) shares of preferred stock, par value $.01 per share
was approved.
3. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT CONTRACTS
Certain executive officers of the Company have entered into
employment contracts, which through amendments, provide for
employment terms of varying lengths the longest of which
expires in April 2001. These agreements may be terminated by
mutual consent or at the option of the Company for cause, death
or disability. In the event termination is due to death,
disability or defined changes in the ownership of the Company,
the full amount of compensation remaining to be paid during the
term of the agreement will be paid to the employee or their
estate, after discounting at 12% to reflect the current value
of unpaid amounts.
MIT CONTINGENCY
As part of the Company's May 1997 acquisition of a 288 mile
interstate transmission system pipeline ("the MIT System") and
two end-user pipelines in northern Alabama ("the TRIGAS
Systems"), collectively ("the MIT Acquisition"), the Company
has agreed to pay additional contingent annual payments, which
will be treated as deferred purchase price adjustments, not to
exceed $250,000 per year. The amount each year is dependent
upon revenues received by the Company from certain gas
transportation contracts. The contingency is due over an eight-
year period commencing April 1, 1998 and payable at the end of
each anniversary date. The Company is obligated to pay the
lesser of 50% of the gross revenues received under these
contracts or $250,000.
MIDLA CONTINGENCY
In October 1997, the Company acquired a 386 mile
interstate transmission pipeline (the "MLGC System"), one
intrastate (the "MLGT System"), two end-user pipelines and
two offshore gathering pipelines, located in Louisiana
(collectively the "Midla Acquisition"), from Republic Gas
Partners, LLC. ("Republic"). In conjunction with the
acquisition, the Company agreed that if a specific
contract with a third party was executed prior to October
2, 1999, which included specific provisions regarding
price and throughputs, Midcoast would be obligated to
issue 110,000 warrants to Republic to acquire Midcoast
common stock at an exercise price of $19.77 per share. In
addition, concurrent with initial expenditures on the
project, the Company would incur a $1.2 million cash
obligation to Republic. At September 30, 1998, none of
the provisions of this contingency have been met.
4. ACQUISITIONS
KOCH ACQUISITION
In July 1998, the Company, through its wholly owned
subsidiaries, Mid Louisiana Gas Company and Mid Louisiana
Gas Transmission Company, purchased two pipeline systems
from Koch Gateway Pipeline Company, for cash consideration
of $2.6 million. The pipeline systems, which comprise
approximately 10 miles of 6" to 12" pipeline near Baton
Rouge, Louisiana, are being acquired as a part of
Midcoast's development of a high pressure pipeline to
enhance service to new and existing customers in and
around the Baton Rogue area. The expansion will help meet
the demand resulting from new contracts executed by
Midcoast's subsidiaries to provide a combined 65 Mmcf/day
of new marketing services and 20 Mmcf/day of new
transportation services to an industrial facility near
Port Hudson, Louisiana and a new cogeneration facility
near Baton Rogue.
ANADARKO ACQUISITION
In September 1998, Midcoast Gas Services, Inc. ("MGSI"), a
wholly owned subsidiary of Midcoast, purchased the
Anadarko gas gathering system from El Paso Field Services
Company, a business unit of El Paso Energy Corporation.
The pipeline system was purchased for cash consideration
of $35 million. The acquisition was financed through
Midcoast's bank credit facility.
Under the agreement, MGSI acquired ownership and operation
of the Anadarko gas gathering system located in Beckham
and Roger Mills counties, Oklahoma and Hemphill, Roberts
and Wheeler counties, Texas effective August 1, 1998. The
system is comprised of over 696 miles of primarily 16" and
20" pipeline with an average throughput of 150 Mmcf/day
and a total capacity of 345 Mmcf/day. The system gathers
gas from approximately 250 wells and includes a 40
Mmcf/day natural gas processing facility, 11 compressor
stations with a total of over 14,000 horsepower and
interconnections with eight major interstate and
intrastate pipeline systems.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS
The Company has grown significantly as a result of the
construction and acquisition of new pipeline facilities.
Since January of 1997, the Company acquired 16 pipelines
for an aggregate acquisition cost of over $111.9 million.
The Company believes the historical results of operations
do not fully reflect the operating efficiencies and
improvements that are expected to be achieved by
integrating the acquired pipeline systems. As the
Company pursues its growth strategy in the future, its
financial position and results of operations may fluctuate
significantly from period to period.
The Company's results of operations are determined
primarily by the volumes of gas transported, purchased and
sold through its pipeline systems or processed at its
processing facilities. Most of the Company's operating
costs do not vary directly with volume on existing
systems, thus, increases or decreases in transportation
volumes on existing systems generally have a direct effect
on net income. Also, the addition of new pipeline systems
typically results in a larger percentage of revenues being
added to operating income as fixed overhead components are
allocated over more systems. The Company derives its
revenues from three primary sources: (i) transportation
fees from pipeline systems owned by the Company, (ii) the
processing and treating of natural gas and (iii) the
marketing of natural gas.
Transportation fees are received by the Company for
transporting gas owned by other parties through the
Company's pipeline systems. Typically, the Company incurs
very little incremental operating or administrative
overhead cost to transport gas through its pipeline
systems, thereby recognizing a substantial portion of
incremental transportation revenues as operating income.
The Company's natural gas processing revenues are realized
from the extraction and sale of natural gas liquids
("NGLs") as well as the sale of the residual natural gas.
These revenues occur under processing contracts with
producers of natural gas utilizing both a "percentage of
proceeds" and "keep-whole" basis. The contracts based on
percentage of proceeds provide that the Company receives a
percentage of the NGL and residual gas revenues as a fee
for processing the producers gas. The contracts based on
keep-whole provide that the Company is required to
reimburse the producers for the BTU energy equivalent of
the NGLs and fuel removed from the natural gas as a result
of processing and the Company retains all revenues from
the sale of the NGL's. Once extracted, the NGLs are
further fractionated in the Company's facilities into
products such as ethane, propane, butanes, natural
gasoline and condensate, then sold to various wholesalers
along with raw sulfur from the Company's sulfur recovery
plant. The Company's processing operations can be
adversely affected by declines in NGL prices, declines in
gas throughput or increases in shrinkage or fuel costs.
The Company's gas marketing revenues are realized through
the purchase and resale of natural gas to the Company's
customers. Generally, gas-marketing activities will
generate higher revenues and correspondingly higher
expenses than revenues and expenses associated with
transportation activities, given the same volumes of gas.
This relationship exists because, unlike revenues derived
from transportation activities, gas marketing revenues and
associated expenses includes the full commodity price of
the natural gas acquired. The operating income the Company
recognizes from its gas marketing efforts is the
difference between the price at which the gas was
purchased and the price at which it was resold to the
Company's customers. The Company's strategy is to focus
its marketing activities on Company owned pipelines. The
Company's marketing activities have historically varied
greatly in response to market fluctuations.
The Company has had quarter-to-quarter fluctuations in
its financial results in the past due to the fact that
the Company's natural gas sales and pipeline throughputs
can be affected by changes in demand for natural gas
primarily because of the weather. Although, historically,
quarter-to-quarter fluctuations resulting from weather
variations have not been significant, the acquisitions of
the Magnolia System, the MIT System and the MLGC System
have increased the impact that weather conditions have on
the Company's financial results. In particular, demand on
the Magnolia System, MIT System and MLGC System fluctuate
due to weather variations because of the large municipal
and other seasonal customers which are served by the
respective systems. As a result, historically the winter
months have generated more income than summer months on
these systems. There can be no assurances that the
Company's efforts to minimize such effects will have any
impact on future quarter-to-quarter fluctuations due to
changes in demand resulting from variations in weather
conditions. Furthermore, future results could differ
materially from historical results due to a number of
factors including but not limited to interruption or
cancellation of existing contracts, the impact of
competitive products and services, pricing of and demand
for such products and services and the presence of
competitors with greater financial resources.
The Company has also from time to time derived
significant income by capitalizing on opportunities in
the industry to sell its pipeline systems on favorable
terms as the Company receives offers for such systems
which are suited to another company's pipeline network.
Although no substantial divestitures are currently under
consideration, the Company will from time to time solicit
bids for selected properties which are no longer suited
to its business strategy.
RESULTS OF OPERATIONS
The following tables present certain data for major
operating units of Midcoast for the three and nine-month
periods ended September 30, 1997 and September 30, 1998.
A discussion follows which explains significant factors
that have affected Midcoast's operating results during
these periods. Gross margin for each of the units is
defined as the revenues of the unit less related direct
costs and expenses of the unit. As previously discussed,
the Company provides natural gas marketing services to
its customers. For analysis purposes, the Company
accounts for the marketing services by recording the
marketing activity on the operating unit where it occurs.
Therefore, the gross margin for each of the major
operating units include a transportation and marketing
component.
TRANSMISSION PIPELINES
(In thousands, except gross margin per Mmbtu)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September September September September
30,1997 30,1998 30,1997 30,1998
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Transportation Fees $ 856 $1,454 $ 1,835 $ 4,751
Marketing 13,660 21,862 23,359 85,591
Total operating revenues 14,516 23,316 25,194 90,342
OPERATING EXPENSES:
Cost of Natural Gas and 12,662 20,225 21,865 78,519
Transportation Charges
Operating Expenses 599 1,106 905 3,308
Total operating expenses 13,261 21,331 22,770 81,827
GROSS MARGIN $ 1,255 $ 1,985 $ 2,424 $ 8,515
VOLUME (in Mmbtu)
Transportation 9,146 11,459 16,703 37,190
Marketing 5,588 9,972 9,174 36,838
TOTAL VOLUME 14,734 21,431 25,877 74,028
GROSS MARGIN per Mmbtu $ .09 $ .09 $ .09 $ .12
</TABLE>
The Company's entrance into the regulated interstate
pipeline business began with the acquisition of the MIT
System (June 1997) and the MLGC System (November 1997)
which significantly enhanced the Company's transmission
pipeline operations in 1998. Significant increases in
revenues, sales volumes and gross margin are attributable
to full quarter and year-to-date operations of the MIT and
MLGC Systems. In the three and nine month periods ended
September 30, 1998, revenues increased 61% and 259%,
respectively on corresponding volume increases of 45% and
186%. For the same periods, gross margins increased by
58% and 251% to $1,985,000 and $8,515,000 from $1,255,000
and $2,424,000.
The gross margin per Mmbtu was affected by the inclusion
of the MIT System and the MLGC System during the 1998
periods. These systems are subject to seasonal margin
variations. The MIT System has a lower summer (April -
October) tariff rate than its winter (November - March)
tariff rate. The MLGC System allows customers to reduce
their demand capacity during the summer months.
The Company has succeeded in increasing contracted
transportation volumes on both the MIT System and MLGC
System since completing the acquisitions. Through the
completion of two successful open seasons, contracted
demand on the MIT System has increased by 28% for the
winter of 1998 which includes new long term transportation
agreements with the cities of Huntsville and Decatur,
Alabama. Construction of new pipeline facilities on the
MIT System is planned to accommodate the incremental
volumes generated by the new transportation contracts and
has received FERC approval. Contracted demand on the MLGC
System has increased due to the execution of a new 20
Mmcf/day gas transportation contract to service a new
cogeneration facility near Baton Rouge. Transportation
services under the new contract will commence upon the
completion of related construction of new facilities
expected in the fourth quarter of 1998.
END-USER PIPELINES
<TABLE>
<CAPTION>
(In thousands, except gross margin per Mmbtu)
For the Three For the Nine
Months Ended Months Ended
September September September September
30,1997 30,1998 30,1997 30,1997
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Transportation Fees $ 833 $ 897 $ 1,713 $ 2,456
Marketing 6,602 21,890 14,883 65,087
Total operating revenues 7,435 22,787 16,596 67,543
OPERATING EXPENSES:
Cost of Natural Gas and 6,494 21,590 14,331 63,638
Transportation Charges
Operating Expenses 75 48 163 141
Total operating expenses 6,569 21,638 14,494 63,779
GROSS MARGIN $ 866 $ 1,149 $ 2,102 $ 3,764
VOLUME (in Mmbtu)
Transportation 3,484 6,003 7,308 15,441
Marketing 2,672 10,293 5,938 29,589
TOTAL VOLUME 6,156 16,296 13,246 45,030
GROSS MARGIN per Mmbtu $ .14 $ .07 $ .16 $ .08
</TABLE>
The Company's end-user operating unit experienced
increases in sales volumes for the three and nine month
periods ended September 30, 1998, primarily due to the
full quarter and year-to-date operations of the
acquisitions of the TRIGAS Systems (June 1997) and MLGT
System (November 1997). As a result, in the three and
nine month periods ended September 30, 1998, revenues
increased 206% and 307%, and gross margin increased 33%
and 79%, respectively.
The Company's gross margin per Mmbtu declined for the
three and nine month periods ended September 30, 1998.
The decrease is attributable to an increase in marketing
activities which are characterized by lower margins and
higher volumes.
Since Midcoast's ownership of the MLGT System, new
marketing services contracts have been executed to provide
25 Mmcf/day of new marketing services beginning January 1,
1998 to an industrial facility near Port Hudson,
Louisiana, and an additional 40 Mmcf/day of natural gas
marketing services to a new cogeneration facility near
Baton Rouge by the end of 1998. The Company is currently
constructing a new high pressure end-user pipeline system
to service the new contracts. The new pipeline will allow
the Company to compete for potential new customers along
the industrial corridor of the Mississippi River requiring
natural gas at pressures previously not available through
the MLGT System.
<TABLE>
<CAPTION>
GATHERING PIPELINES AND NATURAL GAS PROCESSING
(In thousands, except gross margin per Mmbtu)
For the Three For the Nine
Months Ended Months Ended
September September September September
30,1997 30,1998 30,1997 30,1998
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gathering Transportation Fees $ 147 $ 1,346 $ 504 $ 1,789
Processing Revenues 1,099 825 3,626 2,931
Marketing 1,266 1,979 4,017 4,206
Total operating revenues 2,512 4,150 8,147 8,926
OPERATING EXPENSES:
Cost of Natural Gas and 1,068 1,514 3,343 3,051
Transportation Charges
Processing cost 511 325 1,737 1,186
Operating Expenses 419 638 1,195 1,468
Total operating expenses 1,998 2,477 6,275 5,705
GROSS MARGIN $ 514 $ 1,673 $ 1,872 $ 3,221
VOLUME (in Mmbtu)
Gathering 3,177 16,568 9,483 27,965
Processing 428 468 1,383 1,489
Marketing 561 1,490 1,711 3,487
TOTAL VOLUME 4,166 18,526 12,577 32,941
GROSS MARGIN per Mmbtu $ .12 $ .09 $ .15 $ .10
</TABLE>
The gathering pipelines and natural gas processing
operating unit reflected mixed results for the three and
nine month periods ended September 30, 1998 as compared to
the equivalent periods in 1997. Although margins per
Mmbtu declined for the gathering, processing and marketing
units, overall gross margin improved due to increased
volumes gathered, processed and marketed during these
periods.
Gathering volumes increased 421% and 195% for the three
and nine-month periods ended September 30, 1998,
respectively. These volumetric increases are primarily
the result of the Company's acquisition of the Anadarko
System. Although the Anadarko System was operational for
only two-months in the quarter, it is responsible for 57%
and 34% of the volumes gathered for the three and nine
month periods ended September 30, 1998. In addition,
gathering volumes increases are associated with offshore
gathering systems acquired in the Midla Acquisition and
the Company's gathering line investment in Alaska.
Processing volumes increased 9% and 8% for the three and
nine-month periods ended September 30, 1998, respectively.
Weaker NGL pricing, however, mitigated the volume
increase, and therefore, the gross margins for 1998 were
comparable to the corresponding periods in 1997. The
future profitability of the Harmony Plant will be affected
by changes in commodity pricing of NGL and natural gas,
production curtailments, shut-in wells and also the
natural declines in the deliverability of the reservoirs
connected and dedicated to Midcoast's processing plant.
Marketing volumes increased 166% and 104%, for the three
and nine month periods ended September 30, 1998,
respectively. These volumetric increases are primarily
the result of the Texana Acquisition. The Texana system
accounted for 37% and 47% of the total marketing volumes
for the three and nine-month periods ended September 30,
1998, respectively.
The overall decline in gross margin per Mmbtu in 1998 is
primarily attributable to significant volumes gathered by
offshore pipelines acquired in the Midla Acquisition and
significant volumes marketed on the Texana System. These
systems receive a low rate on a per Mmbtu basis and were
not included in the 1997 periods.
OTHER INCOME, COSTS AND EXPENSES
In the three and nine month period ended September 30,
1998, the Company received revenues of $49,000 and
$374,000, respectively from its oil and gas properties as
compared to $60,000 and $212,000 over the same periods in
1997. The increase is primarily attributable to a one-
time settlement received by the Company on its Vealmoor
Field properties. Also, certain of Midcoast's oil and
gas properties in the Sun Field have been approved for
changes in well spacing and tertiary recovery by
depressurization. The Company believes these factors may
contribute to increased volumes and revenues for its oil
and gas properties.
In the three and nine month period ended September 30,
1998, the Company's depreciation, depletion and
amortization increased to $813,000 and $2,202,000,
respectively from $414,000 and $983,000 when compared to
1997. The increase is primarily due to increased
depreciation on assets acquired in the MIT and Midla
Acquisitions. Collectively, these new acquisitions
accounted for 54% and 57% of the increases of $399,000 and
$1,219,000.
In the three and nine month period ended September 30,
1998, the Company's general and administrative expenses
increased to $1,437,000 and $4,353,000, respectively from
$522,000 and $1,477,000 in 1997. The increase is
primarily due to increased costs associated with the
management of the assets acquired in the MIT and Midla
Acquisitions. Collectively, these new acquisitions
accounted for 93% and 96% of the increase of $915,000 and
$2,876,000. In addition, the increase can be attributed
to the Company's expansion of its infrastructure to allow
for continued growth.
Interest expense for the three and nine months ended
September 30, 1998 increased to $807,000 and $2,043,000,
respectively from $184,000 and $680,000 in 1997. The
Company was servicing an average of $45.9 and $36.0
million in debt for the three and nine months ended
September 30, 1998 as compared to $8.5 and $10.8 million
in debt for the three and nine months ended September 30,
1997. The increased debt load in 1998 is primarily
associated with the Company's October 31, 1997 acquisition
of Republic and, its September 1998 acquisition of
Anadarko. The additional expense related to increased debt
levels was mitigated by a reduction in the Company's
weighted average interest rate. The Company's weighted
average interest rate was 7.59% and 7.57% for the three
month and nine-month period ended September 30, 1998 as
compared to 8.66% and 8.40% for the three month and nine-
month period ended September 30, 1997.
The Company recognized net income for the three and nine-
month period ended September 30, 1998 of $1.6 million and
$6.0 million, respectively, as compared to $1.2 million
and $2.9 million for the equivalent period in 1997. Basic
earnings per share ("EPS") for the three and nine month
period ended September 30, 1998 increased 27% and 30%,
respectively from $.22 and $.82 in 1997 to $.28 and $1.07
in 1998. The Company achieved the increased EPS despite
the dilutive effects of issuing additional shares in the
July 1997 common stock offering. The significant
improvement in EPS is primarily attributable to the
positive impact of accretive acquisitions consummated
during 1997.
INCOME TAXES
As of December 31, 1997, the Company had net operating
loss ("NOL") carryforwards of approximately $17.0 million,
expiring in various amounts from 1998 through 2012. The
Company's predecessor and Republic generated these NOLs.
The ability of the Company to utilize the carryforwards is
dependent upon the Company generating sufficient taxable
income and will be affected by annual limitations
(currently estimated at approximately $4.9 million) on the
use of such carryforwards due to a change in shareholder
control under the Internal Revenue Code triggered by the
Company's July 1997 common stock offering and the change
of ownership created by the acquisition of Republic. The
Company believes, however, that the limitation will not
materially impact the Company's ability to utilize the NOL
carryforwards prior to their expiration. Depending on
profitability, the limitation could result in the
Company's income tax expense to increase as compared to
previous years where no such limitation existed.
CAPITAL RESOURCES AND LIQUIDITY
In September 1998, the Company increased its borrowing
availability under its bank financing agreements with Bank
One Texas, N.A. ("Bank One"). Amendments to the credit
agreements (collectively the "Credit Agreements") were
entered into which increased the Company's borrowing
availability, modified the Letter of Credit facility,
established a credit sharing, extended the maturity two
years to August 2002, modified financial covenants,
established waiver and amendment approvals and changed the
fee structure to include a decrease on the interest rate
on borrowings.
The amendments to the Credit Agreements increased the
Company's borrowing availability from $80.0 million to
$150.0 million (with an initial committed amount of $100
million). The amended Credit Agreements provide borrowing
availability as follows: (i) up to a $15.0 million
sublimit for the issuance of standby and commercial
letters of credit and (ii) the difference between the
$100 million and the used sublimit available as a
Revolver. Effective September 8, 1998, at the Company's
option, borrowings under the amended Credit Agreements
will accrue interest at LIBOR plus 1.25% or the Bank One
base rate less .25%. These rates reflect a .25% reduction
in both the LIBOR and Bank One base rate option. Finally,
the amended Credit Agreements have eliminated escalations
of the interest rate spread when borrowings exceed 50% of
the borrowing base.
Under the amended Credit Agreements, a credit sharing has
been established among Bank One, CIBC Oppenheimer, Texas
N.A., Nationsbank Texas, N.A., collectively the
("Lenders") and the Company. The Company is subject to an
initial facility fee of $495,000 which represents all fees
due on borrowings up to $100 million. As funds in excess
of $100 million are borrowed, a .15% fee will be imposed.
The Company's commitment fee will remain at .375%.
Additionally, the Company is subject to an annual
administrative agency fee of $35,000.
The Credit Agreements are secured by all accounts
receivable, contracts, the pledge of the stock of MIT,
MLGC and the pledge of the stock of Magnolia Pipeline
Corporation and a first lien security interest in the
Company's pipeline systems. The Credit Agreements contains
a number of customary covenants that require the Company
to maintain certain financial ratios, and limit the
Company's ability to incur additional indebtedness,
transfer or sell assets, create liens, or enter into a
merger or consolidation. Midcoast was in compliance with
such financial covenants at September 30, 1998.
For the nine months ended September 30, 1998, the Company
generated cash flow from operating activities of
approximately $7.5 million before changes in working
capital accounts and had approximately $79.2 million
available to the Company under its Credit Agreements. At
September 30, 1998, the Company had committed to making
approximately $8.2 million in capital expenditures for the
remainder of 1998. The Company believes that its Credit
Agreements and funds provided by operations will be
sufficient for it to meet its operating cash needs for the
foreseeable future, and its projected capital expenditures
of approximately $8.2 million. If funds under the Credit
Agreements are not available to fund acquisition and
construction projects the Company would seek to obtain
such financing from the sale of equity securities or other
debt financing. There can be no assurances that any such
financing will be available on terms acceptable to the
Company. Should sufficient capital not be available, the
Company will not be able to implement its growth strategy.
RISK MANAGEMENT
According to guidelines provided by the Board, the Company
enters into exchange-traded commodity futures, options and
swap contracts to reduce the exposure to market
fluctuations in price and transportation costs of energy
commodities and is not to engage in speculative trading.
Approvals are required from senior management prior to the
execution of any financial derivative. The financial
derivatives have pricing terms indexed to both the New
York Mercantile Exchange and Kansas City Board of Trade.
The Company's market exposures arise from inventory
balances and fixed price purchase and sale commitments.
The Company uses the exchange-traded commodities to manage
and hedge price risk related to these market exposures.
Gas futures involve the buying and selling of natural gas
at a fixed price. Over-the-counter swap agreements
require the Company to receive or make payments based on
the difference between a specified price and the actual
price of natural gas. The Company uses futures and swaps
to manage margins on offsetting fixed-price purchase or
sales commitments for physical quantities of natural gas.
Options held to hedge risk provide the right, but not the
obligation, to buy or sell energy commodities at a fixed
price. The Company utilizes options to manage margins and
to limit overall price risk exposure.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This report includes "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Exchange Act of 1934.
All statements other than statements of historical fact
included in this report are forward looking statements.
Such forward looking statements include, without
limitation, statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations
- - -- Capital Resources and Liquidity" regarding Midcoast's
estimate of the sufficiency of existing capital resources,
whether funds provided by operations will be sufficient to
meet its operational needs in the foreseeable future, and
its ability to utilize NOL carryforwards prior to their
expiration. Although Midcoast believes that the
expectations reflected in such forward looking statements
are reasonable, it can give no assurance that such
expectations reflected in such forward looking statements
will prove to be correct. The ability to achieve
Midcoast's expectations is contingent upon a number of
factors which include (i) timely approval of Midcoast's
acquisition candidates by appropriate governmental and
regulatory agencies, (ii) the effect of any current or
future competition, (iii) retention of key personnel and
(iv) obtaining and timing of sufficient financing to fund
operations and/or construction or acquisition
opportunities. Important factors that could cause actual
results to differ materially from the Company's
expectations ("Cautionary Statements") are disclosed in
this report, including without limitation those statements
made in conjunction with the forward looking statements
included in this report. All subsequent written and oral
forward looking statements attributable to the Company or
persons acting on its behalf are expressly qualified in
their entirety by the Cautionary Statements.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits:
EXHIBITS DESCRIPTION OF EXHIBITS
2.8 Purchase and Sale Agreement dated September 8, 1998,
by and between El Paso Field Services Company, a
Delaware corporation, and Midcoast Gas Services,
Inc., a Delaware corporation.
10.30 Amended and restated Credit Agreement dated
August 31, 1998, by and among Midcoast Energy
Resources, Inc., and, Bank One Texas, N.A., the
("Administrative Agent"), CIBC Inc., ("Syndication
Agent"), and Nationsbank, N.A. the "Documentation
Agent").
______
b. Reports on Form 8-K:
A report on Form 8-K was filed during the third quarter
of 1998. Such report was filed on September 22, 1998 to report
the Purchase and Sales Agreement dated July 29, 1998 by and
between El Paso Field Services Company and Midcoast Gas
Services, Inc.
Signature
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MIDCOAST ENERGY RESOURCES, INC.
(Registrant)
BY: /s/ Richard A. Robert
Richard A. Robert
Principal Financial Officer
Treasurer
Principal Accounting Officer
Date: November 16, 1998
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is
entered into as of __________, 1998, by and between El Paso Field
Services Company, a Delaware corporation (the "Seller"), and
Midcoast Gas Services, Inc., a Delaware corporation (the
"Buyer"). The Seller and the Buyer are referred to collectively
herein as the "Parties."
RECITALS
WHEREAS, the Seller owns the properties and assets
comprising the Anadarko gas gathering system (collectively, the
"Assets") described in Section 2 hereof;
WHEREAS, this Agreement contemplates a transaction in
which the Buyer will purchase from the Seller, and the Seller
will sell to the Buyer, all of the Assets in return for the
consideration specified herein;
NOW, THEREFORE, in consideration of the premises and
the mutual promises herein made, and in consideration of the
representations, warranties and covenants herein contained, the
Parties agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in
settlement, liabilities, obligations, taxes, liens, losses,
expenses and fees, including court costs and attorneys' fees and
expenses, but excluding consequential damages.
"Affiliate" has the meaning set forth in Rule 12b-
2 of the regulations promulgated under the Securities Exchange
Act.
"Assets" has the meaning set forth in Section 2.
"Buyer" has the meaning set forth in the preface
above.
"Closing" has the meaning set forth in Section
2(f) below.
"Closing Date" has the meaning set forth in
Section 2(f) below.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Confidentiality Agreement" means the
Confidentiality Agreement between the Buyer's parent and the
Seller dated May 12, 1998.
"Customary Post-Closing Consents" means consents
and approvals from Governmental Authorities that are customarily
obtained after closing in connection with a sale of ownership
interests or assets of the nature of the Assets.
"Employee Pension Benefit Plan" has the meaning
set forth in ERISA section 3(2).
"Encumbrance" means any mortgage, pledge, lien,
encumbrance, charge, other security interest or defect in title.
"Environmental Law" or "Environmental Laws" has
the meaning given to that term in Section 4(i) of this Agreement.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Excluded Assets" has the meaning set forth in
Section 2(b).
"Excluded Liabilities" has the meaning set forth
in Section 2(d).
"Governmental Authority" means the United States
and any state, county, city or other political subdivision,
agency, court or instrumentality.
"Hart-Scott-Rodino Act" means the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended.
"Hazardous Substances" means all materials,
substances and wastes which are regulated under any Environmental
Law or which may form the basis for liability under any
Environmental Law.
"Indemnified Party" has the meaning set forth in
Section 8(d) below.
"Indemnifying Party" has the meaning set forth in
Section 8(d) below.
"Knowledge" means, in the case of the Seller, the
actual knowledge of the individuals listed on SCHEDULE 1(a)
hereto without independent investigation and, in the case of the
Buyer, the actual knowledge of the individuals listed on SCHEDULE
1(b) hereto without independent investigation.
"Laws" means any constitution, statute, code,
regulation, rule, injunction, judgment, order, decree, ruling,
charge or other restriction of any applicable Governmental
Authority.
"Material Adverse Effect" means any change or
effect that, individually or in the aggregate with other changes
or effects, is adverse to the business, operations and/or
properties comprising the Assets, in the amount of Twenty-Five
Thousand Dollars ($25,000.00) or more.
"Ordinary Course of Business" means the ordinary
course of business consistent with the affected party's past
custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface
above.
"Permitted Encumbrances" means any of the
following: (i) any liens for taxes and assessments not yet
delinquent or, if delinquent, that are being contested in good
faith in the ordinary course of business; (ii) any obligations or
duties reserved to or vested in any municipality or other
Governmental Authority to regulate any Asset in any manner
including all applicable Laws; (iii) mechanic's, materialmen's,
and similar liens identified in SCHEDULE 1; (iv) purchase money
liens and liens securing rental payments under capital lease
arrangements; and (v) any Customary Post-Closing Consents with
respect to the Assets.
"Person" means an individual, a partnership, a
corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental
entity (or any department, agency, or political subdivision
thereof).
"Purchase Price" has the meaning set forth in
Section 2(e) below.
"Securities Act" means the Securities Act of 1933,
as amended.
"Securities Exchange Act" means the Securities
Exchange Act of 1934, as amended.
"Seller" has the meaning set forth in the preface
above.
"Tax(es)" means any federal, state, local or
foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code 59A), custom duties,
capital stock, franchise profits, withholding, social security
(or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax of any kind
whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
"Tax Return" means any return, declaration,
report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
"Third Party Claim" has the meaning set forth in
Section 8(d) below.
"Year 2000 Compliant" means that the Assets and
all data processing related to the Assets will be able to
function without interruption or human intervention with four-
digit year processing on all Date Data, including errors or
interruptions from functions which may involve Date Data from
more than one century or leap years, regardless of the date of
processing or date of Date Data ("Date Data" ("Date Datameans any
data, input, or output which includes an indication of date), and
provide results from any operation accurately reflecting any Date
Data used in the operation performed, with output in any form,
except graphics, having four-digit years, or provide data
interchange in the ISO 8601:1988 standard of CCYYMMDD.
2. Purchase and Sale of the Assets.
(a) Assets. Subject to the terms and conditions
of this Agreement, the Seller agrees to sell, and the Buyer
agrees to purchase from the Seller, the Assets, consisting of:
(i) the Anadarko gathering system,
compression facilities and dehydration facilities
depicted on the maps attached hereto as SCHEDULE
2(a)(i) together with all valves, taps,
interconnections and flow meters attached thereto or
used in connection therewith;
(ii) all equipment whether owned or leased
which is routinely used or held for use in connection
with the Anadarko gathering system and facilities
described or referred to in clause (a)(i) above,
including but not limited to the compressor units,
scrubbers, dehydration units, tanks, traps, cathodic
protection equipment, radios (not radio frequencies),
remote terminal units, the communication tower at
Canadian, Texas, flow computers, laptop computers, and
other personal property listed on the attached SCHEDULE
2(a)(ii);
(iii) all real property interests
currently used by the Seller in connection with the
Anadarko gathering system and facilities described or
referred to in clause (a)(i) above, including those fee
interests, surface leases, easements, rights-of-way,
surface use agreements and other similar agreements
listed on the attached SCHEDULE 2(a)(iii) (collectively
the "Rights-of-Way");
(iv) the vehicles and heavy motorized
equipment, trailers and like equipment listed on the
attached SCHEDULE 2(a)(iv);
(v) the gas purchase contracts, residue gas
sales contracts, gas gathering agreements, processing
agreements, treating agreements, compression agreements
and third party contractor or supplier agreements,
together with all amendments thereto and ratifications
thereof, listed on the attached SCHEDULE 2(a)(v)
(collectively, the "Gas Contracts");
(vi) any and all other facilities, equipment,
tools, office furniture and equipment, operating
supplies, gasoline or diesel fuel, spare parts,
chemicals and other tangible assets currently located
at or attached or appurtenant to the Anadarko gathering
system and facilities described or referred to in
clause (a)(i) above, whether in use or non-use, and
whether specifically described or not described in the
schedules attached to this Agreement;
(vii) all books, files, maps, records and
reports (including electronic data files that would not
violate any license or law) pertaining primarily to the
Anadarko gathering system and facilities described or
referred to in clause (a)(i) above and the equipment
referred to in clause (a)(ii) above, including, but not
limited to, all pipeline and plant construction and
testing records, vessel and pipe certifications and
weld x-rays, equipment specifications and operating
manuals and inspection reports, and reports and filings
to and with the U.S. Department of Transportation, the
U.S. Environmental Protection Agency and the states of
Oklahoma and Texas;
(viii) all permits, licenses, orders,
certificates of occupancy and other governmental
authorizations obtained by the Seller pertaining or
relating to the Anadarko gathering system and
facilities described or referred to in clause (a)(i)
above set forth on SCHEDULE 2(a)(viii) hereto, to the
extent legally assignable or transferable; and
(ix) the office building and property located
at South Highway 83, Shamrock, Texas 79079, and all of
the furnishings, fixtures and equipment therein.
(b) Excluded Assets. Notwithstanding any
provision of Section 2(a) hereof, the Assets do not include, and
the Seller shall retain all right, title and interest in and to
the following assets (the "Excluded Assets"):
(i) all cash and cash equivalents of the
Seller;
(ii) all accounts and notes receivable
arising out of, resulting from or relating to the
business and operations of the Assets for periods up to
the Effective Time, and all claims, causes of action
and rights relating thereto and proceeds thereof, other
than those notes and/or accounts listed on the attached
SCHEDULE 2(b) and the claims, causes of action and
rights relating thereto and proceeds thereof to the
extent relating to periods after the Effective Time;
(iii) all rights under insurance policies
of the Seller and its Affiliates relating to the
Assets;
(iv) the items listed on SCHEDULE 2(b)(iv);
(v) all computer equipment (except as listed
in Section 2(a) herein);
(vi) Tax credits, Tax refunds or other
Tax assets relating to whole or partial taxable periods
on or before the Closing Date;
(vii) Tax Returns, Tax workpapers and
other Tax records and information;
(ix) all equipment located in the
Seller's offices located in Houston, Texas, El Paso,
Texas, and Farmington, New Mexico; and
(x) that certain payment by Exxon Company,
U.S.A. to the Seller described as the past settlement
for litigation and the purchase of the Northeast
Mayfield Treating Plant in Beckham County, Oklahoma.
(c) Assumed Liabilities. Except for the
liabilities and obligations described in Section 2(d) below,
subject to the terms and conditions of, and the Closing of, this
Agreement, effective as of the Effective Time, the Buyer shall
assume and shall thereafter be responsible for and shall pay and
discharge when due, all liabilities and obligations arising out
of, resulting from or relating to any of the Assets, whether
absolute, contingent, matured or unmatured, and whether arising
prior to, on or after the Effective Time (collectively, the
"Assumed Liabilities"). The assumption of the Assumed
Liabilities by the Buyer hereunder shall not be deemed to create,
confirm or give rise to any rights of any third party, as third-
party beneficiary or otherwise, or to waive any defenses
available to the Seller or the Buyer with respect to any such
liabilities; it being understood that such assumption is for the
purpose of allocating responsibility between the Seller and the
Buyer. Further, assumption of the Assumed Liabilities by the
Buyer hereunder shall not be deemed a waiver of any breach of any
representation, warranty, covenant, agreement or undertaking of
the Seller under this Agreement even though such breach gives
rise to Assumed Liabilities.
(d) Excluded Liabilities. Notwithstanding
Section 2(c) hereof, the Buyer is not assuming, and the Seller
shall retain and be responsible for and shall pay and discharge
when due, the following liabilities and obligations
(collectively, the "Excluded Liabilities"):
(i) all accounts and notes payable arising
out of, resulting from or relating to the Assets to the
extent relating to or for periods up to and including
the Effective Time;
(ii) all indebtedness of the Seller; and
(iii) all Taxes arising out of, resulting
from or relating to the Assets for whole or partial
taxable periods on or before the Closing Date.
(e) Purchase Price. The Buyer agrees to pay to
the Seller, at the Closing, Thirty- Five Million Dollars
($35,000,000.00) (the "Purchase Price"), as adjusted at Closing
pursuant to this Agreement, payable by wire transfer or delivery
of other immediately available funds.
(f) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of the Seller, 1001 Louisiana Street, Houston,
Texas 77002, commencing at 9:00 a.m. local time on the second
business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with
respect to actions each Party will take at the Closing itself) or
such other date as the Buyer and the Seller may mutually
determine (the "Closing Date"). Notwithstanding the consummation
of the purchase and sale contemplated by this Agreement on the
Closing Date, the Closing will be deemed to be effective as of
9:00 a.m. on August 1, 1998 (the "Effective Time").
(g) Deliveries at the Closing. At the Closing,
(i) the Seller will deliver to the Buyer the various
certificates, instruments and documents referred to in Section
7(a) below, (ii) the Buyer will deliver to the Seller the various
certificates, instruments and documents referred to in Section
7(b) below, (iii) the Seller will deliver to the Buyer such
instruments of assignment, conveyance and transfer, with special
warranty of title as to all claims by, through and under the
Seller only, and otherwise in form and content mutually
acceptable to the Seller and the Buyer, as shall be necessary to
transfer to the Buyer all of the Assets, and (iv) the Buyer will
deliver to the Seller the Purchase Price specified in Section
2(e) above.
(h) Apportionments. (i) Subject to Section 2(ii)
below, all accounts and notes receivable and accounts and notes
payable with respect to any or all of the Assets shall be
prorated between the Seller and the Buyer as of the Effective
Time. Any account or note receivable shall be deemed to have
accrued when it was earned (whether or not billed); any account
or note payable shall be deemed to have accrued when the event
giving rise to such account or note payable occurred (whether or
not such account or note payable was invoiced or paid at the
Effective Time).
(ii) The Buyer shall be responsible for the
actual payment of all ad valorem and property Taxes with
respect to the Assets for the calendar year in which the
Closing occurs; provided, however, that the Seller shall
reimburse the Buyer for its pro rata share of such Taxes to
the extent not previously paid by the Seller. An estimate
of such Taxes shall be made at the Closing and such amount
shall be paid to the Buyer at Closing. The ad valorem and
property Taxes for the year of Closing for which the Seller
is responsible shall be determined by applying a fraction
based on the number of days in the calendar year prior to
the Effective Time to such Taxes for the calendar year.
Payment of any amount owed by the Buyer to the Seller or by
the Seller to the Buyer shall be made within thirty (30)
days after the actual ad valorem and property Taxes with
respect to the Assets for the calendar year in which Closing
occurs have been determined.
(i) Imbalances. The Seller shall make reasonable
efforts to cause the individual physical natural gas cumulative
imbalances with respect to the Assets to be reduced to as close
to zero as possible as of the Closing Date. To the extent all
necessary information is available, a determination of the
imbalances existing on the Assets shall be made as of the Closing
Date. To the extent all necessary information is not available
prior to the Closing Date, such determination of imbalances shall
be made within 180 days after Closing Date (the "Imbalance
Adjustment Period"). The Seller shall prepare a schedule of
imbalances as of the Closing Date, which shall set forth by
shipper, estimated imbalance receivables and imbalance payables.
To the extent that there are any remaining imbalances
attributable to actions which occurred prior to the Closing Date
at the end of the Imbalance Adjustment Period, the Seller and the
Buyer shall agree to an imbalance settlement statement, and based
upon such statement (i) the Buyer shall "cash out" and pay the
Seller for any imbalances due from shippers by multiplying the
imbalance quantity by the "Imbalance Price" set forth below, and
(ii) the Seller shall "cash out" and pay the Buyer for any
imbalances due to shippers by multiplying the imbalance quantity
by the "Imbalance Price" described below. The "Imbalance Price"
shall be arithmetic average of the monthly Index Prices found in
the first issue of the month (pertaining to the last month in
the Imbalance Adjustment Period) of The McGraw-Hill Companies,
Inc.'s "Inside F.E.R.C.'s Gas Market Report" under the table
labeled PRICES OF SPOT GAS DELIVERED TO PIPELINES for ANR
Pipeline Co. (Oklahoma), Natural Gas Pipeline of America (Mid-
Continent Zone), and Panhandle Eastern Pipe Line Co. (Texas-
Oklahoma mainline)
(j) Purchase Price Allocation. For the
purpose of making the requisite filings under
Section 1060 of Code and the regulations thereunder,
the Seller and the Buyer will, within one hundred-
twenty (120) days following the Closing Date, agree to
allocate the Purchase Price among the Assets and set
forth the same in a letter agreement between them. The
Seller and the Buyer each agree to report the federal,
state and local income and other Tax consequences of
the transactions contemplated herein, and in particular
to report the information required by Section 1060(b)
of the Code, in a manner consistent with such
allocation. The Seller and the Buyer agree that each
will furnish the other a copy of Form 8594 (Asset
Acquisition Statement under Section 1060) as filed with
the Internal Revenue Service by such party or any
affiliate thereof within 30 days of the filing of such
form with the Internal Revenue Service.
(k) Adjustments to the Purchase Price. The
Purchase Price shall be increased or decreased by the
following amounts: (a) capital expenditures or
acquisitions or construction of fixed assets agreed to
by the Buyer in accordance with Section 4 (d) (viii);
(b) if a positive number increased, and if a negative
number decreased, by the amount of revenues less Taxes
(to the extent such Taxes are the responsibility of the
Buyer under this Agreement and have not previously been
paid by the Seller) and expenses arising out of,
resulting from or relating to the Assets (to the extent
such expenses are the responsibility of the Buyer under
this Agreement and have not previously been paid by the
Seller) from the Effective Time to the Closing Date as
agreed in writing by the Seller and the Buyer on or
prior to the Closing and (c) any other amount provided
for in this Agreement or agreed upon in writing by the
Buyer and the Seller.
3. Representations and Warranties Concerning the
Transaction.
(a) Representations and Warranties of the Seller.
The Seller represents and warrants to the Buyer that the
statements contained in this Section 3(a) are correct and
complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this
Agreement throughout this Section 3(a)), except as set forth in
SCHEDULE 3(a) attached hereto.
(i) Organization of the Seller. The Seller
is a corporation duly organized, validly existing and
in good standing under the laws of the state of
Delaware.
(ii) Authorization of Transaction. The
Seller has full power and authority (including full
corporate power and authority) to execute and deliver
this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and
legally binding obligation of the Seller, enforceable
in accordance with its terms and conditions, subject,
however, to the effects of bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally, and to general principles
of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The
Seller need not give any notice to, make any filing
with or obtain any authorization, consent or approval
of, any Governmental Authority in order to consummate
the transactions contemplated by this Agreement, except
for the filings required under the Hart-Scott-Rodino
Act and approvals of or filings with the Oklahoma
Corporation Commission and the Texas Railroad
Commission.
(iii) Noncontravention. Except for the
approvals and filings specified in Section 3(a)(ii) or
as set forth in SCHEDULE 3(a)(iii), neither the
execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling,
charge or other restriction of any Governmental
Authority to which the Seller is subject or any
provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default
under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify or
cancel, or require any notice under any agreement,
contract, lease, license, instrument or other
arrangement to which the Seller is a party or by which
it is bound or to which any of its assets is subject,
except for such violations, defaults, breaches or other
occurrences that do not, individually or in the
aggregate, have a material adverse effect on the
ability of the Seller to consummate the transactions
contemplated by this Agreement.
(iv) Brokers' Fees. The Seller has no
liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(v) Buyer's Breach of Representation or
Warranty. To the Seller's Knowledge as of the date of
this Agreement, there is no fact or circumstance that
would cause the Buyer to be in material breach of any
representation or warranty set forth in this Agreement.
(b) Representations and Warranties of the Buyer. The
Buyer represents and warrants to the Seller that the statements
contained in this Section 3(b) are correct and complete as of the
date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement throughout this
Section 3(b)), except as set forth in SCHEDULE 3(b) attached
hereto.
(i) Organization of the Buyer. The Buyer is
a corporation duly organized, validly existing, and in
good standing under the laws of the state of Delaware.
(ii) Authorization of Transaction. The Buyer
has full power and authority (including full corporate
power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder.
This Agreement constitutes the valid and legally
binding obligation of the Buyer, enforceable in
accordance with its terms and conditions, subject,
however, to the effects of bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally and to general principles
of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The
Buyer need not give any notice to, make any filing with
or obtain any authorization, consent or approval of any
Governmental Authority in order to consummate the
transactions contemplated by this Agreement, except for
the approvals and filings specified in Section
3(a)(ii).
(iii) Noncontravention. Except for the
approvals and filings specified in Section 3(a)(ii),
neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree,
ruling, charge or other restriction of any Governmental
Authority to which the Buyer is subject or any
provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default
under, result in the acceleration of, create in any
Party the right to accelerate, terminate, modify or
cancel, or require any notice under any agreement,
contract, lease, license, instrument or other
arrangement to which the Buyer is a party or by which
it is bound or to which any of its assets is subject,
except for such violations, defaults, breaches or other
occurrences that do not, individually or in the
aggregate, have a material adverse effect on the
ability of the Buyer to consummate the transactions
contemplated by this Agreement.
(iv) Brokers' Fees. The Buyer has no
liability or obligation to pay any fees or commissions
to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
(v) Financing. Buyer has sufficient cash,
available lines of credit or other sources of
immediately available funds (excluding financing tied
specifically to or secured primarily by the Assets) to
enable it to make payment of the Purchase Price at
Closing.
(vi) Seller's Breach of Representation or
Warranty. To the Buyer's Knowledge as of the date of
this Agreement, there is no fact or circumstance that
would cause the Seller to be in material breach of any
representation or warranty set forth in this Agreement.
4. Representations and Warranties Concerning the
Assets. The Seller represents and warrants to the Buyer that the
statements contained in this Section 4 are correct and complete
as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement
throughout this Section 4), except as set forth in SCHEDULE 4.
(a) Noncontravention. Except for the approvals
and filings specified in Section 3(a)(ii) or as set forth in
SCHEDULE 4(a), neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated
hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge or
other restriction of any Governmental Authority to which any
Asset is subject or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify or
cancel, or require any notice or trigger any rights to payment or
other compensation under any agreement, contract, lease, license,
instrument or other arrangement to which any Asset is subject (or
result in the imposition of any Encumbrance upon any of the
Assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to
give notice, right to payment or other compensation, or
Encumbrance would not have a Material Adverse Effect, or
materially adversely affect the ability of the Seller to
consummate the transactions contemplated by this Agreement.
(b) Title to Assets; Condition. The Seller owns
good title to all real property included in the Assets, and owns
good title or (in the case of leases and contractual rights) a
valid and subsisting contractual right to its interest in, all of
the other assets included in the Assets, free and clear of all
Encumbrances, except for (1) Permitted Encumbrances, and (2) the
Encumbrances disclosed in SCHEDULE 4(b). The tangible assets
included in the Assets are in good operating condition and
repair, ordinary wear and tear excepted, and are suitable for the
use for which such assets are currently used. Except as set
forth in Schedule 4(b) and except for the Excluded Assets, the
Assets include all assets or rights used primarily by the Seller
in connection with the business and operations conducted with the
Assets.
(c) Financial Statements. SCHEDULE 4(c) sets
forth the unaudited earnings before interest, taxes, depreciation
and amortization ("EBITDA") for the Assets for the period January
1, 1996 through June 30, 1998 (collectively, the "Financial
Data"). The Financial Data is derived from the books and records
of the Seller which were prepared in accordance with Generally
Accepted Accounting Principles, has been prepared consistent with
the past practices of the Seller in reporting such Financial
Data, and is true and correct and presents fairly the EBITDA in
all material respects.
(d) Material Change. Except as set forth in
SCHEDULE 4(d), since the date of this Agreement:
(i) there has not been any Material Adverse
Effect;
(ii) the Assets have been operated and
maintained in the Ordinary Course of Business;
(iii) there has not been any damage,
destruction or loss to any material portion of the
Assets, whether or not covered by insurance, except as
would not have a Material Adverse Effect;
(iv) there has been no purchase, sale or
lease of assets included in the Assets, except as would
not have a Material Adverse Effect;
(v) there has been no actual, pending or, to
the Knowledge of the Seller, threatened change
affecting any of the Assets with any customers,
licensors, suppliers, distributors or sales
representatives, except such as has not had a Material
Adverse Effect;
(vi) there has been no contract or
commitment entered into outside the Ordinary Course of
Business;
(vii) there has been no contract which
grants to a Person a preferential right to purchase any
of the Assets;
(viii) there has been no contract or
commitment for capital expenditures or the acquisition
or construction of fixed assets for which the Buyer
shall or may have responsibility after the Closing,
except as agreed to in writing by the Buyer (and where
the Buyer agreed to a capital expenditure or
acquisition or construction of fixed assets in writing,
the Purchase Price shall be adjusted in the amount
agreed to in that writing); and
(ix) there is no contract, commitment or
agreement to do any of the foregoing, except as
expressly permitted hereby.
(e) Legal Compliance. The Seller (with respect
to the Assets) has complied with all applicable laws (including
rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), except
where the failure to comply would not have a Material Adverse
Effect.
(f) Tax Matters. Except as set forth in SCHEDULE
4(f),
(i) The Seller (with respect to the Assets)
has filed all Tax Returns due that it was required to
file. All Taxes owed by the Seller (with respect to
the Assets) shown on any such Tax Return have been
paid.
(ii) There is no material dispute or claim
concerning any Tax liability of the Seller (with
respect to the Assets) either (A) claimed or raised by
any authority in writing or (B) as to which the Seller
has Knowledge.
(g) Contracts and Commitments. SCHEDULE 4(g)
includes a list of all material contracts and commitments
(including, without limitation, any contract, lease, agreement or
commitment, written or oral, providing for receipt or payment,
contingent or otherwise, of Twenty Five Thousand Dollars
($25,000.00) or more or which may not be terminated without
payment or penalty, or restricting the ability of the owner of
the Assets to engage in any line of business in any geographic
area, or containing any indemnity obligation, or relating to
indebtedness or guarantee obligations) which are included in the
Assets, and each such contract is in full force and effect,
except where the failure to be in full force and effect would not
have a Material Adverse Effect. The Seller has performed all
material obligations required to be performed by it to date under
the contracts, and is not in default under any material
obligation of any such contracts, except when such default would
not have a Material Adverse Affect. To the Knowledge of the
Seller, no other party to any contract is in default thereunder.
(h) Litigation. SCHEDULE 4(h) sets forth each
instance in which any of the Assets (i) is subject to any
outstanding injunction, judgment, order, decree or ruling or (ii)
is the subject of any action, suit, proceeding, hearing or
investigation of, in or before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign
jurisdiction, or is the subject of any pending or, to the
Knowledge of the Seller, threatened claim, demand or notice of
violation or liability from any party, except where any of the
foregoing would not have a Material Adverse Effect.
(i) Environmental Matters. Except as set forth
in SCHEDULE 4(i),
(i) The Seller (with respect to the Assets)
is and has been in compliance with all applicable
federal, state and local laws (including common law),
ordinances, orders, agreements, decisions, orders,
rules and regulations relating to protection or
enhancement of human health or the environment
including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act
of 1980, as amended, 42 U.S.C. section 9601, et seq.,
the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. section 6901, et seq., the Clean Air
Act, as amended, 42 U.S.C. section 7401, et seq., the
Federal Water Pollution Control Act, as amended, 33
U.S.C. section 1251, et seq., and the Oil Pollution Act
of 1990, 33 U.S.C. section 2701, et seq. (collectively,
the "Environmental Laws" and individually an
"Environmental Law"), except for such instances of
noncompliance that individually or in the aggregate do
not have a Material Adverse Effect.
(ii) The Seller (with respect to the Assets)
has obtained all permits, licenses, franchises,
authorities, consents and approvals, and has made all
filings and maintained all material information,
documentation, and records, as necessary under
applicable Environmental Laws for operating the
business conducted with the Assets as it is presently
conducted, and all such permits, licenses, franchises,
authorities, consents, approvals, and filings remain in
full force and effect, except for such matters that
individually or in the aggregate do not have a Material
Adverse Effect.
(iii) There are no pending or, to the
Seller's Knowledge, threatened claims, demands,
actions, administrative proceedings, lawsuits or
investigations against the Seller (with respect to the
Assets), and the Seller (with respect to the Assets) is
not subject to any injunction, judgment, order, decree
or ruling under any Environmental Laws.
(iv) None of the real property included in
the Assets and, to the Seller's Knowledge, no off-site
location used for the treatment, storage or disposal of
waste from any Asset, is: (A) listed on the National
Priorities List or any similar state list of sites
requiring remedial action; (B) to the Knowledge of the
Seller, being considered for possible inclusion on the
National Priorities List or on any such similar state
list; or (C) to the Knowledge of the Seller, the
subject of any action or investigation that may lead to
claims under any Environmental Law.
(v) No part of any of the real property
included in the Assets is now being used, or has been
used by the Seller or its Affiliates or, to the
Knowledge of the Seller, by any third party, as a
landfill, dump or other disposal area for Hazardous
Substances.
(vi) The Seller has not received any notice
or other communication that it (with respect to the
Assets) is or may be a potentially responsible party or
otherwise liable under any Environmental Law in
connection with any site actually or allegedly
containing or used for the treatment, storage or
disposal of Hazardous Substances.
The Seller makes no representation or warranty
regarding any compliance or failure to comply with, or any actual
or contingent liability under, any Environmental Law, except as
expressly set forth in this Section 4(i), nor does the Seller
make any representation or warranty in this Section 4(i) with
respect to Taxes.
(j) Permits. Except as set forth in SCHEDULE 4(j),
the Seller owns or holds all franchises, licenses, permits,
consents, approvals and authorizations of all Governmental
Authorities necessary for the conduct of the business and
operations conducted with the Assets (collectively, the
"Permits"), except for Permits whose absence would not have a
Material Adverse Effect. Each Permit is in full force and
effect, and the Seller is in compliance with all of its
obligations with respect to each Permit, except where the failure
to be in full force and effect or to be in compliance would not
have a Material Adverse Effect, and (ii) to the Knowledge of the
Seller, no event has occurred that permits, or upon the giving of
notice or the lapse of time or otherwise would permit, revocation
or termination of any Permit except such as in the aggregate
would not have a Material Adverse Effect.
(k) No "Take or Pay". Except as expressly set forth
in SCHEDULE 4(k), there are currently no arrangements under any
of the Gas Contracts by which the Buyer will be obligated by
virtue of a prepayment arrangement, a "take-or-pay" arrangement,
a production payment or any other arrangement, to sell, transport
or deliver hydrocarbons at some future time without then or
thereafter being entitled to receive full payment therefor, or to
make payment at some future time for hydrocarbons or the
transportation or the delivery of hydrocarbons purchased or
transported prior to the date of this Agreement.
(l) Pipeline Rights-of-Way. Except as expressly set
forth in SCHEDULE 4(l), the Seller has not received written
notice from any third party and does not have Knowledge of any
deficiency in any Rights-of-Way with respect to the entire route
of all pipelines owned and used or held for use with respect to
the Assets. Other than sales or assignments to customers, the
Seller has not sold or assigned any Rights-of-Way, in whole or in
part, or any undivided interest therein to any party whatsoever,
except as expressly disclosed in SCHEDULE 4(l).
(m) Tariffs. Except as expressly set forth in
SCHEDULE 4(m), to the extent that the operations with respect to
the Assets are subject to a tariff approved by the Federal Energy
Regulating Commission ("FERC"), those operations are in
compliance with each such tariff, except where such noncompliance
would not, individually or in the aggregate, have a Material
Adverse Effect. The Seller has no Knowledge of any refund claim
of any customers or any refund obligation imposed under an order
issued by FERC and, except as expressly set forth in SCHEDULE
4(m), has no Knowledge of any facts or circumstance which would
give rise to any such refund claim or refund obligation. Except
as expressly set forth in SCHEDULE 4(m), there are no customer
complaints pending or, to the Seller's Knowledge threatened,
before FERC or any other administrative or regulatory agency,
which would, either individually or in the aggregate, have a
Material Adverse Effect.
(n) No Partnership. The Assets are not subject to any
partnership or joint venture.
(o) Real Property. The Seller has not received
written notice from any third party of any threatened termination
or reduction of the current access to or from the real property
comprising a part of the Assets to existing roads or the sewer or
other utility services presently serving such real property. The
Seller has not received any written notice that its real property
is in violation of any zoning, laws, statutes, ordinances or
building or use restrictions applicable to such real property or
which prohibit the use of such real property for its current use
or uses with respect to the Assets.
(p) Patents, Copyright, Trademarks, Etc. Except as
expressly set forth in SCHEDULE 4(p), to the Seller's Knowledge,
the present conduct of business with respect to the Assets does
not conflict with, infringe upon or violate the patents,
trademarks, servicemarks, trade names, copyrights or trade
secrets or other intangible assets of any other Person, and the
Seller has not received any written notice of any infringement
thereof, except where such conflicts, infringements and
violations would not, either individually or in the aggregate,
have a Material Adverse Effect.
(q) No Leases. Except as expressly set forth in
SCHEDULE 4(q), all the equipment and real property (other than
Rights-of-Way, easements, licenses and permits) which is material
to the operation of the Assets is owned by the Seller and not
leased or rented.
(r) Public Utility Holding Company Act. The Seller is
not a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" "of a subsidiary company" of a
"holding company", in each case within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(s) Disclaimer of Representations and Warranties
Concerning Personal Property, Equipment, and Fixtures. The Buyer
acknowledges that (a) it has had and pursuant to this Agreement
will have before Closing access to the Seller and the Assets, and
the officers and employees of the Seller, and (b) in making the
decision to enter into this Agreement and consummate the
transactions contemplated hereby, the Buyer has relied solely on
its own independent investigation and upon the express
representations, warranties, covenants and agreements set forth
in this Agreement. Accordingly, the Buyer acknowledges that,
except as expressly set forth in this Agreement, the Seller has
not made, and THE SELLER MAKES NO AND DISCLAIMS ANY
REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND
WHETHER BY COMMON LAW, STATUTE OR OTHERWISE, REGARDING (i) THE
QUALITY, CONDITION OR OPERABILITY OF ANY PERSONAL PROPERTY,
EQUIPMENT OR FIXTURES, (ii) ITS MERCHANTABILITY, (iii) ITS
FITNESS FOR ANY PARTICULAR PURPOSE, (iv) ITS CONFORMITY TO MODELS
OR SAMPLES OF MATERIALS OR (v) AS TO WHETHER ANY ASSET IS YEAR
2000 COMPLIANT, AND ALL PERSONAL PROPERTY AND EQUIPMENT IS
DELIVERED "AS IS, WHERE IS" IN THE CONDITION IN WHICH THE SAME
EXISTS.
(t) Billing Under the Gas Contracts. The Seller
has invoiced for all services (including without limitation for
compression, treating, gathering, and processing services)
provided by the Seller in accordance with the terms and
conditions in the Gas Contracts, and has administered the Gas
Contracts in accordance with their terms and conditions, except
where the failure to do so would not have a Material Adverse
Effect.
5. Pre-Closing Covenants. The Parties agree as
follows with respect to the period between the date of this
Agreement and the Closing.
(a) General. Each Party will use its reasonable
best efforts to take all action and to do all things necessary,
proper or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth
in Section 7 below).
(b) Notices and Consents. The Seller will give
any notices to third parties, and will use its reasonable best
efforts to obtain the third party consents, necessary to effect
the assignment of all Gas Contracts, Rights-of-Way and other
Assets to the Buyer, including those consents listed on the
attached SCHEDULE 5(b)(i). If the Seller is unable to obtain any
necessary third party consents to the assignment of any Gas
Contracts or Rights-of-Way, then the Seller shall retain its
interest in such Gas Contract or Right-of-Way after the Closing
and the Buyer shall operate and maintain such Gas Contract or
Right-of-Way as the Seller's operator under an operating
agreement in the form of SCHEDULE 5(b)(ii). Each of the Parties
will give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents
and approvals of Governmental Authorities in connection with the
matters referred to in subsection 3(a)(ii), subsection 3(b)(ii),
and section 4(b) above. Without limiting the generality of the
foregoing, each of the Parties will file any notification, report
forms and related material that it may be required to file with
the Federal Trade Commission and the Antitrust Division of the
U.S. Department of Justice under the Hart-Scott-Rodino Act, will
use its reasonable best efforts to obtain a waiver from the
applicable waiting period, and will make any further filings
pursuant thereto that may be necessary in connection therewith.
(c) Operation of Business. The Seller will not,
without the consent of the Buyer, engage in any practice, take
any action or enter into any transaction with respect to the
Assets outside the Ordinary Course of Business. Without limiting
the generality of the foregoing, the Seller will not, without the
consent of the Buyer, except as expressly contemplated by this
Agreement or as contemplated by SCHEDULE 5(c), do any of the
following with respect to the Assets:
(i) cause or allow any of the Assets to
become subject to an Encumbrance, except for Permitted
Encumbrances;
(ii) (A) acquire (including, without
limitation, by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other
business organization or any division thereof or any
material amount of assets in the Ordinary Course of
Business; (B) sell, lease or otherwise dispose of any
property or assets, other than sales of goods or
services in the Ordinary Course of Business; or (C)
enter into or amend a contract, agreement, commitment
or arrangement with respect to any matter set forth in
this paragraph (ii); or
(iii) amend in any material respect any
contract or agreement relating to the Assets, or
terminate any such contract or agreement before the
expiration of the term thereof.
(d) Full Access. The Seller will permit
representatives of the Buyer to have full access at all
reasonable times, and in a manner so as not to interfere with the
normal business operations of the Seller, to all premises,
properties, personnel, books, records (including tax records),
contracts and documents of or pertaining to the Assets. Any
information obtained by the Buyer, its employees,
representatives, consultants, attorneys, agents, lenders and
other advisors under this Section 5(d) shall be subject to the
confidentiality and use restrictions contained in the
Confidentiality Agreement.
(e) Notice of Developments. Each Party will give
prompt written notice to the other of any material adverse
development which would result in the failure to any condition to
Closing set forth in Section 7 hereof. No disclosure by any
Party pursuant to this subsection 5(e), however, shall be deemed
to amend or supplement any Schedule hereto or to prevent or cure
any misrepresentation or breach of warranty.
(f) Casualty Loss. If, prior to the Closing, any
portion of the Assets have been or are damaged or destroyed by
fire, flood, storm or other casualty or shall be taken by
condemnation or under the right of eminent domain (all of which
are herein called "Casualty Loss"), and the Casualty Loss does
not have a Material Adverse Effect, then the Buyer shall bear the
risk of loss, provided, however, that the Seller shall, at the
Closing, pay by means of an adjustment to the Purchase Price to
the Buyer all sums actually received by the Seller (net of actual
expenses incurred by the Seller in connection with such sums
received) from persons or Governmental Authorities by reason of
the damage, destruction or taking of such assets and shall
assign, transfer and set over unto the Buyer all of the right,
title and interest of the Seller in and to any unpaid proceeds or
other payments from third parties (net of any expenses actually
incurred by the Seller in connection with such proceeds or
payments) arising out of such destruction or taking, and all
claims and causes of action with respect to such destruction or
taking; further, provided, however, if the Casualty Loss has a
Material Adverse Effect and such Assets are not repaired or
replaced and the business operation restored to its original
state by the Seller prior to Closing, either the Buyer or the
Seller shall have the right to terminate this Agreement unless
the Parties mutually agree upon an appropriate adjustment to the
Purchase Price. Prior to the Closing, the Seller shall not
voluntarily compromise, settle or adjust any amount payable by
reason of any Casualty Loss which would be assigned to the Buyer
pursuant to the foregoing provisions of this Section 5(f).
6. Post-Closing Covenants. The Parties agree as
follows:
(a) General. In case at any time after the
Closing any further action is necessary to carry out the purposes
of this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further
instruments and documents) as the other Party reasonably may
request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification
therefor under Section 8 below).
(b) Litigation Support. In the event and for so
long as any Party actively is contesting or defending against any
action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or
transaction on or before the Closing Date involving any Asset,
the other Party shall cooperate with the contesting or defending
Party and its counsel in the defense or contest, make available
its personnel, and provide such testimony and access to its books
and records as shall be necessary in connection with the defense
or contest, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Section 8 below).
(c) Employee Matters.
(i) Within five (5) business days after the
execution of this Agreement ("Interview Period"), the Buyer
shall have the right to interview the employees listed on
SCHEDULE 6(c). On or before the fifth (5th) business day
after the Interview Period, the Buyer shall deliver to the
Seller a list of any such employees ("Employees") that the
Buyer desires to make an offer of employment. At the
Closing, the Buyer shall make offers of employment to each
Employee at salaries, wages and benefits that are in the
aggregate comparable withat least as great as the salaries,
wages and benefits as paid by the Seller and its
subsidiaries on the Closing Date. The Buyer shall (i) waive
any preexisting condition limitations applicable to the
Employees and any covered dependents under the group medical
plan of the Buyer or its Affiliates, (ii) ensure that
Employees are given full credit for all copayments and
deductibles incurred by such Employees and covered
dependents under the applicable group medical plan of the
Seller and its subsidiaries for the 1998 plan year, and
(iii) cause any such plan that is an Employee Pension
Benefit Plan and that is intended to be qualified under
Section 401 of the Code to credit Employees for
participation and vesting purposes only under such plan for
their period of employment with the Seller and its
subsidiaries and their predecessors to the extent such
predecessor employment was recognized by any tax-qualified
pension plan of the Seller and its subsidiaries and credit
Employees for their period of employment with the Seller and
its subsidiaries for purposes of participation or accruals
under any vacation, sick leave or other service-based plan
or policy (other than any severance or pension plan or
policy) of the Buyer or its Affiliates.
(ii) The Buyer agrees that, if any Employee
who accepts employment with the Buyer is terminated from
employment by the Buyer on or after the Closing Date but on
or before the first anniversary thereof for any reason other
than cause, or is required to transfer to a job location
that is more than 50 miles from his or her current job
location or to take a reduction in salary, wages or
benefits, but refuses such transfer or reduction and
terminates his or her employment with the Buyer, the Buyer
shall provide the Employee with (A) a lump sum cash
severance payment equal to the severance to which such
Employee would have been entitled under the severance policy
of the Seller attached as SCHEDULE 6(c)(ii) based upon such
Employee's years of service and salary with the Seller and
its subsidiaries and their predecessors to the extent such
predecessor employment is recognized by such severance
policy, and (B) continued health insurance coverage for the
Employee and his or her dependents under Part 6 of Title I
of ERISA (COBRA) at a cost to the Employee that is not in
excess of the cost of coverage for active employees of the
Buyer or its Affiliates who were formerly employed by the
Seller or its Affiliates. For purposes of this subparagraph
(ii), termination shall be for cause if it is for conduct
such as fraud, embezzlement, theft, commission of a felony
or any other criminal act against the Buyer or its
Affiliates or deliberate and substantial disregard of
assigned duties and responsibilities.
(iii) As of the Closing Date, the
Buyer shall make available (or cause one of its Affiliates
to make available) a defined contribution plan for the
benefit of the Employees (" Buyer DC Plan"). As promptly as
practicable after the Closing Date, the Seller shall cause
the trustee of the El Paso Energy Corporation Retirement
Savings Plan ("Seller DC Plan") to transfer to the trustee
of the Buyer DC Plan, and the Buyer shall cause the trustee
of the Buyer DC Plan to accept, the account balances of each
Employee with respect to whom the Seller DC Plan maintains
an account as of the close of business on the Closing Date.
Such transfers shall be equal to the value of the
transferred account balances as of the close of business on
the day preceding the date of transfer and shall be in cash
(or, in the case of participant loans granted prior to the
Closing Date, if any, such loans and promissory notes or
other documents evidencing such loans). The Buyer DC Plan
shall protect, maintain and continue any rights or features
of the Seller DC Plan that, pursuant to the provisions of
Section 411(d)(6) of the Code, are required to be continued
for the benefit of the Employees, but only to the extent
required by Section 411(d)(6).
(d) Replacement Bonds. After Closing, the Buyer
shall promptly replace bonds as set forth in SCHEDULE 6 (d)
posted by the Seller with the Minerals Management Service with
respect to the Assets.
(e) Transition. The Seller shall, for a period
of not less than 3 months and not more than 6 months after the
Closing Date, provide to the Buyer transition services pursuant
to the Transition Agreement attached as SCHEDULE 6(e).
(f) Delivery and Retention of Records. On or
promptly after the Closing Date, the Seller will deliver or cause
to be delivered to the Buyer all files, records, information and
data relating to the Assets (other than Tax Returns, Tax
workpapers and other Tax records and information) that are in the
possession or control of the Seller and its subsidiaries
(together with all of the Seller's and its subsidiaries'
contractual rights to request other such files, records,
information and data from any third party) (the "Records"). The
Buyer agrees to (i) hold the Records and not to destroy or
dispose of any thereof for a period of six years from the Closing
Date or such longer time as may be required by law, provided
that, if it desires to destroy or dispose of such Records during
such period, it will first offer in writing at least 60 days
before such destruction or disposition to surrender them to the
Seller and if the Seller does not accept such offer within 20
days after receipt of such offer, the Buyer may take such action
and (ii) following the Closing Date to afford the Seller, its
accountants and counsel, during normal business hours, upon
reasonable request, at any time, full access to the Records and
to the Buyer's employees to the extent that such access may be
requested for any legitimate purpose at no cost to the Seller
(other than for reasonable out-of-pocket expenses); provided,
however, that such access will not be construed to require the
disclosure of Records that would cause the waiver of any attorney-
client, work product or like privilege; provided, further, that
in the event of any litigation nothing herein shall limit either
Party's rights of discovery under applicable law. The Buyer
shall have the same rights, and the Seller shall have the same
obligations, as are set forth in this Section with respect to any
copies of the Records of the Seller pertaining to the Assets that
are retained by the Seller, with the exception of Tax Returns,
Tax workpapers and other Tax records and information retained by
the Seller, provided that such access will not be construed to
require the disclosure of Records that would cause the waiver of
any attorney-client, work product or like privilege.
(g) Mail; Payments. (a) The Seller hereby
authorizes the Buyer from and after the Closing to receive and
open all mail and other communications relating to the business
conducted with the Assets, and to act with respect to such
communications in such manner as the Buyer may elect to the
extent that such communications relate to the rights and
obligations of the Buyer with respect to the Assets. If any
communication does not relate exclusively to the rights and
obligations of the Buyer with respect to the Assets, the Buyer
shall forward the original or a copy of such communication
promptly to the Seller. The Buyer shall promptly deliver to the
Seller any moneys, checks or other instruments of payment
received by the Buyer to which the Seller is entitled hereunder.
(b) The Seller shall promptly deliver to the
Buyer the original or a copy of any mail or other communication
received by it after the Closing pertaining to the Assets. The
Seller shall promptly deliver to the Buyer any moneys, checks or
other instruments of payment received by the Seller to which the
Buyer is entitled hereunder.
(h) Certificate of Non-foreign Status. On or
prior to the Closing Date, the Seller shall provide the Buyer
with a properly executed certificate of non-foreign status in
accordance with Treas. Reg. 1.1445-2(b) (a "FIRPTA Certificate")
certifying under penalties of perjury that the Seller is not a
foreign person within the meaning of Section 1445(f) of the Code
and Treas. Reg. 1.1445-2(b). Provided the Buyer is otherwise
entitled to rely on such Certificate, the Buyer shall not
withhold a portion of the Purchase Price under Section 1445 of
the Code. The Buyer and the Seller acknowledge that unless the
Seller provides the Buyer with such FIRPTA Certificate in the
time and manner described above, the Buyer shall be obligated to
withhold a portion of the Purchase Price in the amount and manner
required under Section 1445 of the Code and the applicable
Treasury Regulations.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The
obligation of the Buyer to consummate the transactions to be
performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set
forth in Section 3(a) and Section 4 above shall be true
and correct in all material respects at and as of the
Closing Date, except for such failures to be true and
correct as do not, in the aggregate, result in Adverse
Consequences exceeding One Million Dollars
($1,000,000.00);
(ii) the Seller shall have performed and
complied with all of its covenants hereunder in all
material respects through the Closing;
(iii) there shall not be any injunction,
judgment, order, decree or ruling in effect preventing
consummation of the transactions contemplated by this
Agreement;
(iv) the Seller shall have delivered to the
Buyer a certificate to the effect that each of the
conditions specified above in subsections 7(a)(i)-(iii)
is satisfied in all respects;
(v) all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act
shall have expired or otherwise been terminated and the
Parties shall have received all other authorizations,
consents, and approvals of Governmental Authorities
referred to in subsection 3(a)(ii), subsection
3(b)(iii), and Section 4(b) above (other than Customary
Post-Closing Consents) or in SCHEDULE 3(a)(ii) or
SCHEDULE 4(b) and consents, approvals and waivers of
third parties referred to in SCHEDULE 5(b)(i); and
(vi) all actions to be taken by the Seller in
connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this
Section 7(a) if it executes a writing so stating at or before the
Closing.
(b) Conditions to Obligation of the Seller. The
obligation of the Seller to consummate the transactions to be
performed by it in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set
forth in Section 3(b) above shall be true and correct
in all material respects at and as of the Closing Date;
(ii) the Buyer shall have performed and
complied with all of its covenants hereunder in all
material respects through the Closing;
(iii) there shall not be any injunction,
judgment, order, decree or ruling in effect preventing
consummation of the transactions contemplated by this
Agreement;
(iv) the Buyer shall have delivered to the
Seller a certificate to the effect that each of the
conditions specified above in subsections 7(b)(i)-(iii)
is satisfied in all respects;
(v) all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act
shall have expired or otherwise been terminated and the
Parties shall have received all other authorizations,
consents, and approvals of Governmental Authorities
referred to in subsection 3(a)(ii), subsection
3(b)(ii), and Section 4(b) above (other than Customary
Post-Closing Consents) and consents, approvals and
waivers of third parties referred to in SCHEDULE
5(b)(i); and
(vi) all actions to be taken by the Buyer in
connection with consummation of the transactions
contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller.
The Seller may waive any condition specified in this Section 7(b)
if it executes a writing so stating at or before the Closing.
8. Remedies for Breaches of this Agreement.
(a) Survival of Representations, Warranties and
Certain Covenants. All of the representations and warranties of
the Seller contained in Sections 3 and 4 above (other than
Sections 4(f) and 4(t)) shall survive the Closing hereunder and
continue in full force and effect for a period of eighteen (18)
months after the Closing Date; and (ii) the representations and
warranties in Sections 4(f) and 4(t) shall survive the Closing
indefinitely with respect to any given claim that would
constitute a breach of such representation or warranty. The
representations and warranties of the Buyer contained in Section
3 above shall survive the Closing and continue in full force for
a period of eighteen (18) months after the Closing Date. The
covenants contained in this Agreement to be performed after the
Closing shall survive the Closing indefinitely.
(b) Indemnification Provisions for Benefit of the
Buyer.
(i) In the event the Seller breaches any of
its representations, warranties and covenants (it being
understood that for purposes of any claim under this
Section 8 for breach of any representation or warranty,
any representation or warranty which is qualified by
materiality, Material Adverse Effect or words of
similar import shall be deemed not to include any such
qualification) contained herein (other than the
covenants in Section 2(d) above and the representations
and warranties in Section 3(a) above) and, if there is
an applicable survival period pursuant to Section 8(a)
above, provided that the Buyer makes a written claim
for indemnification against the Seller pursuant to
Section 11(f) below within such survival period, then
the Seller agrees to indemnify the Buyer from and
against any Adverse Consequences to the extent in
excess of Ten Thousand Dollars ($10,000.00) per event
that are caused proximately by the breach and suffered
by the Buyer through and after the date of the claim
for indemnification; provided, that the Seller shall
not have any obligation to indemnify the Buyer from and
against any such Adverse Consequences caused by the
breach of any representation or warranty of the Seller
contained in Section 4 above (A) until the Buyer has
suffered Adverse Consequences by reason of all such
breaches in excess of a One Million Dollar
($1,000,000.00) aggregate deductible (after which point
the Seller will be obligated only to indemnify the
Buyer from and against further such Adverse
Consequences) or thereafter (B) to the extent the
Adverse Consequences the Buyer has suffered by reason
of all such breaches exceeds a Six Million Dollars
($6,000,000.00) aggregate ceiling (after which point
the Seller will have no obligation to indemnify the
Buyer from and against further such Adverse
Consequences).
(ii) In the event the Seller breaches any of
its representations and warranties in Section 3(a)
above, and, if there is an applicable survival period
pursuant to Section 8(a) above, provided that the Buyer
makes a written claim for indemnification against the
Seller pursuant to Section 11(f) below within such
survival period, then the Seller agrees to indemnify
the Buyer from and against the entirety of any Adverse
Consequences caused proximately by the breach and
suffered by the Buyer through and after the date of the
claim for indemnification.
(iii) Except for the rights of
indemnification provided in this Section 8 and in
Section 11(o), the Buyer hereby waives any claim or
cause of action pursuant to common or statutory law or
otherwise against the Seller or its Affiliates
regarding obligations and liabilities of any nature
whatsoever that are attributable to the Assets, whether
arising before or after the Closing Date.
(c) Indemnification Provisions for Benefit of the
Seller. In the event the Buyer breaches any of its
representations, warranties and covenants contained herein (other
than the covenants in Section 2(c) above), and, if there is an
applicable survival period pursuant to Section 8(a) above,
provided that the Seller makes a written claim for
indemnification against the Buyer pursuant to Section 11(f) below
within such survival period, then the Buyer agrees to indemnify
the Seller from and against the entirety of any Adverse
Consequences caused proximately by the breach and suffered by the
Seller through and after the date of the claim for
indemnification.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any
Party (the "Indemnified Party") with respect to any
matter (a "Third Party Claim") that may give rise to a
claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly (and in any event
within five business days after receiving notice of the
Third Party Claim) notify the Indemnifying Party
thereof in writing.
(ii) The Indemnifying Party will have the
right to assume and thereafter conduct the defense of
the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party;
provided, however, that the Indemnifying Party will not
consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified
Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the
payment of money damages and does not impose an
injunction or other equitable relief upon the
Indemnified Party.
(iii) Unless and until the Indemnifying
Party assumes the defense of the Third Party Claim as
provided in subsection 8(d)(ii) above, however, the
Indemnified Party may defend against the Third Party
Claim in any manner it reasonably may deem appropriate.
(iv) In no event will the Indemnified Party
consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying
Party which consent shall not be withheld unreasonably.
(e) Determination of Amount of Adverse
Consequences. The Adverse Consequences giving rise to any
indemnification obligation hereunder shall be limited to the
actual loss suffered by the Indemnified Party (i.e., reduced by
any insurance proceeds or other payment or recoupment received,
realized or retained by the Indemnified Party as a result of the
events giving rise to the claim for indemnification net of any
expenses related to the receipt of such proceeds, payment or
recoupment, including retrospective premium adjustments, if any),
and any reduction in federal, state, or local income or franchise
tax liability of the Indemnified Party (or the affiliated group
of which it is a member) occasioned by such loss or damage, but
shall include an amount equal to any increase in federal, state
or local income or franchise tax liability of the Indemnified
Party (or the affiliated group of which it is a member)
occasioned by the indemnity payment. The amount of the actual
loss and the amount of the indemnity payment shall be computed by
taking into account the timing of the loss or payment, as
applicable, using a 10 percent interest or discount rate, as
appropriate. Upon the request of the Indemnifying Party, the
Indemnified Party shall provide the Indemnifying Party with
information sufficient to allow the Indemnifying Party to
calculate the amount of the indemnity payment in accordance with
this Section 8(e).
(f) Special Indemnification Provisions.
(i) Notwithstanding any terms and provisions
of this Agreement to the contrary, the Seller hereby
covenants and agrees to protect, defend, indemnify and
save the Buyer, its successors and assigns, harmless
from and against any and all claims, demands, actions,
causes of action, arbitration proceedings, judgments,
awards, attorneys' fees and costs (including costs of
investigation and defense), and all other costs and
expenses incurred in connection with or arising out of
all breaches, if any, by the Seller of its covenants to
the Buyer under Section 2(d) above.
(ii) Notwithstanding any terms and provisions
of this Agreement to the contrary, the Buyer hereby
covenants and agrees to protect, defend, indemnify and
save the Seller, its successors and assigns, harmless
from and against any and all claims, demands, actions,
causes of action, arbitration proceedings, judgments,
awards, attorneys' fees and costs (including costs of
investigation and defense), and all other costs and
expenses incurred in connection with or arising out of
all breaches, if any, by the Buyer of its covenants to
the Seller under Section 2(c) above.
9. Termination.
(a) Termination of Agreement. The Parties may
terminate this Agreement as provided below:
(i) the Buyer and the Seller may terminate
this Agreement by mutual written consent at any time
before the Closing;
(ii) the Buyer may terminate this Agreement
by giving written notice to the Seller at any time
before Closing (A) in the event the Seller has breached
any representation, warranty or covenant contained in
this Agreement in any material respect, the Buyer has
notified the Seller of the breach, and the breach has
continued without cure for a period of 10 days after
the notice of breach or (B) if the Closing shall not
have occurred on or before October 31, 1998 (unless the
failure results primarily from the Buyer itself
breaching any representation, warranty or covenant
contained in this Agreement);
(iii) the Seller may terminate this
Agreement by giving written notice to the Buyer at any
time before the Closing (A) in the event the Buyer has
breached any representation, warranty or covenant
contained in this Agreement in any material respect,
the Seller has notified the Buyer of the breach, and
the breach has continued without cure for a period of
10 days after the notice of breach or (B) if the
Closing shall not have occurred on or before
October 31, 1998 (unless the failure results primarily
from the Seller itself breaching any representation,
warranty or covenant contained in this Agreement); and
(iv) either the Seller or the Buyer may
terminate this Agreement under the circumstances
provided in Section 5(f).
(b) Effect of Termination. If any Party
terminates this Agreement pursuant to Section 9(a) above, all
rights and obligations of the Parties hereunder shall terminate
without any liability of either Party to the other Party (except
for any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in the
Confidentiality Agreement shall survive termination.
10. Prohibited Activities of the Seller.
In order to protect the goodwill and business interests
of the Buyer as to its utilization of the Assets for a period of
eighteen (18) months following the Closing, the Seller covenants
and agrees that it and its Affiliates, now or hereafter existing,
will not, acting alone or in conjunction with others, directly or
indirectly:
(a) connect or attempt to connect any wells (and the
gas delivered from such wells) that are connected to the Assets
as of the Closing Date to any other pipeline system of the Seller
or its Affiliates; provided, that if the Seller, or any Affiliate
of the Seller, acquires a pipeline or pipelines in connection
with the acquisition of other pipeline assets or a pipeline
company, which pipeline(s) or pipeline company at the time of
acquisition is connected to the Assets or serves any of the
present customers of the Assets, then the Seller or its
Affiliate, as applicable, can conduct business and compete in the
ordinary course of business without being in violation of this
covenant;
(b) directly or indirectly, request or advise any
party to any Gas Contract to withdraw, curtail or cancel any
service to or from the Buyer under the terms of such contract;
(c) aid, abet or otherwise assist any person, firm or
corporation seeking to interfere with the Buyer's relationship
with the parties to , or the term of, any Gas Contract.
11. Miscellaneous.
(a) Press Releases and Public Announcements. The
Parties may issue press releases upon the execution of this
Agreement, provided that each Party shall submit to the other
Party a copy of its intended press release not less that forty
eight (48) hours prior to the time of release. No Party shall
issue any press release or make any public announcement relating
to the subject matter of this Agreement during the period after
the press release herein before mentioned and before the Closing
without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly traded
securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party before making
the disclosure).
(b) No Third Party Beneficiaries. This Agreement
shall not confer any rights or remedies upon any Person other
than the Parties and their respective successors and permitted
assigns.
(c) Succession and Assignment. This Agreement
shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior
written approval of the other Party, except that the Buyer may
assign its rights hereunder to any wholly owned subsidiary of the
Buyer, provided that no such assignment shall relieve the Buyer
of any of its liabilities or obligations hereunder.
(d) Counterparts. This Agreement may be executed
in counterparts, each of which shall be deemed an original but
which together will constitute one and the same instrument.
(e) Headings. The section headings contained in
this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(f) Notices. All notices, requests, demands,
claims, and other communications hereunder will be in writing.
Any notice, request, demand, claim, or other communication
hereunder shall be deemed duly given two business days after it
is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Buyer: Midcoast Gas Services, Inc.
1100 Louisiana Street,
Suite 2950
Houston, Texas 77002
Attention: President
If to the Seller: El Paso Field Services Company
P. O. Box 2511
Houston, Texas 77252-2511
Attention: President
Any Party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the
addresses set forth above using any other means (including
personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by
the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
(g) Governing Law. This Agreement shall be
governed by and construed in accordance with the domestic laws of
the state of Texas without giving effect to any choice or
conflict of law provision or rule (whether of the state of Texas
or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the state of Texas.
(h) Amendments and Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall
be in writing and signed by the Buyer and the Seller. No waiver
by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(i) Severability. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) Transaction Expenses. Each of the Buyer and
the Seller will bear its own costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and
the transactions contemplated hereby, except as provided in
paragraph (k) below.
(k) Certain Taxes. Notwithstanding anything in
this Agreement to the contrary, the Seller will file all
necessary Tax Returns and other documentation with respect to all
transfer, documentary, sales, use, stamp, registration and other
Taxes and fees in connection with this Agreement, and, if
required by applicable law, the Buyer will, and will cause its
Affiliates to, join in the execution of any such Tax Returns and
other documentation. The Buyer will pay to the Seller, on or
before the date such payments are due from the Seller, any
transfer, documentary, sales, use, stamp, registration and other
Taxes and fees incurred in connection with this Agreement.
(l) Construction. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any
federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation.
(m) Incorporation of Exhibits and Schedules. The
Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
(n) WAIVER OF CONSUMER RIGHTS. IT IS THE
INTENT OF THE PARTIES THAT THE BUYER'S RIGHTS AND REMEDIES WITH
RESPECT TO THIS TRANSACTION AND WITH RESPECT TO ALL ACTS OR
PRACTICES OF THE SELLER, PAST, PRESENT OR FUTURE, IN CONNECTION
WITH THIS TRANSACTION SHALL BE GOVERNED BY LEGAL PRINCIPLES OTHER
THAN THE TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION
ACT, TEX. BUS. & COM. CODE ANN. SECTION 17.41 ET SEQ. (VERNON
1987 AND SUPP. 1995) (THE "DTPA"). THE BUYER ACKNOWLEDGES,
REPRESENTS AND WARRANTS THAT IT IS NOT A CONSUMER AS DEFINED BY
THE DTPA BECAUSE (i) IT IS A CORPORATION THAT SEEKS TO ACQUIRE
THE ASSETS FOR COMMERCIAL OR BUSINESS USE AND (ii) IT HAS ASSETS
OF $25 MILLION OR MORE OR IS OWNED OR CONTROLLED BY A CORPORATION
OR ENTITY WITH ASSETS OF $25 MILLION OR MORE. IF THE BUYER IS
NONETHELESS DEEMED TO BE A CONSUMER AS DEFINED BY THE DTPA, IT
HEREBY WAIVES ITS RIGHTS UNDER THE DTPA, A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION
WITH AN ATTORNEY OF THE BUYER'S OWN SELECTION, THE BUYER
VOLUNTARILY CONSENTS TO THIS WAIVER. THE BUYER ACKNOWLEDGES,
REPRESENTS AND WARRANTS THAT (i) IT IS NOT IN A SIGNIFICANTLY
DISPARATE BARGAINING POSITION WITH THE SELLER; (ii) IT WAS
REPRESENTED BY LEGAL COUNSEL IN THIS TRANSACTION; AND (iii) IT
SELECTED ITS OWN LEGAL COUNSEL, WHICH WAS NOT DIRECTLY OR
INDIRECTLY IDENTIFIED, SUGGESTED OR SELECTED BY THE SELLER, A
COMPANY OR A SUBSIDIARY OR ANY AGENT THEREOF. THE BUYER
EXPRESSLY RECOGNIZES THAT THE PRICE FOR WHICH THE SELLER HAS
AGREED TO SELL THE ASSETS AND PERFORM ITS OBLIGATIONS UNDER THIS
AGREEMENT HAS BEEN PREDICATED UPON THE INAPPLICABILITY OF THE
DTPA AND THE EFFECTIVENESS OF THIS WAIVER OF THE DTPA. THE BUYER
FURTHER RECOGNIZES THAT THE SELLER, IN DETERMINING TO ENTER INTO
THIS AGREEMENT, HAS EXPRESSLY RELIED ON THIS WAIVER AND THE
INAPPLICABILITY OF THE DTPA.
(o) Bulk Transfers. The Parties waive compliance
with the requirements of the bulk sales law of any jurisdiction
in connection with the sale of the Assets to the Buyer hereunder.
The Seller shall indemnify and hold harmless the Buyer and its
Affiliates against all Adverse Consequences which may be incurred
by the Buyer as a result of noncompliance with any such bulk
sales laws.
(p) ENTIRE AGREEMENT. THIS AGREEMENT (INCLUDING
THE DOCUMENTS REFERRED TO HEREIN) CONSTITUTES THE ENTIRE
AGREEMENT AMONG THE PARTIES AND SUPERSEDES ANY PRIOR
UNDERSTANDINGS, AGREEMENTS OR REPRESENTATIONS BY OR AMONG THE
PARTIES, WRITTEN OR ORAL, TO THE EXTENT THEY HAVE RELATED IN ANY
WAY TO THE SUBJECT MATTER HEREOF.
*****
IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement as of the date first above written.
MIDCOAST GAS SERVICES, INC.
By:
Name: _______________________
Title:
EL PASO FIELD SERVICES COMPANY
By:
Name: Robert G. Phillips
Title: President
1 AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is made and
entered into this 31st day of August, 1998, by and among
MIDCOAST ENERGY RESOURCES, INC., a Nevada corporation
("Borrower"), the lenders listed on the signature pages hereto
under the caption "Lenders" (the "Lenders"), BANK ONE, TEXAS,
N.A., a national banking association, individually as a Lender
("Bank One") and as administrative agent for the other Lenders
(in such capacity, together with any other Person who becomes
the administrative agent, the "Administrative Agent"), CIBC
INC., a Delaware corporation, individually as a Lender ("CIBC")
and as syndication agent for the other Lenders (in such
capacity, together with any other Person who becomes the
syndication agent, the "Syndication Agent") and NATIONSBANK,
N.A., a national banking association, individually as a Lender
("NationsBank") and as documentation agent for the other
Lenders (in such capacity, together with any other Person who
becomes the documentation agent, the "Documentation Agent").
R E C I T A L S:
A. The Borrower and its then existing subsidiaries,
Magnolia Pipeline Corporation, an Alabama corporation
("Magnolia Pipeline"), and H&W Pipeline Corporation, an Alabama
corporation ("H&W"), entered into a Credit Agreement dated
August 22, 1996, with Bank One, which Credit Agreement was
amended (i) as of May 30, 1997, by a First Amendment to Credit
Agreement among Borrower, Magnolia Pipeline, H&W, Magnolia
Resources, Inc., a Mississippi corporation ("Magnolia
Resources"), Magnolia Gathering, Inc., an Alabama corporation
("Magnolia Gathering"), Midcoast Holdings No. One, Inc., a
Delaware corporation ("Midcoast Holdings"), Midcoast Gas
Pipeline, Inc., a Texas corporation ("Midcoast Gas Pipeline"),
Nugget Drilling Corporation, a Minnesota corporation
("Nugget"), Midcoast Marketing, Inc., a Texas corporation
("Midcoast Marketing"), Alatenn Energy Marketing Company, an
Alabama corporation ("Atemco"), Tennessee River Intrastate Gas
Company, Inc., an Alabama corporation ("Trigas"), and Bank One,
(ii) as of October 31, 1997 by Borrower, Magnolia Pipeline,
H&W, Magnolia Resources, Magnolia Gathering, Midcoast Holdings,
Midcoast Gas Pipeline, Nugget, Midcoast Marketing, Atemco,
Trigas, Mid Louisiana Gas Company, a Delaware corporation ("Mid
LA"), Mid Louisiana Marketing Company, a Delaware corporation
("MLM"), Mid Louisiana Gas Transmission Company, a Delaware
corporation ("MLT"), Midla Energy Services Company, a Delaware
corporation ("MLESCO"; Magnolia Pipeline, H&W, Magnolia
Resources, Magnolia Gathering, Midcoast Holdings, Midcoast Gas
Pipeline, Nugget, Midcoast Marketing, Atemco, Trigas, Mid LA,
MLM, MLT, and MLESCO herein collectively called the "Original
Subsidiaries") and Bank One, and (iii) as of December 17, 1997
by Borrower, the Original Subsidiaries and Bank One (as
heretofore amended, the "Original Midcoast Credit Agreement").
Pursuant to the Original Midcoast Credit Agreement, Bank One
agreed, subject to the terms and conditions thereof to make
available a Reducing Revolving Line of Credit (as such term is
defined in the Original Midcoast Credit Agreement) and LC Line
of Credit (as such term is hereinafter defined) (and Bank One
agreed to issue Letters of Credit) (collectively, the "Original
Midcoast Loan").
B. Subsequent to the execution and delivery of the
Original Midcoast Credit Agreement, Atemco, MLM and MLESCO
merged with and into Midcoast Marketing with Midcoast Marketing
being the surviving entity.
C. As of May 30, 1997, Bank One entered into a credit
facility with Midcoast Interstate Transmission, Inc., an
Alabama corporation (formerly known as Alabama Tennessee
Natural Gas Company) ("MIT") (as amended, the "MIT Credit
Agreement"; the Original Midcoast Credit Agreement and the MIT
Credit Agreement herein collectively called the "Original
Credit Agreements"). Pursuant to the MIT Credit Agreement,
Bank One agreed to advance loans thereunder to MIT (the "MIT
Loan"; the Original Midcoast Loan and the MIT Loan collectively
called the "Original Loans").
D. On or about July 2, 1998 the Borrower, through it's
wholly-owned subsidiary, MLT acquired all of the issued and
outstanding stock of Creole Gas Pipeline Corporation, a
Louisiana corporation ("Creole").
E. As of the date of this Agreement, the Borrower and
the Original Subsidiaries are indebted to Bank One in the
principal amount of $33,090,265.55 in connection with the
Original Midcoast Credit Agreement and Bank One has issued
pursuant to the Original Midcoast Credit Agreement a letter of
credit in the face amount of $25,000.00 (the "Existing Letter
of Credit").
F. As of the date of this Agreement, MIT is indebted to
Bank One in the principal amount of $100.00 in connection with
the MIT Credit Agreement.
G. The Borrower, through its wholly-owned subsidiary,
Midcoast Gas Services, Inc., a Delaware corporation ("MGS"),
has entered into that certain Purchase and Sale Agreement dated
July 29, 1998 (the "Purchase Agreement") with El Paso Field
Services Company, a Delaware corporation ("El Paso"), pursuant
to which MGS will acquire certain properties and assets
comprising the Andarko Gas Gathering System, all as more
particularly described therein.
H. The Borrower has formed two new Subsidiaries,
Midcoast Gas Pipeline, Inc., a Delaware corporation ("MGP"),
and Midcoast Energy Marketing, Inc., a Delaware corporation
("MEM").
I. The Borrower, the Original Subsidiaries, MIT, MGS,
MGP, MEM and Bank One desire to amend and restate the Original
Midcoast Credit Agreement and the MIT Credit Agreement pursuant
to this Amended and Restated Credit Agreement to (i) increase
the amount of the credit facility, (ii) permit CIBC and
NationsBank to become Lenders, (iii) evidence more particularly
their respective agreements and obligations in respect to the
renewal, extension and rearrangement of the terms existing and
arising under the Original Credit Agreements, and the
obligations, liabilities and indebtedness outstanding and to
arise thereunder, including, but without limitation, the
provisions for the restructuring and rearrangement of the
Original Midcoast Loan and the MIT Loan into the Loan (as such
term is hereinafter defined).
I. Subject to the terms and conditions hereof, and
relying on the representations, warranties and covenants made
by the Borrower and the Guarantors (as such term is hereinafter
defined) to the Administrative Agent and the Lenders, the
Administrative Agent and the Lenders are prepared to enter into
this Agreement and to make the Loan contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants set forth herein, the Borrower, the
Administrative Agent and the Lenders agree as follows:
1 ARTICLE DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above . As used in this Credit
Agreement, the terms "Borrower", "Lenders", "Bank One",
"Administrative Agent", "CIBC", "Syndication Agent",
"NationsBank", "Documentation Agent", "Magnolia Pipeline",
"H&W", "Magnolia Resources", "Magnolia Gathering", "Midcoast
Holdings", "Midcoast Gas Pipeline", "Nugget", "Midcoast
Marketing", "Trigas", "Mid LA", "MLT", "Original Subsidiaries",
"Original Midcoast Credit Agreement", "Creole","Existing
Letter of Credit", "MGS", "El Paso", "MGP", "MEM", "Purchase
Agreement", "MIT", "MIT Credit Agreement", "MIT Loan,"
"Original Credit Agreements", "Original Midcoast Loan", and
"Original Loans" shall have the meaning assigned to them
hereinabove.
1.2
1.3 Additional Defined Terms . As used in this Credit
Agreement, each of the following terms shall have the meaning
assigned thereto in this Section, unless the context otherwise
requires:
1.4
"Additional Costs" shall mean costs which any Lender
determines are attributable to such Lender's obligations
to make or maintain any Fixed Rate Loan, or any reduction
in any amount receivable by such Lender in respect of any
such obligation or any Fixed Rate Loan, resulting from any
Regulatory Change which (a) changes the basis of taxation
of any amounts payable to such Lender under this Agreement
or such Lender's Note in respect of any Fixed Rate Loan
(other than taxes imposed on the overall net income of
such Lender), (b) imposes or modifies any reserve, special
deposit, minimum capital, capital rates, or similar
requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of,
such Lender (including Fixed Rate Loans and Dollar
deposits in the London interbank market in connection with
LIBO Rate Loans), or any commitments of such Lender
hereunder, or (c) imposes any other condition affecting
this Agreement or any of such extensions of credit,
liabilities, or commitments.
"Adjusted LIBO Rate" shall mean, for any LIBO Rate
Loan, an interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of l%) to be equal to the
sum of the LIBO Rate for such Loan plus the Applicable
Margin, but in no event exceeding the Highest Lawful Rate.
"Administrative Agent's Fee" shall mean the facility
fee payable to the Lenders by the Borrower pursuant to
Section 2.11.
"Administrative Questionnaire" means an
Administrative Questionnaire in form and substance
acceptable to the Administrative Agent, which each Lender
shall complete and provide to the Administrative Agent and
the Borrower.
"Affiliate" shall mean any Person directly or
indirectly controlling, or under common control with, the
Borrower and includes any Subsidiary of the Borrower and
any "affiliate" of the Borrower within the meaning of Reg.
240.12b-2 of the Securities Exchange Act of 1934, as
amended, with "control," as used in this definition,
meaning possession, directly or indirectly, of the power
to direct or cause the direction of management, policies
or action through ownership of voting securities,
contract, voting trust, or membership in management or in
the group appointing or electing management or otherwise
through formal or informal arrangements or business
relationships.
"Aggregate Initial Commitment" shall mean
$100,000,000.00.
"Aggregate Increased Commitment" shall mean the
increased aggregate commitment of the Lenders over the
Aggregate Initial Commitment but not to exceed the
Aggregate Maximum Commitment, which Aggregate Initial
Commitment may be increased pursuant to Section 2.4 .
"Aggregate Maximum Commitment" shall mean
$150,000,000.00.
"Agreement" shall mean this Amended and Restated
Credit Agreement, as it may be amended, supplemented, or
restated from time to time.
"Applicable Lending Office" shall mean, for each type
of Loan, the lending office of the Lender (or an affiliate
of the Lender) designated for such type of Loan on the
signature pages hereof or such other office of the Lender
(or an affiliate of the Lender) as the Lender may from
time to time specify to the Borrower as the office by
which Loans of such type are to be made and maintained.
"Applicable Margin" shall mean for each LIBO Rate
Loan, one and one-quarter percent (1-1/4%).
"Arrangement Fee" shall mean the fee payable to the
Administrative Agent for its account by the Borrower
pursuant to Section 2.10.
"Available Commitment" shall mean, at any time, an
amount equal to the Aggregate Initial Commitment or the
Aggregate Increased Commitment, as the case may be, less
the total Loan Balance and the L/C Exposure at such time.
"Bankruptcy Code" has the meaning specified in
Section 8.01(a).
"Base Rate" shall mean the interest rate announced or
published by the Administrative Agent from time to time as
its general reference rate of interest, which Base Rate
shall change upon any change in such announced or
published general reference interest rate and which Base
Rate may not be the lowest interest rate charged by the
Administrative Agent.
"Borrowing Request" shall mean each written request,
in substantially the form attached hereto as Exhibit II,
by the Borrower to the Administrative Agent for a
borrowing, conversion, or prepayment pursuant to Sections
2.1 or 2.9, each of which shall:
(a) be signed by a Responsible Officer of the Borrower;
(a) specify the amount and type of Loan requested, and,
as applicable, the Loan to be converted or prepaid and the date
of the borrowing, conversion, or prepayment (which shall be a
Business Day);
(a) when requesting a Floating Rate Loan, be delivered to
the Administrative Agent no later than 10:00 a.m., Central
Standard or Daylight Savings Time, as the case may be, on the
Business Day of the requested borrowing, conversion, or
prepayment;
(a) when requesting a LIBO Rate Loan, be delivered to the
Administrative Agent no later than 10:00 a.m., Central Standard
or Daylight Savings Time, as the case may be, three (3)
Business Days preceding the requested borrowing, conversion, or
prepayment and designate the Interest Period requested with
respect to such Loan.
"Business Day" shall mean (a) for all purposes other
than as covered by clause (b) of this definition, a day
other than a Saturday, Sunday, legal holiday for
commercial banks under the laws of the State of Texas, or
any other day when banking is suspended in the State of
Texas, and (b) with respect to all requests, notices, and
determinations in connection with, and payments of
principal and interest on, LIBO Rate Loans, a day which is
a Business Day described in clause (a) of this definition
and which is a day for trading by and between banks for
Dollar deposits in the London interbank market.
"Cash Flow" shall mean, for any period, consolidated
net income of the Borrower, its Subsidiaries and any
acquired companies of the Borrower or any Subsidiary from
operations for such period plus (i) interest; (ii)
depreciation, amortization, and depletion; and (iii) other
non-cash expenses of the Borrower, its Subsidiaries and
acquired companies of the Borrower or any Subsidiary.
"Closing Date" shall mean the effective date of this
Agreement.
"Code" shall mean the United States Internal Revenue
Code of 1986, as amended from time to time.
"Collateral" shall mean the Mortgaged Properties and
any other Property now or at any time used or intended as
security for the payment or performance of all or any
portion of the Obligations.
"Commitment" shall mean the obligation of the
Lenders, subject to applicable provisions of this
Agreement, to make Loans to or for the benefit of the
Borrower pursuant to Section 2.1 and to issue Letters of
Credit pursuant to Section 2.2.
"Commitment Fees" shall mean each fee payable to the
Lenders by the Borrower pursuant to Section 2.12.
"Commitment Period" shall mean the period from and
including the Closing Date to but not including the
Commitment Termination Date.
"Commitment Termination Date" shall mean August 31,
2002.
"Commonly Controlled Entity" shall mean any Person
which is under common control with the Borrower within the
meaning of Section 4001 of ERISA.
"Compliance Certificate" shall mean each Certificate,
substantially in the form attached hereto as Exhibit III,
executed by a Responsible Officer of the Borrower and
furnished to the Administrative Agent from time to time in
accordance with Section 6.2.
"Contingent Obligation" shall mean, as to any Person,
any obligation of such Person guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends, or other
obligations of any other Person (for purposes of this
definition, a "primary obligation") in any manner, whether
directly or indirectly, including, without limitation, any
obligation of such Person, regardless of whether such
obligation is contingent, (a) to purchase any primary
obligation or any Property constituting direct or indirect
security therefor, (b) to advance or supply funds (i) for
the purchase or payment of any primary obligation, or (ii)
to maintain working or equity capital of any other Person
in respect of any primary obligation, or otherwise to
maintain the net worth or solvency of any other Person,
(c) to purchase Property, securities or services primarily
for the purpose of assuring the owner of any primary
obligation of the ability of the Person primarily liable
for such primary obligation to make payment thereof, or
(d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss in respect thereof,
with the amount of any Contingent Obligation being deemed
to be equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.
"Current Assets" shall mean all assets which would,
in accordance with GAAP, be included as current assets on
a consolidated balance sheet of the Borrower and its
Subsidiaries after eliminating any intercompany items, as
of the date of calculation, after deducting adequate
reserves in each case in which a reserve is proper in
accordance with GAAP plus an amount equal to the Available
Commitment.
"Current Liabilities" shall mean all liabilities
which would, in accordance with GAAP, be included as
current liabilities on a consolidated balance sheet of the
Borrower and its Subsidiaries as of the date of
calculation, but excluding current maturities in respect
of the Obligations.
"Default" shall mean any event or occurrence which
with the lapse of time or the giving of notice or both
would become an Event of Default.
"Default Rate" shall mean a per annum interest rate
equal to the Base Rate plus five percent (5%), but in no
event exceeding the Highest Lawful Rate.
"Documentation Agent's Fee" shall mean the facility
fee payable to the Documentation Agent by the Borrower
pursuant to Section 2.11.
"Dollars" and "$" shall mean dollars in lawful
currency of the United States of America.
"Environmental Complaint" shall mean any written or
oral complaint, order, directive, claim, citation, notice
of environmental report or investigation, or other notice
by any Governmental Authority or any other Person with
respect to (a) air emissions, (b) spills, releases, or
discharges to soils, any improvements located thereon,
surface water, groundwater, or the sewer, septic, waste
treatment, storage, or disposal systems servicing any
Property of the Borrower, (c) solid or liquid waste
disposal, (d) the use, generation, storage,
transportation, or disposal of any Hazardous Substance, or
(e) other environmental, health, or safety matters
affecting any Property of the Borrower, any of its
Subsidiaries or the business conducted thereon.
"Environmental Laws" shall mean (a) the following
federal laws as they may be cited, referenced, and amended
from time to time: the Clean Air Act, the Clean Water Act,
the Safe Drinking Water Act, the Comprehensive
Environmental Response, Compensation and Liability Act,
the Endangered Species Act, the Resource Conservation and
Recovery Act, the Occupational Safety and Health Act, the
Hazardous Materials Transportation Act, the Superfund
Amendments and Reauthorization Act, and the Toxic
Substances Control Act; (b) any and all equivalent
environmental statutes of any state in which Property of
the Borrower or any of its Subsidiaries is situated, as
they may be cited, referenced and amended from time to
time; (c) any rules or regulations promulgated under or
adopted pursuant to the above federal and state laws; and
(d) any other equivalent federal, state, or local statute
or any requirement, rule, regulation, code, ordinance, or
order adopted pursuant thereto, including, without
limitation, those relating to the generation,
transportation, treatment, storage, recycling, disposal,
handling, or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and
the regulations thereunder and interpretations thereof.
"Event of Default" shall mean any of the events
specified in Section 9.1.
"Excess Funding Obligor" has the meaning specified in
Section 8.5(i).
"Excess Payment" has the meaning specified in Section
8.5(ii).
"Existing Note" shall mean (A) that certain
promissory note dated October 31, 1997 in the original
principal amount of One Hundred Million and No/100 Dollars
($100,000,000.00) executed by Borrower and the Original
Subsidiaries payable to the order of Bank One, which note
was given by Borrower and the Original Subsidiaries in
extension, renewal and modification of, but not in
novation or discharge of, the obligations and indebtedness
evidenced by (i) that certain promissory note dated August
22, 1996 in the original principal amount of Forty Million
and No/100 Dollars ($40,000,000.00), executed by Borrower,
Magnolia Pipeline and H&W in favor of Bank One; (ii) that
certain promissory note in the original principal amount
of Four Million Four Hundred Thousand and No/100 Dollars
($4,400,000.00) dated April 3, 1996, executed by Republic
Gas Partners, L.L.C., a Delaware limited liability company
("Republic Gas"), and payable to the order of Union Bank,
a Division of Union Bank of California, N.A. ("Union
Bank"); (iii) that certain promissory note in the original
principal amount of Thirteen Million Two Hundred Thousand
and No/100 Dollars ($13,200,000.00) dated April 3, 1996,
executed by Republic Gas and payable to the order of
Union Bank; and (iv) that certain promissory note in the
original principal amount of Two Million Four Hundred
Thousand and No/100 Dollars ($2,400,000.00) dated April 3,
1996 executed by Republic Gas and payable to the order of
Union Bank; which notes described in (ii), (iii) and (iv)
above, among other things, were assigned by Union Bank to
Bank One pursuant to that certain Assignment of Notes,
Liens, Security Interests, Collateral Security and Other
Rights dated October 31, 1997, executed by Union Bank, as
assignor, in favor of Bank One and (B) that certain
promissory note dated May 30, 1997 in the original
principal amount of Five Million and No/100 Dollars
($5,000,000.00) executed by MIT payable to the order of
Bank One.
"Facility Fees" shall mean the facility fees payable
to the Lenders by the Borrower pursuant to Section 2.13.
"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 members
of the Federal Reserve System arranged by federal funds
brokers on such day, as published by the Federal Reserve
Bank of Dallas, Texas, on the Business Day next succeeding
such day, provided that (a) if the day 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 (b) if
such rate is not so published for any day, the Federal
Funds Rate for such day shall be the average rate charged
to Administrative Agent on such day on such transactions
as determined by the Administrative Agent.
"Final Maturity" shall mean August 31, 2002.
"Financial Statements" shall mean statements of the
consolidated financial condition of the Borrower and its
Subsidiaries as at the point in time and for the period
indicated and consisting of at least a balance sheet and
related statements of operations, common stock and other
stockholders equity, and cash flows for the Borrower and
its Subsidiaries and, when required by applicable
provisions of this Agreement to be audited, accompanied by
the unqualified certification of a nationally recognized
firm of independent certified public accountants or other
independent certified public accountants acceptable to the
Administrative Agent and footnotes to any of the
foregoing, all of which shall be prepared in accordance
with GAAP consistently applied and in comparative form
with respect to the corresponding period of the preceding
fiscal period.
"Fixed Rate Loan" shall mean any LIBO Rate Loan.
"Floating Rate" shall mean the Base Rate, but in no
event exceeding the Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any
portion of the Loan Balance which the Borrower has
requested, in the initial Borrowing Request for such Loan
or a subsequent Borrowing Request for such portion of the
Loan Balance, bear interest at the Floating Rate, or which
pursuant to the terms hereof is otherwise required to bear
interest at the Floating Rate.
"GAAP" shall mean generally accepted accounting
principles established by the Financial Accounting
Standards Board or the American Institute of Certified
Public Accountants and in effect in the United States from
time to time.
"Governmental Authority" shall mean any nation,
country, commonwealth, territory, government, state,
county, parish, municipality, or other political
subdivision and any entity exercising executive,
legislative, judicial, regulatory, or administrative
functions of or pertaining to government.
"Guaranteed Obligations" has the meaning specified in
Section 8.1(a).
"Guarantor" individually means Magnolia Pipeline,
H&W, Magnolia Resources, Magnolia Gathering, Midcoast
Holdings, Midcoast Gas Pipeline, Nugget, Midcoast
Marketing, Trigas, Mid LA, MLT, MIT, Creole, MGP, MEM and
MGS and any other Person who guarantees all or a portion
of the Obligations (whether by execution of a Subsidiary
Guarantor Counterpart or otherwise) and "Guarantors"
collectively means all of the foregoing.
"Guaranty" means collectively the guaranty of the
Guarantors contained in Article VIII.
"Hazardous Substances" shall mean flammables,
explosives, radioactive materials, hazardous wastes,
asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBS), toxic substances or
related materials, petroleum, petroleum products,
associated oil or natural gas exploration, production, and
development wastes, or any substances defined as
"hazardous substances," "hazardous materials," "hazardous
wastes," or "toxic substances" under the Comprehensive
Environmental Response, Compensation and Liability Act, as
amended, the Superfund Amendments and Reauthorization Act,
as amended, the Hazardous Materials Transportation Act, as
amended, the Resource Conservation and Recovery Act, as
amended, the Toxic Substances Control Act, as amended, or
any other law or regulation now or hereafter enacted or
promulgated by any Governmental Authority.
"Hedging Agreement" shall mean any interest rate
protection agreement or other interest rate hedging
arrangement.
"Highest Lawful Rate" shall mean, with respect to
each Lender, the maximum non-usurious interest rate, if
any (or, if the context so requires, an amount calculated
at such rate), that at any time or from time to time may
be contracted for, taken, reserved, charged, or received
on such Lender's Note or on any other amounts due, if any,
pursuant to this Agreement under laws applicable to such
Lender which are presently in effect or, to the extent
allowed by applicable law, as such laws may hereafter be
in effect and which allow a higher maximum non-usurious
interest rate than such laws now allow.
"Increased Commitment" shall mean as to each Lender,
the amount of the increase in such Lender's commitment
effected pursuant to Section 2.4 .
"Indebtedness" shall mean, as to any Person, without
duplication, (a) all liabilities (excluding reserves for
deferred income taxes, deferred compensation liabilities,
and other deferred liabilities and credits) which in
accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a
balance sheet, (b) all obligations of such Person
evidenced by bonds, debentures, promissory notes, or
similar evidences of indebtedness, and (c) all other
indebtedness of such Person for borrowed money.
"Initial Commitment" shall mean as to each Lender,
the amount set opposite each Lender's name on the
signature page hereof, as modified from time to time
pursuant to the terms hereof.
"Insolvency Proceeding" shall mean application
(whether voluntary or instituted by another Person) for,
or the consent to the appointment of, a receiver, trustee,
conservator, custodian, or liquidator of any Person or of
all or a substantial part of the Property of such Person,
or the filing of a petition (whether voluntary or
instituted by another Person) commencing a case under
Title 11 of the United States Code, seeking liquidation,
reorganization, or rearrangement or taking advantage of
any bankruptcy, insolvency, debtor's relief, or other
similar law of the United States, the State of Texas, or
any other jurisdiction.
"Insolvent" or "Insolvency" shall mean, with respect
to any Multiemployer Plan, that such Plan is insolvent
within the meaning of such term as used in Section 4245 of
ERISA.
"Intellectual Property" shall mean patents, patent
applications, trademarks, tradenames, copyrights,
technology, know-how, and processes.
"Interest Period" shall mean, subject to the
limitations set forth in Section 2.21, with respect to any
LIBO Rate Loan, a period commencing on the date such Loan
is made or converted from a Loan of another type pursuant
to this Agreement or the last day of the next preceding
Interest Period with respect to such Loan and ending on
the numerically corresponding day in the calendar month
that is one, two, three, or six months thereafter, as the
Borrower may request in the Borrowing Request for such
Loan.
"Investment" in any Person shall mean any stock,
bond, note, or other evidence of Indebtedness, or any
other security (other than current trade and customer
accounts) of, investment or partnership interest in, or
loan to, such Person.
"Issuing Lender" shall mean Bank One, in its capacity
as issuer of one or more Letters of Credit, together with
any successor letter of credit issuer and any replacement
letter of credit issuer hereunder.
"L/C Exposure" shall mean, at any time, the sum of
(a) the total face amount of all issued, undrawn and
uncancelled Letters of Credit, plus (b) the total unpaid
reimbursement obligations of the Borrower under drawings
under any Letter of Credit.
"Letter of Credit" shall mean (i) the Existing Letter
of Credit and (ii) any standby or commercial letter of
credit issued by the Issuing Lender for the account of the
Borrower pursuant to Section 2.2.
"Letter of Credit Application" shall mean the
standard letter of credit application employed by the
Issuing Lender from time to time in connection with
letters of credit.
"Letter of Credit Fees" shall mean each fee payable
to the Issuing Lender by the Borrower pursuant to Section
2.14 upon or in connection with the issuance of a Letter
of Credit.
"LIBO Rate" shall mean, with respect to any Interest
Period for any LIBO Rate Loan, the lesser of (a) the rate
per annum (rounded upwards, if necessary, to the nearest
1/16th of 1%) equal to the average of the offered
quotations appearing on Telerate Page 3750 (or if such
Telerate Page shall not be available, any successor or
similar service selected by the Administrative Agent and
the Borrower) as the London interbank offered rate as of
approximately 11:00 a.m., Central Standard or Daylight
Savings Time, as the case may be, on the day two Business
Days prior to the first day of such Interest Period for
Dollar deposits in an amount comparable to the principal
amount of such LIBO Rate Loan and having a term comparable
to the Interest Period for such LIBO Rate Loan, or (b) the
Highest Lawful Rate. If neither such Telerate Page 3750
nor any successor or similar service is available, the
term "LIBO Rate" shall mean, with respect to any Interest
Period for any LIBO Rate Loan, the lesser of (a) the rate
per annum (rounded upwards if necessary, to the nearest
1/16th of 1%) quoted by the Administrative Agent at
approximately 11:00 a.m., London time (or as soon
thereafter as practicable) two Business Days prior to the
first day of the Interest Period for such LIBO Rate Loan
for the offering by the Administrative Agent to leading
banks in the London interbank market of Dollar deposits in
an amount comparable to the principal amount of such LIBO
Rate Loan and having a term comparable to the Interest
Period for such LIBO Rate Loan, or (b) the Highest Lawful
Rate.
"LIBO Rate Loan" shall mean any Loan and any portion
of the Loan Balance which the Borrower has requested, in
the initial Borrowing Request for such Loan or a
subsequent Borrowing Request for such portion of the Loan
Balance, bear interest at the Adjusted LIBO Rate and which
is permitted by the terms hereof to bear interest at the
Adjusted LIBO Rate.
"Lien" shall mean any interest in Property securing
an obligation owed to, or a claim by, a Person other than
the owner of such Property, whether such interest is based
on common law, statute, or contract, and including, but
not limited to, the lien or security interest arising from
a mortgage, ship mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt, or a lease,
consignment, or bailment for security purposes (other than
true leases or true consignments), liens of mechanics,
materialmen, and artisans, maritime liens and
reservations, exceptions, encroachments, easements, rights
of way, covenants, conditions, restrictions, leases, and
other title exceptions and encumbrances affecting Property
which secure an obligation owed to, or a claim by, a
Person other than the owner of such Property (for the
purpose of this Agreement, the Borrower and any of its
Subsidiaries shall be deemed to be the owner of any
Property which it has acquired or holds subject to a
conditional sale agreement, financing lease, or other
arrangement pursuant to which title to the Property has
been retained by or vested in some other Person for
security purposes), and the filing or recording of any
financing statement or other security instrument in any
public office.
"Limitation Period" shall mean any period during
which any amount remains owing on any Lender's Note and
interest on such amount, calculated at the applicable
interest rate, plus any fees or other sums payable to such
Lender under any Loan Document and deemed to be interest
under applicable law, would exceed the amount of interest
which would accrue at the Highest Lawful Rate.
"Loan" individually shall mean any loan made by any
Lender to or for the benefit of the Borrower pursuant to
this Agreement up to $150,000,000 which shall include up
to $15,000,000 of Letters of Credit and any payment made
by Issuing Lender under a Letter of Credit and "Loans"
collectively shall mean all loans made by the Lenders to
or for the benefit of the Borrower pursuant to this
Agreement and all payments made by Issuing Lender under
all Letters of Credit.
"Loan Balance" shall mean, at any time, the
outstanding principal balance of the Notes at such time.
"Loan Documents" shall mean this Agreement, the
Notes, the Letter of Credit Applications, the Letters of
Credit, the Security Instruments, the Hedging Agreements,
the Subsidiary Guarantor Counterparts and all other
documents and instruments now or hereafter delivered
pursuant to the terms of or in connection with this
Agreement, the Notes, the Letter of Credit Applications,
the Letters of Credit, the Security Instruments, or the
Hedging Agreements and all renewals and extensions of,
amendments and supplements to, and restatements of, any or
all of the foregoing from time to time in effect.
"Majority Lenders" shall mean, at any time, Lenders
holding at least 66 2/3% of the Loan Balance at such time,
or if the Loan Balance is zero, then Lenders holding at
least 66 2/3% of the Commitment at such time.
"Material Adverse Effect" shall mean (a) any material
adverse effect on the business, operations, properties,
condition (financial or otherwise), or prospects of the
Borrower and its Subsidiaries, taken as a whole, (b) any
adverse effect upon the business operations, properties,
condition (financial or otherwise), or prospects of the
Borrower and its Subsidiaries, taken as a whole, which
increases the risk that any of the Obligations will not be
repaid as and when due, or (c) any adverse effect upon the
Collateral.
"Maximum Commitment" shall mean as to each Lender,
the amount set opposite each Lender's name on the
signature page hereof.
"Mortgaged Properties" shall mean all pipeline
systems of the Borrower and its Subsidiaries together with
all contract rights in connection with such pipeline
systems subject to a perfected first-priority Lien in
favor of the Administrative Agent for the benefit of the
Lenders, subject only to Permitted Liens, as security for
the Obligations.
"Multiemployer Plan" shall mean a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of
ERISA.
"Net Income" shall mean, for any period, the
consolidated net income of the Borrower and its
Subsidiaries for such period, determined in accordance
with GAAP.
"Note" shall mean individually the promissory note of
the Borrower payable to the order of a Lender, in the form
attached hereto as Exhibit I, together with all renewals,
extensions for any period, increases, and rearrangements
thereof and "Notes" collectively shall mean all of such
Notes.
"Obligations" shall mean, without duplication, (a)
all Indebtedness evidenced by the Notes, (b) the
Reimbursement Obligations, (c) the undrawn amount of all
outstanding, unexpired Letters of Credit, (d) the
obligation of the Borrower for the payment of Commitment
Fees, Facility Fees, Letter of Credit Fees, Administrative
Agent's Fees and the Arrangement Fee, (e) all indebtedness
of the Borrower to any Lender in connection with any
Hedging Agreement, and (f) all other obligations and
liabilities of the Borrower to the Lenders, now existing
or hereafter incurred, under, arising out of or in
connection with any Loan Document, and to the extent that
any of the foregoing includes or refers to the payment of
amounts deemed or constituting interest, only so much
thereof as shall have accrued, been earned and which
remains unpaid at each relevant time of determination.
"Original Loan Documents" shall mean the Loan
Documents, as such term is defined in the Original Credit
Agreement and in the MIT Credit Agreement in existence on
the Closing Date.
"Original Security Instruments" shall mean the
Security Instruments, as such term is defined in the
Original Credit Agreement and in the MIT Credit Agreement.
"Other Activities" has the meaning specified in
Section 10.3.
"Other Financings" has the meaning specified in
Section 10.3.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV
of ERISA or any entity succeeding to any or all of its
functions under ERISA.
"Permitted Liens" shall mean (a) Liens for taxes,
assessments, or other governmental charges or levies not
yet due or which (if foreclosure, distraint, sale, or
other similar proceedings shall not have been initiated)
are being contested in good faith by appropriate
proceedings, and such reserve as may be required by GAAP
shall have been made therefor, (b) Liens in connection
with workers compensation, unemployment insurance or other
social security (other than Liens created by Section 4068
of ERISA), old-age pension, or public liability
obligations which are not yet due or which are being
contested in good faith by appropriate proceedings, and
such reserve as may be required by GAAP shall have been
made therefor, (c) Liens in favor of vendors, carriers,
warehousemen, repairmen, mechanics, workmen, materialmen,
construction, or similar Liens arising by operation of law
in the ordinary course of business in respect of
obligations which are not yet due or which are being
contested in good faith by appropriate proceedings, and
such reserve as may be required by GAAP shall have been
made therefor, (d) other Liens in favor of the
Administrative Agent and other Liens expressly permitted
under the Security Instruments, (e) Liens on property
securing purchase money debt permitted by Section 7.1
incurred solely for the purpose of financing the
acquisition of such property, (f) encumbrances consisting
of minor easements, zoning restrictions, or other
restrictions on the use of property that do not
(individually or in the aggregate) materially affect the
value of assets encumbered thereby or materially impair
the ability of the Borrower or any Guarantor to use such
assets in their respective business, and none of which is
violated in any material respect by existing or proposed
structures or land use, and (g) Liens resulting from good
faith deposits to secure the performance of statutory
obligations, surety and appeal bonds, bids, or contracts,
or leases made in the ordinary course of business.
"Person" shall mean an individual, corporation,
partnership, limited liability company, trust,
unincorporated organization, government, any agency or
political subdivision of any government, or any other form
of entity.
"Plan" shall mean, at any time, any employee benefit
plan which is covered by ERISA and in respect of which the
Borrower or any Commonly Controlled Entity is (or, if such
plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Primary Balance" shall mean, the respective
outstanding and unpaid balance of the Original Loans as of
the date hereof, said respective balances being, in
respect of the Original Midcoast Loan, $33,090,265.55, and
in respect of the MIT Loan, $100.00.
"Principal Office" shall mean the principal office of
the Administrative Agent in Houston, Texas, presently
located at 910 Travis, Houston, Texas 77002.
"Prohibited Transaction" shall have the meaning
assigned to such term in Section 4975 of the Code.
"Property" shall mean any interest in any kind of
property or asset, whether real, personal or mixed,
tangible or intangible.
"Pro Rata Share" has the meaning specified in Section
8.5(iii).
"Reorganization" shall mean, with respect to any
Multiemployer Plan, that such Plan is in reorganization
within the meaning of such term in Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set
forth in Section 4043(b) of ERISA, other than those events
as to which the thirty-day notice period is waived under
subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
2615.
"Regulation D" shall mean Regulation D of the Board
of Governors of the Federal Reserve System, as the same
may be amended or supplemented from time to time.
"Regulation G" shall mean Regulation G of the Board
of Governors of the Federal Reserve System, as the same
may be amended or supplemented from time to time.
"Regulation T" shall mean Regulation T of the Board
of Governors of the Federal Reserve System, as the same
may be amended or supplemented from time to time.
"Regulation U" shall mean Regulation U of the Board
of Governors of the Federal Reserve System, as the same
may be amended or supplemented from time to time.
"Regulation X" shall mean Regulation X of the Board
of Governors of the Federal Reserve System, as the same
may be amended or supplemented from time to time.
"Regulatory Change" shall mean the passage, adoption,
institution, or amendment of any federal, state, local, or
foreign Requirement of Law (including, without limitation,
Regulation D) , or any interpretation, directive, or
request (whether or not having the force of law) of any
Governmental Authority or monetary authority charged with
the enforcement, interpretation, or administration
thereof, occurring after the Closing Date and applying to
a class of banks including the Administrative Agent or its
Applicable Lending Office.
"Reimbursement Obligation" shall mean the obligation
of the Borrower to provide to the Issuing Lender or
reimburse the Issuing Lender for any amounts payable,
paid, or incurred by the Issuing Lender with respect to
Letters of Credit.
"Release of Hazardous Substances" shall mean any
emission, spill, release, disposal, or discharge, except
in accordance with a valid permit, license, certificate,
or approval of the relevant Governmental Authority, of any
Hazardous Substance into or upon (a) the air, (b) soils or
any improvements located thereon, (c) surface water or
groundwater, or (d) the sewer or septic system, or the
waste treatment, storage, or disposal system servicing any
Property of the Borrower or any of its Subsidiaries.
"Requirement of Law" shall mean, as to any Person,
the certificate or articles of incorporation and by-laws
or other organizational or governing documents of such
Person, and any applicable law, treaty, ordinance, order,
judgment, rule, decree, regulation, or determination of an
arbitrator, court, or other Governmental Authority,
including, without limitation, rules, regulations, orders,
and requirements for permits, licenses, registrations,
approvals, or authorizations, in each case as such now
exist or may be hereafter amended and are applicable to or
binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
"Responsible Officer" shall mean, as to any Person,
its President, Chief Executive Officer, Chief Financial
Officer or any Vice President.
"Security Instruments" shall mean the Original
Security Instruments, the security instruments executed
and delivered in satisfaction of the condition set forth
in Section 4.1(g), and all other documents and instruments
at any time executed as security for all or any portion of
the Obligations, as such instruments may be amended,
restated, or supplemented from time to time.
"Single Employer Plan" shall mean any Plan which is
covered by Title IV of ERISA, but which is not a
Multiemployer Plan.
"Subsidiary" shall mean, as to any Person, a
corporation of which shares of stock having ordinary
voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of
such corporation are at the time owned, or the management
of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by such
Person.
"Subsidiary Guarantor Counterpart" shall mean the
subsidiary guarantor counterpart, in substantially the
form attached hereto as Exhibit VI, executed by a newly
acquired or formed direct or indirect Subsidiary of the
Borrower furnished to the Administrative Agent in
accordance with Section 6.17.
"Superfund Site" shall mean those sites listed on the
Environmental Protection Agency National Priority List and
eligible for remedial action or any comparable state
registries or list in any state of the United States.
"Syndication Agent's Fee" shall mean the facility fee
payable to the Syndication Agent by the Borrower pursuant
to Section 2.11.
"Tangible Net Worth" shall mean (a) total assets, as
would be reflected on a balance sheet of the Borrower and
its Subsidiaries prepared on a consolidated basis and in
accordance with GAAP (exclusive of Intellectual Property,
experimental or organization expenses, franchises,
licenses, permits, and other intangible assets, treasury
stock, unamortized underwriters' debt discount and
expenses, and goodwill) minus (b) total liabilities, as
would be reflected on a balance sheet of the Borrower and
its Subsidiaries prepared on a consolidated basis and in
accordance with GAAP.
"Transferee" shall mean any Person to which the
Lender has sold, assigned, transferred, or granted a
participation in any of the Obligations, as authorized
pursuant to Section 11.1, and any Person acquiring, by
purchase, assignment, transfer, or participation, from any
such purchaser, assignee, transferee, or participant, any
part of such Obligations.
"UCC" shall mean the Uniform Commercial Code as from
time to time in effect in the State of Texas.
1.1 Undefined Financial Accounting Terms . Undefined
financial accounting terms used in this Agreement shall be
defined according to GAAP at the time in effect.
1.2
1.3 References . References in this Agreement to
Exhibit, Article, or Section numbers shall be to Exhibits,
Articles, or Sections of this Agreement, unless expressly
stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove,"
"hereinbelow," "hereof," "hereunder" and words of similar
import shall be to this Agreement in its entirety and not only
to the particular Exhibit, Article, or Section in which such
reference appears.
1.4
1.5 Articles and Sections . This Agreement, for
convenience only, has been divided into Articles and Sections;
and it is understood that the rights and other legal relations
of the parties hereto shall be determined from this instrument
as an entirety and without regard to the aforesaid division
into Articles and Sections and without regard to headings
prefixed to such Articles or Sections.
1.6
1.7 Number and Gender . Whenever the context requires,
reference herein made to the single number shall be understood
to include the plural; and likewise, the plural shall be
understood to include the singular. Definitions of terms
defined in the singular or plural shall be equally applicable
to the plural or singular, as the case may be, unless otherwise
indicated. Words denoting sex shall be construed to include
the masculine, feminine and neuter, when such construction is
appropriate; and specific enumeration shall not exclude the
general but shall be construed as cumulative.
1.8
1.9 Incorporation of Exhibits . The Exhibits attached to
this Agreement are incorporated herein and shall be considered
a part of this Agreement for all purposes.
1.10
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1
ARTICLE TERMS OF FACILITY
(a) Loans . Upon the terms and conditions (including,
without limitation, the right of the Lenders to decline to make
any Loan so long as any Default or Event of Default exists) and
relying on the representations and warranties contained in this
Agreement, each Lender severally agrees, during the Commitment
Period, to make Loans to the Borrower from time to time in an
aggregate principal amount that will not result in (a) such
Lender's Loans exceeding such Lender's Initial Commitment (or,
if the Initial Commitment of such Lender has been increased
pursuant to Section 2.4, such Lender's Increased Commitment) or
(b) the sum of the total Loans plus the L/C Exposure then
exceeding the Aggregate Initial Commitment (or, if the
Aggregate Initial Commitment has been increased pursuant to
Section 2.4, such Aggregate Increased Commitment). Such Loans
shall be made in immediately available funds at the Principal
Office of the Administrative Agent, to or for the benefit of
the Borrower, from time to time on any Business Day designated
by the Borrower following receipt by the Administrative Agent
of a Borrowing Request.
(b)
(c) Each Loan shall be made as part of a borrowing
consisting of revolving credit loans made by the Lenders
ratably in accordance with their respective Initial or
Increased Commitment. The failure of any Lender to make any
Loan required to be made by it shall not relieve any other
Lender of its obligations hereunder.
(d)
(e) Subject to the terms of this Agreement, during the
Commitment Period, the Borrower may borrow, repay, and reborrow
and convert Loans of one type or with one Interest Period into
Loans of another type or with a different Interest Period.
Each borrowing, conversion, and prepayment of principal of
Loans shall be in an amount at least equal to $1,000,000. Each
borrowing, prepayment, or conversion of or into a Loan of a
different type or, in the case of a Fixed Rate Loan, having a
different Interest Period, shall be deemed a separate
borrowing, conversion, and prepayment for purposes of the
foregoing, one for each type of Loan or Interest Period.
Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of LIBO Rate Loans having the same
Interest Period shall be at least equal to $1,000,000; and if
any LIBO Rate Loan would otherwise be in a lesser principal
amount for any period, such Loan shall be a Floating Rate Loan
during such period.
(f)
(g) The Loans shall be made and maintained by each Lender
at its Applicable Lending Office and shall be evidenced by such
Lender's Note.
(h)
(i) It is understood and agreed by all parties hereto
that as of the date hereof, the Primary Balance in respect of
the Original Midcoast Loan and the MIT Loan have been, and
shall be deemed to have been, advanced on the Loan.
(j)
(k) Letter of Credit Facility . Upon the terms and
conditions (including, without limitation, the right of the
Issuing Lender to decline to issue any Letter of Credit so long
as any Default or Event of Default exists) and relying on the
representations and warranties contained in this Agreement, the
Issuing Lender agrees, during the Commitment Period, to issue
Letters of Credit following the receipt not less than two (2)
Business Days prior to the requested date for issuance of the
relevant Letter of Credit, of a Letter of Credit Application
executed by the Borrower; provided, however, (a) no Letter of
Credit shall have an expiration date which is more than 60 days
after the issuance thereof or subsequent to the Commitment
Termination Date, and (b) the Issuing Lender shall not be
obligated to issue any Letter of Credit if (i) the face amount
thereof would exceed the Available Commitment, or (ii) after
giving effect to the issuance thereof, (A) the L/C Exposure,
when added to the Loan Balance then outstanding, would exceed
the Initial Commitment or the Increased Commitment, as the case
may be, or (B) the L/C Exposure would exceed the lesser of
$15,000,000 or the Available Commitment.
(l)
(m) Should the Issuing Lender be called upon by the
beneficiary of any Letter of Credit to honor all or any portion
of the commitment thereunder, whether upon the presentation of
drafts or otherwise, such payment by the Issuing Lender on
account of such Letter of Credit shall be treated, for all
purposes, as a Floating Rate Loan and an advance against the
Notes.
(n)
(o) The Existing Letter of Credit shall be deemed issued
under and pursuant to this Agreement by the Issuing Lender and
shall be deemed a Letter of Credit issued hereunder for all
purposes.
(p)
(q) Use of Loan Proceeds and Letters of Credit .
Proceeds of all Loans shall be used solely for general
corporate purposes including working capital needs, to
refinance existing debt and for acquisitions.
(r)
(s) Letters of Credit shall be used solely for working
capital needs.
(t)
1.2 Commitment Amount Increase . The Borrower may
request that the Aggregate Initial Commitment be increased at
any time up to but not to exceed the Aggregate Maximum
Commitment. The Lenders, in their sole and absolute
discretion, may agree to increase the Aggregate Initial
Commitment and if they so agree, the Administrative Agent shall
so notify the Borrower.
1.3
1.4 Interest . Subject to the terms of this Agreement
(including, without limitation, Section 2.17), interest on the
Loans shall accrue and be payable at a rate per annum equal to
the Floating Rate for each Floating Rate Loan and the Adjusted
LIBO Rate for each LIBO Rate Loan. Interest on all Floating
Rate Loans 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) during the
period for which payable. Interest on all LIBO 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) during the period for which payable. Notwithstanding
the foregoing, interest on past due principal and, to the
extent permitted by applicable law, past due interest, shall
accrue at the Default Rate, 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) during the
period for which payable, and shall be payable upon demand by a
Lender at any time as to all or any portion of such interest.
In the event that the Borrower fails to select the duration of
any Interest Period for any Fixed Rate Loan within the time
period and otherwise as provided herein, such Loan (if
outstanding as a Fixed Rate Loan) will be automatically
converted into a Floating Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a
Floating Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Floating Rate Loan. Interest
provided for herein shall be calculated on unpaid sums actually
advanced and outstanding pursuant to the terms of this
Agreement and only for the period from the date or dates of
such advances until repayment.
1.5
1.6 Repayment of Loans and Interest . Accrued and unpaid
interest on each outstanding Floating Rate Loan shall be due
and payable monthly commencing on the first day of October,
1998, and continuing on the first day of each calendar month
thereafter while any Floating Rate Loan remains outstanding,
the payment in each instance to be the amount of interest which
has accrued and remains unpaid in respect of the relevant Loan.
Accrued and unpaid interest on each outstanding Fixed Rate Loan
shall be due and payable on the last day of the Interest Period
for such Fixed Rate Loan and, in the case of any Interest
Period in excess of three months, on the day of the third
calendar month following the commencement of such Interest
Period corresponding to the day of the calendar month on which
such Interest Period commenced, the payment in each instance to
be the amount of interest which has accrued and remains unpaid
in respect of the relevant Loan. The Loan Balance together
with all accrued and unpaid interest thereon, shall be due and
payable at Final Maturity. At the time of making each payment
hereunder or under the Notes, the Borrower shall specify to the
Administrative Agent the Loans or other amounts payable by the
Borrower hereunder to which such payment is to be applied. In
the event the Borrower fails to so specify, or if an Event of
Default has occurred and is continuing, the Administrative
Agent may apply such payment as it may elect in its sole
discretion; provided, however, the Administrative Agent will
apply the payments to the Loans in the descending order of
interest costs.
1.7
1.8 Outstanding Amounts . The outstanding principal
balance of the Notes reflected by the notations by the
Administrative Agent on its records shall be rebuttably
presumptive evidence of the principal amount owing on the
Notes. The liability for payment of principal and interest
evidenced by the Notes shall be limited to principal amounts
actually advanced and outstanding pursuant to this Agreement
and interest on such amounts calculated in accordance with this
Agreement.
1.9
1.10 Time, Place, and Method of Payments . All payments
required pursuant to this Agreement or the Notes shall be made
in lawful money of the United States of America and in
immediately available funds, shall be deemed received by the
Administrative Agent on the next Business Day following receipt
if such receipt is after 2:00 p.m., Central Standard or
Daylight Savings Time, as the case may be, on any Business Day,
and shall be made at the Principal Office. Except as provided
to the contrary herein, if the due date of any payment
hereunder or under the Notes 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.
1.11
1.12 Voluntary Prepayments and Conversions of Loans . (a)
Subject to applicable provisions of this Agreement, the
Borrower shall have the right at any time or from time to time
to prepay Loans and to convert Loans of one type or with one
Interest Period into Loans of another type or with a different
Interest Period; provided, however, that (i) the Borrower
shall give the Administrative Agent notice of each such
prepayment or conversion of all or any portion of a Fixed Rate
Loan no less than three (3) Business Days prior to prepayment
or conversion, (ii) any Fixed Rate Loan may be prepaid or
converted only on the last day of an Interest Period for such
Loan, (iii) the Borrower shall pay all accrued and unpaid
interest on the amounts prepaid or converted, and (iv) no such
prepayment or conversion shall serve to postpone the repayment
when due of any Obligation.
1.13
1.14 (b) Borrower may prepay all or any portion of the
principal amount of the Loan bearing interest at a LIBOR Rate,
provided that if Borrower makes any such prepayment other than
on the last day of an Interest Period, Borrower (i) with such
prepayment, shall pay all accrued interest on the principal
amount prepaid (unless less than all of the principal amount of
the Loan is being prepaid, in which case such interest shall be
due and payable on the next scheduled interest payment date),
and (ii) on demand, shall reimburse Lenders and hold Lenders
harmless from all losses and expenses incurred by Lenders as a
result of such prepayment, including, without limitation, any
losses and expenses arising from the liquidation or
reemployment of deposits acquired to fund or maintain the
principal amount prepaid. Such reimbursement shall be
calculated as though Lenders funded the principal amount
prepaid through the purchase of U.S. Dollar deposits in the
London, England interbank market having a maturity
corresponding to such Interest Period and bearing an interest
rate equal to the LIBOR Rate for such Interest Period, whether
in fact that is the case or not. Lenders' determination of the
amount of such reimbursement shall be conclusive in the absence
of manifest error.
1.15
1.16 Arrangement Fee . The Borrower shall pay to the
Administrative Agent on the Closing Date, in immediately
available funds, for the Administrative Agent's account, the
Arrangement Fee in the amount of $65,000.
1.17
1.18 Respective Agent's Fees . To compensate the
Administrative Agent for its administrative responsibilities
under this Agreement, the Borrower shall pay to the
Administrative Agent on the Closing Date and annually
thereafter while this Agreement is in effect, in immediately
available funds, for the Administrative Agent's account, an
Administrative Agent's Fee in the amount of $35,000, which fee
shall be earned as of the Closing Date and each anniversary
thereafter and which Administrative Agent's Fee will not be
refunded or prorated even if this Agreement remains outstanding
for less than a full year after payment of such Administrative
Agent's Fee. To compensate the Syndication Agent for its
responsibilities under this Agreement, the Borrower shall pay
to the Syndication Agent on the Closing Date, in immediately
available funds, for the Syndication Agent's account, a
Syndication Agent's Fee in the amount of $65,000, which fee
shall be earned as of the Closing Date. To compensate the
Documentation Agent for its responsibilities under this
Agreement, the Borrower shall pay to the Documentation Agent on
the Closing Date, in immediately available funds, for the
Documentation Agent's account, a Documentation Agent's Fee in
the amount of $65,000, which fee shall be earned as of the
Closing Date .
1.19
1.20 Commitment Fees . To compensate the Lenders for
maintaining funds availability under this Agreement, the
Borrower shall pay to the Administrative Agent for the account
of each Lender, in immediately available funds, on the 1st day
of November, 1998, and on the first day of each third calendar
month thereafter during the Commitment Period, a fee in the
amount of three-eighths percent (3/8%) per annum, calculated 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), on the average daily amount of the Available
Commitment during the preceding quarterly period.
1.21
1.22 Facility Fees . (a) To compensate the Lenders for
the costs of establishing this credit facility in the amount of
their respective Initial Commitments, the Borrower shall pay on
the Closing Date, in immediately available funds, (i) to Bank
One, for its account, a facility fee in the amount of $100,000,
(ii) to CIBC, for its account, a facility fee in the amount of
$100,000, and (iii) to NationsBank, for its account, a facility
fee in the amount of $100,000.
1.23
1.24 (b) To compensate the Lenders for the costs of
increasing the Commitment in excess of the Aggregate Initial
Commitment, the Borrower shall pay to the Administrative Agent
for the account of each Lender an additional facility fee equal
to the product obtained by multiplying the increase in the
Commitment by fifteen (15) basis points (.015) over the
Aggregate Initial Commitment (or any higher Aggregate Increased
Commitment if previously increased over the Aggregate Initial
Commitment) (not to include amounts paid and reborrowed), such
facility fee to be shared by the Lenders pro rata according to
their respective Increased Commitments at the time of such
Increased Commitment, with such additional facility fee to be
paid on the date of any Increased Commitment in immediately
available funds.
1.25
1.26 Letter of Credit Fees . The Borrower agrees to pay
to the Issuing Lender, on the date of issuance of each Letter
of Credit, a fee equal to the greater of (i) $400 and (ii) one
percent (1%) per annum, calculated 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), on the
face amount of such Letter of Credit during the period for
which such Letter of Credit is issued; provided, however, in
the event such Letter of Credit is canceled prior to its
original expiry date or a payment is made by the Issuing Lender
with respect to such Letter of Credit, the Issuing Lender
shall, within ten days after such cancellation or the making of
such payment, rebate to the Borrower the unearned portion of
such fee. The Borrower also agrees to pay to the Issuing
Lender on demand its customary letter of credit transactional
fees, including, without limitation, amendment fees, payable
with respect to each Letter of Credit.
1.27
1.28 Loans to Satisfy Obligations of Borrower . The
Administrative Agent may, with the consent of the Majority
Lenders, but shall not be obligated to, make Loans for the
benefit of the Borrower and apply proceeds thereof to the
satisfaction of any condition, warranty, representation, or
covenant of the Borrower or any Subsidiary contained in this
Agreement or any other Loan Document. Any such Loan shall be
evidenced by the Notes and shall be made as a Floating Rate
Loan.
1.29
1.30 Security Interest in Accounts: Right of Offset . As
security for the payment and performance of the Obligations,
the Borrower and each Guarantor hereby transfers, assigns, and
pledges to the Administrative Agent, for the benefit of the
Lenders, and grants to the Administrative Agent, for the
benefit of the Lenders, a security interest in all funds of the
Borrower and each Guarantor now or hereafter or from time to
time on deposit with any Lender, with such security interest to
be retransferred, reassigned, and/or released, as the case may
be, at the expense of the Borrower upon payment in full and
complete performance by the Borrower of all Obligations. All
remedies as secured party or assignee of such funds shall be
exercisable by the Administrative Agent upon the occurrence of
any Event of Default, regardless of whether the exercise of any
such remedy would result in any penalty or loss of interest or
profit with respect to any withdrawal of funds deposited in a
time deposit account prior to the maturity thereof.
Furthermore, the Borrower and each Guarantor hereby grants to
the Administrative Agent the right, exercisable at such time as
any Obligation shall mature, whether by acceleration of
maturity or otherwise, of offset or banker's lien against all
funds of the Borrower or any Guarantor now or hereafter or from
time to time on deposit with any Lender, regardless of whether
the exercise of any such remedy would result in any penalty or
loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity
thereof.
1.31
(a) General Provisions Relating to Interest . It is the
intention of the parties hereto to comply strictly with
applicable usury laws including, where applicable, the usury
laws of the State of Texas and the United States of America.
In this connection, there shall never be collected, charged, or
received on the sums advanced hereunder interest in excess of
that which would accrue at the Highest Lawful Rate. For
purposes of Texas law, to the extent applicable, the Borrower
agrees that the Highest Lawful Rate shall be the weekly rate
ceiling as defined in Texas Revised Civil Statutes Article 5069-
1D.001 et seq. or any successor statute; provided that any
Lender may also rely, to the extent permitted by applicable
laws, on alternative maximum rates of interest under other
applicable laws, if greater.
(b)
(c) Notwithstanding anything herein or in any Note to the
contrary, during any Limitation Period, the interest rate to be
charged on amounts evidenced by such Note shall be the Highest
Lawful Rate, and the obligation, if any, of the Borrower for
the payment of fees or other charges deemed to be interest
under applicable law payable to the Lender holding such Note
shall be suspended. During any period or periods of time
following a Limitation Period, to the extent permitted by
applicable laws, the interest rate to be charged hereunder
shall remain at the Highest Lawful Rate until such time as
there has been paid to the affected Lender (i) the amount of
interest in excess of that accruing at the Highest Lawful Rate
that such Lender would have received during the Limitation
Period had the interest rate remained at the otherwise
applicable rate, and (ii) all interest and fees otherwise
payable to such Lender but for the effect of such Limitation
Period.
(d)
(e) If, under any circumstances, the aggregate amounts
paid on the Notes or under this Agreement or any other Loan
Document include amounts which by applicable law are deemed
interest and which would exceed the amount permitted if the
Highest Lawful Rate were in effect, the Borrower stipulates
that such payment and collection will have been and will be
deemed to have been, to the extent permitted by applicable law,
the result of mathematical error on the part of the Borrower
and such Lender; and such Lender shall promptly refund the
amount of such excess (to the extent only of such interest
payments in excess of that which would have accrued and been
payable on the basis of the Highest Lawful Rate) upon discovery
of such error by such Lender or notice thereof from the
Borrower. In the event that the maturity of any Obligation is
accelerated, by reason of an election by the Administrative
Agent or otherwise, or in the event of any required or
permitted prepayment, then the consideration constituting
interest under applicable laws may never exceed the Highest
Lawful Rate; and excess amounts paid which by law are deemed
interest, if any, shall be credited by the affected Lender on
the principal amount of the Obligations payable to it, or if
the principal amount of such Obligations shall have been paid
in full, refunded to the Borrower.
(f)
(g) All sums paid, or agreed to be paid, to the Lenders
for the use, forbearance or detention of the proceeds of any
Loan hereunder shall, to the extent permitted by applicable
law, be amortized, prorated, allocated, and spread throughout
the full term hereof until paid in full so that the actual rate
of interest is uniform but does not exceed the Highest Lawful
Rate throughout the full term hereof.
(h)
1.32 Limitation on Types of Loans . Anything herein to
the contrary notwithstanding, no more than eight (8) separate
Loans shall be outstanding at any one time, with, for purposes
of this Section, all Floating Rate Loans constituting one Loan
and each borrowing consisting of a separate LIBO Rate Loan
constituting one Loan. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any
interest rate for any LIBO Rate Loan for any Interest Period
therefor:
1.33
(a) any Lender determines (which determination shall be
conclusive) that quotations of interest rates for the deposits
referred to in the definition of "LIBO Rate" in Section 1.2 are
not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for
such Loan as provided in this Agreement; or
(b)
(c) any Lender determines (which determination shall be
conclusive) that the rates of interest referred to in the
definition of "LIBO Rate" in Section 1.2 upon the basis of
which the rate of interest for such Loan for such Interest
Period is to be determined do not accurately reflect the cost
to such Lender of making or maintaining such Loan for such
Interest Period,
(d)
(e) then such Lender shall give the Administrative Agent and
the Borrower prompt notice thereof; and so long as such
condition remains in effect, such Lender shall be under no
obligation to make LIBO Rate Loans or to convert Loans of any
other type into LIBO Rate Loans, and the Borrower shall, on the
last day of the then current Interest Period for each
outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan
or convert such Loan into another type of Loan in accordance
with Section 2.9. Before giving such notice pursuant to this
Section, the affected Lender will designate a different
available Applicable Lending Office for LIBO Rate Loans or take
such other action as the Borrower may request if such
designation or action will avoid the need to suspend the
obligation of such Lender to make LIBO Rate Loans hereunder and
will not, in the opinion of such affected Lender, be
disadvantageous to such Lender.
(f)
1.34 Illegality . Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any
Lender or its Applicable Lending Office to (a) honor its
obligation to make any type of Fixed Rate Loans hereunder, or
(b) maintain any type of Fixed Rate Loans hereunder, then such
Lender shall promptly notify the Administrative Agent and the
Borrower thereof; and the obligation of such Lender hereunder
to make such type of Fixed Rate Loans and to convert other
types of Loans into Fixed Rate Loans of such type shall be
suspended until such time as such Lender may again make and
maintain Fixed Rate Loans of such type, and the outstanding
Fixed Rate Loans of such type shall be converted into Floating
Rate Loans in accordance with Section 2.9. Before giving such
notice pursuant to this Section, such Lender will designate a
different available Applicable Lending Office for Fixed Rate
Loans or take such other action as the Borrower may request if
such designation or action will avoid the need to suspend the
obligation of such Lender to make Fixed Rate Loans and will
not, in the opinion of the affected Lender, be disadvantageous
to such Lender.
1.35
1.36 Regulatory Change . In the event that by reason of
any Regulatory Change, any Lender (a) incurs Additional Costs
based on or measured by the excess above a specified level of
the amount of a category of deposits or other liabilities of
the affected Lender which includes deposits by reference to
which the interest rate on any Fixed Rate Loan is determined as
provided in this Agreement or a category of extensions of
credit or other assets of such Lender which includes any Fixed
Rate Loan, or (b) becomes subject to restrictions on the amount
of such a category of liabilities or assets which it may hold,
then, at the election of such Lender with notice to the
Administrative Agent and the Borrower, the obligation of such
Lender to make such Fixed Rate Loans and to convert Floating
Rate Loans into such Fixed Rate Loans shall be suspended until
such time as such Regulatory Change ceases to be in effect, and
all such outstanding Fixed Rate Loans shall be converted into
Floating Rate Loans in accordance with Section 2.9.
1.37
1.38 Limitations on Interest Periods . Each Interest
Period selected by the Borrower (a) which commences on the last
Business Day of a calendar month (or, with respect to any LIBO
Rate Loan, 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, (b) which would otherwise end on a
day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business
Day falls in the next succeeding calendar month, on the next
preceding Business Day), (c) which would otherwise commence
before and end after Final Maturity shall end on Final
Maturity, and (d) shall have an Interest Period no shorter than
one month, and if shorter than one month, the relevant Loan
shall be a Floating Rate Loan during such period.
1.39
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1
ARTICLE STATUS OF LOANS; WAIVER
1.1 Status of Loans . (a) The Loan and the Notes are
entered into in renewal, extension and rearrangement of, and
complete substitution and replacement for, the Original Loans
and the notes evidencing the Original Loans, but not in the
extinguishment of (in whole or in part) any liabilities or
indebtedness of the Borrower or any of its Subsidiaries owing
or outstanding in connection therewith or any liens or security
interests securing any of the same.
1.2
1.3 (b) In furtherance of the foregoing, but not in
limitation thereof, all of the Borrower's and its Subsidiaries'
rights to request borrowings under the Original Credit
Agreements, and all of Bank One's commitments and obligations
to grant borrowings or issue letters of credit under the
Original Credit Agreements, are cancelled in their entirety,
and in replacement and substitution therefor, and in renewal,
extension and rearrangement thereof, the Loan is granted by the
Lenders to, and accepted by, the Borrower pursuant and subject
to the provisions of this Agreement. In all other respects,
this Agreement is entered into to amend and restate the terms,
conditions and provisions of the Original Credit Agreements and
in such regard, the terms, conditions and provisions of this
Agreement, except as expressly provided herein and to the
express extent so provided, shall control and govern; provided,
however, all liens, security interests and other rights and
remedies heretofore granted or made in favor and for the
benefit of Bank One, by the Borrower, any of its Subsidiaries,
MIT or any other Person, are hereby reaffirmed, ratified and
continued as valid and subsisting and in full force and effect
to secure the prompt payment of the Loans and all other
liabilities and indebtedness now or heretofore existing or
hereafter arising in connection with, or related to, this
Agreement, and the prompt performance of all terms and
provisions hereof and in connection herewith.
1.4
1.5 Waiver . The Borrower and the Guarantors each
warrant and represent to the Administrative Agent and the
Lenders that to their knowledge no facts, events, statuses or
conditions exist or have existed which, either now or with the
passage of time or giving of notice, or both, constitute or
will constitute a basis for any claim or cause of action
against the Administrative Agent or any Lender or any defense
to (y) the payment of any obligations and indebtedness under
the Original Credit Agreements and/or this Agreement or (z) the
performance of any of their respective obligations in respect
to the Original Credit Agreements and/or this Agreement, and in
the event any such facts, events, statuses or conditions exist
or have existed, the Borrower and each Guarantor
unconditionally and irrevocably waives any and all claims and
causes of action against the Administrative Agent and Lenders
and any defenses to their payment and performance obligations
in respect to the Original Credit Agreements and this
Agreement.
1.6
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1
ARTICLE CONDITIONS
2 The obligations of the Lenders to enter into this
Agreement and to make Loans and issue Letters of Credit are
subject to the satisfaction of the following conditions
precedent:
3
3.1 Receipt of Loan Documents and Other Items . The
Lenders shall have no obligation under this Agreement unless
and until all matters incident to the consummation of the
transactions contemplated herein, shall be satisfactory to the
Lenders, and the Lenders shall have received, reviewed, and
approved the following documents and other items, appropriately
executed when necessary and, where applicable, acknowledged by
one or more authorized officers of the Borrower or a Subsidiary
of the Borrower, all in form and substance satisfactory to the
Lenders and dated, where applicable, of even date herewith or a
date prior thereto and acceptable to the Lenders:
3.2
(a) multiple counterparts of this Agreement, as requested by
the Administrative Agent;
(a) the Existing Notes, endorsed payable to the
Administrative Agent, as agent for the Lenders;
(b)
(c) the Notes;
(a) copies of the Articles of Incorporation or
Certificate of Incorporation and all amendments thereto and the
bylaws and all amendments thereto of the Borrower and
Guarantors accompanied by a certificate issued by the secretary
or an assistant secretary of the Borrower or such Guarantor to
the effect that each such copy is correct and complete;
(b)
(c) certificates of incumbency and signatures of all
officers of the Borrower and Guarantors who are authorized to
execute Loan Documents on behalf of the Borrower or such
Guarantor, each such certificate being executed by the
secretary or an assistant secretary of the Borrower or such
Guarantor;
(d)
(e) copies of corporate resolutions approving the Loan
Documents and authorizing the transactions contemplated herein
and therein, duly adopted by the board of directors of the
Borrower and Guarantors accompanied by certificates of the
secretary or an assistant secretary of the Borrower or such
Guarantor to the effect that such copies are true and correct
copies of resolutions duly adopted at a meeting or by unanimous
consent of the board of directors of the Borrower or such
Guarantor and that such resolutions constitute all the
resolutions adopted with respect to such transactions, have not
been amended, modified, or revoked in any respect, and are in
full force and effect as of the date of such certificate;
(f)
(g) multiple counterparts, as requested by the
Administrative Agent, of the following documents ratifying,
amending, and/or restating the Original Security Instruments
and otherwise establishing Liens in favor of the Administrative
Agent, for the benefit of the Lenders, in and to the
Collateral:
(h)
(i) Assignment of Note and Liens relating to the Existing
Note executed in connection with the Original Midcoast Credit
Agreement to be filed in various counties and parishes;
(i) Assignment of Note and Liens relating to the Existing
Note executed in connection with the MIT Credit Agreement to be
filed in various counties;
(i) Mortgage, Open-End Mortgage, Deed of Trust,
Indenture, Security Agreement and Financing Statement from MGS
to be filed in Texas and Oklahoma;
(i) Act of Mortgage and Security Agreement from Creole to
be filed in Louisiana;
(i) Amended and Restated Act of Mortgage and Security
Agreement from Mid LA and MLT to be filed in Louisiana;
(i) Amended and Restated Mortgage, Security Agreement,
Assignment of Leases, Rents and Proceeds from Mid LA and MLT to
be filed in Mississippi;
(i) Amended and Restated Mortgage, Open-End Mortgage,
Deed of Trust, Indenture, Security Agreement and Financing
Statement from Borrower to be filed in New York;
(i) Mortgage, Open-End Mortgage, Deed of Trust,
Indenture, Security Agreement and Financing Statement from
Borrower to be filed in Kansas;
(i) Amended and Restated Mortgage, Open-End Mortgage,
Deed of Trust, Indenture, Security Agreement and Financing
Statement from Borrower to be filed in Texas, Oklahoma,
Tennessee, Alabama and Mississippi;
(i) Amended and Restated Act of Mortgage and Security
Agreement from Borrower to be filed in Louisiana;
(i) Amended and Restated Mortgage, Assignment of
Proceeds, Security Agreement and Financing Statement from
Magnolia Pipeline to be filed in Alabama;
(i) Amended and Restated Mortgage, Open-End Mortgage,
Deed of Trust, Indenture, Security Agreement and Financing
Statement from MIT to be filed in Alabama, Tennessee and
Mississippi;
(i) Affidavit of Testimony from MIT to be filed in
Alabama;
(i) Affidavit of Testimony from Magnolia Pipeline to
be filed in Alabama;
(i) Affidavit of Testimony from Borrower to be filed
in Kansas;
(i) Security Agreement- Stock Pledge Agreement from Mid
LA;
(i) Amended and Restated Security Agreement-Stock
Pledge from Borrower;
(i) Amended and Restated Security Agreement from
Borrower, Magnolia Pipeline, H&W, Magnolia Resources, Magnolia
Gathering, Midcoast Holdings, Midcoast Gas Pipeline, Nugget,
Midcoast Marketing, Trigas, Mid LA, MLT and MIT;
(i) Amended and Restated Security Agreement from
Magnolia Pipeline;
(i) Security Agreement from MEM, MGS, Creole and MGP;
(i) uniform commercial code financing statements from
MGS for filing in the States of Texas and Oklahoma;
(i) uniform commercial code financing statements from
Creole for filing in the State of Louisiana;
(i) uniform commercial code financing statements from MGP;
(i) uniform commercial code financing statements from MEM;
and
(i) uniform commercial code financing statement
amendments from Borrower, Magnolia Pipeline, H&W, Magnolia
Resources, Magnolia Gathering, Midcoast Holdings, Midcoast Gas
Pipeline, Nugget, Midcoast Marketing, Trigas, Mid LA, MLT and
MIT for filing in various states;
(a) audited consolidated Financial Statements of the Borrower
and its Subsidiaries as of December 31, 1997;
(a) certificates dated as of a recent date from the Secretary
of State or other appropriate Governmental Authority evidencing
the existence or qualification and good standing of the
Borrower and each Guarantor in its jurisdiction of
incorporation and in any other jurisdictions where Borrower or
any Guarantor does business other than those jurisdictions
where failure to qualify would not have a Material Adverse
Effect;
(a) results of searches of the UCC Records of the Secretary of
State of the States of Texas, Louisiana, Oklahoma, New York,
Mississippi, Kansas and Alabama from a source acceptable to the
Administrative Agent and reflecting no Liens against any of the
Collateral as to which perfection of a Lien is accomplished by
the filing of a financing statement other than in favor of the
Administrative Agent for the benefit of the Lenders;
(a) the opinion of counsel to the Borrower and Guarantors,
substantially in the form of Schedule IV;
(a) certificates evidencing the insurance coverage required
pursuant to Section 6.16;
(m) a certificate executed by a Responsible Officer of
the Borrower certifying to the delivery of true, complete
and correct copies of the Purchase Agreement and all
documents and instruments executed in connection
therewith;
(n) the waiting period associated with the filings made
by the Borrower and El Paso with respect to the Purchase
Agreement under the Hart-Scott-Rodino Anti-Trust
Improvement Act of 1976 shall have expired;
(o) all legal opinions issued in connection with the
Purchase Agreement shall contain language permitting the
Lenders to rely thereon; and
(p) such other agreements, documents, instruments,
opinions, certificates, waivers, consents, and evidence as
the Administrative Agent may reasonably request.
1.1 Each Loan and Letter of Credit . In addition to the
conditions precedent stated elsewhere herein, the Lenders shall
not be obligated to make any Loan and the Issuing Lender will
not be obligated to issue any Letter of Credit unless:
1.2
(a) the Borrower shall have delivered to the Administrative
Agent a Borrowing Request at least the requisite time prior to
the requested date for the relevant Loan, or a Letter of Credit
Application at least one Business Day prior to the requested
issuance date for the relevant Letter of Credit; and each
statement or certification made in such Borrowing Request or
Letter of Credit Application, as the case may be, shall be true
and correct in all material respects on the requested date for
such Loan or the issuance of such Letter of Credit;
(a) no Event of Default or Default shall exist or will occur
as a result of the making of the requested Loan or the issuance
of the requested Letter of Credit;
(a) if requested by the Administrative Agent, the Borrower
shall have delivered evidence satisfactory to the
Administrative Agent substantiating any of the matters
contained in this Agreement which are necessary to enable the
Borrower to qualify for such Loan or the issuance of such
Letter of Credit;
(a) the Administrative Agent shall have received, reviewed,
and approved such additional documents and items as described
in Section 4.1 as may be requested by the Administrative Agent
with respect to such Loan or Letter of Credit;
(a) no event shall have occurred which, in the reasonable
opinion of the Administrative Agent, could have a Material
Adverse Effect;
(a) each of the representations and warranties contained in
this Agreement shall be true and correct and shall be deemed to
be repeated by the Borrower as if made on the requested date
for such Loan or the issuance of such Letter of Credit;
(a) all of the Security Instruments shall be in full force and
effect and provide to the Administrative Agent and Lenders the
security intended thereby;
(b) neither the consummation of the transactions contemplated
hereby nor the making of such Loan nor the issuance of such
Letter of Credit shall contravene, violate, or conflict with
any Requirement of Law;
(a) the Borrower or one or more of the Guarantors shall hold
full legal title to the Collateral and be the sole beneficial
owner thereof;
(a) the Administrative Agent shall have received payment of
the Administrative Agent's Fee and the Lenders shall have
received the payment of all Facility Fees, Letter of Credit
Fees, and other fees payable to the Lenders hereunder and
reimbursement from the Borrower, and special legal counsel for
the Administrative Agent shall have received payment from the
Borrower, for (i) all reasonable fees and expenses of counsel
to the Administrative Agent for which the Borrower is
responsible pursuant to applicable provisions of this Agreement
and for which invoices have been presented as of or prior to
the date of the relevant Loan or Letter of Credit Application,
and (ii) estimated fees charged by filing officers and other
public officials incurred or to be incurred in connection with
the filing and recordation of any Security Instruments, for
which invoices have been presented as of or prior to the date
of the requested Loan or Letter of Credit Application; and
(a) all matters incident to the consummation of the
transactions hereby contemplated shall be satisfactory to the
Administrative Agent and its counsel.
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1
ARTICLE REPRESENTATIONS AND WARRANTIES
2 To induce the Lenders to enter into this Agreement
and to make the Loans and issue Letters of Credit, the Borrower
represents and warrants to the Lenders (which representations
and warranties shall survive the delivery of the Notes) that:
3
3.1 Due Authorization . The execution and delivery by
the Borrower and each Guarantor of this Agreement and the
borrowings hereunder, the execution and delivery by the
Borrower of the Notes and each Loan Document to which the
Borrower or any Guarantor is a party, the repayment of the
Notes and interest and fees provided for in the Notes and this
Agreement, the execution and delivery of the Security
Instruments to which the Borrower or any Guarantor is a party
and the performance of all obligations of the Borrower and each
Guarantor under the Loan Documents are within the power of the
Borrower or such Guarantor, respectively, have been duly
authorized by all necessary corporate action by the Borrower or
such Guarantor, as the case may be, and do not and will not (a)
require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law, (c)
contravene or conflict with any indenture, instrument, or other
agreement to which the Borrower or any Guarantor is a party or
by which any Property of the Borrower or any Guarantor may be
presently bound or encumbered, or (d) result in or require the
creation or imposition of any Lien in, upon or on any Property
of the Borrower or any Guarantor under any such indenture,
instrument, or other agreement, other than the Loan Documents.
3.2
3.3 Corporate Existence . The Borrower and each
Guarantor is a corporation duly organized, legally existing,
and in good standing under the laws of the state of its
incorporation and is duly qualified as a foreign corporation
and is in good standing in all jurisdictions wherein the
ownership of Property or the operation of its business
necessitates same, other than those jurisdictions wherein the
failure to so qualify will not have a Material Adverse Effect.
3.4
3.5 Valid and Binding Obligations . All Loan Documents,
when duly executed and delivered by the Borrower and each
Guarantor which is a party thereto, will be the legal, valid,
and binding obligations of the Borrower and Guarantor party
thereto, enforceable against the Borrower and Guarantor party
thereto in accordance with their respective terms.
3.6
3.7 Security Instruments . The provisions of each
Security Instrument are effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal,
valid, and enforceable Lien in all right, title, and interest
of the Borrower or Guarantor, as the case may be, in the
Collateral described therein, which Liens, assuming the
accomplishment of recording and filing in accordance with
applicable laws prior to the intervention of rights of other
Persons, shall constitute fully perfected first priority Liens
on all right, title, and interest of the Borrower or Guarantor
party thereto, in the Collateral described therein.
3.8
3.9 Title to Assets . The Borrower and Guarantors have
good and indefeasible title to all of their respective
Properties, free and clear of all Liens except Permitted Liens.
3.10
3.11 Scope and Accuracy of Financial Statements . The
Financial Statements of the Borrower as of December 31, 1997,
present fairly the consolidated financial position and results
of operations and cash flows of the Borrower and its
Subsidiaries in accordance with GAAP as at the relevant point
in time or for the period indicated, as applicable. No event
or circumstance has occurred since December 31, 1997, which
could reasonably be expected to have a Material Adverse Effect.
3.12
3.13 No Material Misstatements . No information, exhibit,
statement, or report furnished to the Administrative Agent or
any Lender by or at the direction of the Borrower in connection
with this Agreement contains any material misstatement of fact
or omits to state a material fact or any fact necessary to make
the statements contained therein not misleading as of the date
made or deemed made.
3.14
3.15 Liabilities, Litigation, and Restrictions . Other
than as listed under the heading "Liabilities" on Exhibit V
attached hereto, the Borrower and Guarantors have no
liabilities, direct, or contingent, which may materially and
adversely affect their respective business or operations or
their ownership of the Collateral. Except as set forth under
the heading "Litigation" on Exhibit V hereto, no litigation or
other action of any nature affecting the Borrower or Guarantors
is pending before any Governmental Authority or, to the best
knowledge of the Borrower, threatened against or affecting the
Borrower or any Guarantor which might reasonably be expected to
result in any impairment of its ownership of any Collateral or
have a Material Adverse Effect. To the best knowledge of the
Borrower, after due inquiry, no unusual or unduly burdensome
restriction, restraint or hazard exists by contract,
Requirement of Law, or otherwise relative to the business or
operations of the Borrower or any Guarantor or the ownership
and operation of the Collateral other than such as relate
generally to Persons engaged in business activities similar to
those conducted by the Borrower and Guarantors.
3.16
3.17 Authorizations; Consents . Except as expressly
contemplated by this Agreement, no authorization, consent,
approval, exemption, franchise, permit, or license of, or
filing with, any Governmental Authority or any other Person is
required to authorize or is otherwise required in connection
with the valid execution and delivery by the Borrower and
Guarantors of the Loan Documents or any instrument contemplated
hereby, the repayment by the Borrower of the Notes and interest
and fees provided in the Notes and this Agreement, or the
performance by the Borrower or the Guarantors of the
Obligations.
3.18
3.19 Compliance with Laws . Except as set forth on
Exhibit V under the heading "Compliance," the Borrower and
Guarantors and their respective Property, including, without
limitation, the Mortgaged Property, are in compliance with all
applicable Requirements of Law, including, without limitation,
Environmental Laws, the Natural Gas Policy Act of 1978, as
amended, and ERISA, except to the extent non-compliance with
any such Requirements of Law could not reasonably be expected
to have a Material Adverse Effect.
3.20
3.21 ERISA . No Reportable Event has occurred with
respect to any Single Employer Plan, and each Single Employer
Plan has complied with and been administered in all material
respects in accordance with applicable provisions of ERISA and
the Code. To the best knowledge of the Borrower, (a) no
Reportable Event has occurred with respect to any Multiemployer
Plan, and (b) each Multiemployer Plan has complied with and
been administered in all material respects with applicable
provisions of ERISA and the Code. The present value of all
benefits vested under each Single Employer Plan maintained by
the Borrower or any Commonly Controlled Entity (based on the
assumptions used to fund such Plan) did not, as of the last
annual valuation date applicable thereto, exceed the value of
the assets of such Plan allocable to such vested benefits.
Neither the Borrower nor any Commonly Controlled Entity has had
a complete or partial withdrawal from any Multiemployer Plan
for which there is any withdrawal liability. As of the most
recent valuation date applicable to any Multiemployer Plan,
neither the Borrower nor any Commonly Controlled Entity would
become subject to any liability under ERISA if the Borrower or
such Commonly Controlled Entity were to withdraw completely
from such Multiemployer Plan. Neither the Borrower nor any
Commonly Controlled Entity has received notice that any
Multiemployer Plan is Insolvent or in Reorganization. To the
best knowledge of the Borrower, no such Insolvency or
Reorganization is reasonably likely to occur. Based upon GAAP
existing as of the date of this Agreement and current factual
circumstances, the Borrower has no reason to believe that the
annual cost during the term of this Agreement to the Borrower
and all Commonly Controlled Entities for post-retirement
benefits to be provided to the current and former employees of
the Borrower and all Commonly Controlled Entities under Plans
which are welfare benefit plans (as defined in Section 3(l) of
ERISA) will, in the aggregate, have a Material Adverse Effect.
3.22
3.23 Environmental Laws . To the best knowledge and
belief of the Borrower, except as would not have a Material
Adverse Effect, or as described on Exhibit V under the heading
"Environmental Matters:"
3.24
(a) no Property of the Borrower or any of its Subsidiaries is
currently on or has ever been on, or is adjacent to any
Property which is on or has ever been on, any federal or state
list of Superfund Sites;
(a) no Hazardous Substances have been generated, transported,
and/or disposed of by the Borrower or any of its Subsidiaries
at a site which was, at the time of such generation,
transportation, and/or disposal, or has since become, a
Superfund Site;
(a) except in accordance with applicable Requirements of Law
or the terms of a valid permit, license, certificate, or
approval of the relevant Governmental Authority, no Release of
Hazardous Substances by the Borrower or any of its Subsidiaries
from, affecting, or related to any Property of the Borrower or
any of its Subsidiaries or adjacent to any Property of the
Borrower or any of its Subsidiaries has occurred; and
(a) no Environmental Complaint has been received by the
Borrower or any of its Subsidiaries.
1.1 Compliance with Federal Reserve Regulations . No
transaction contemplated by the Loan Documents is in violation
of any regulations promulgated by the Board of Governors of the
Federal Reserve System, including, without limitation,
Regulations G, T, U, or X.
1.2
1.3 Investment Company Act Compliance . The Borrower is
not, nor is the Borrower directly or indirectly controlled by
or acting on behalf of any Person which is, an "investment
company" or an "affiliated person" of an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended.
1.4
1.5 Public Utility Holding Company Act Compliance . The
Borrower is not a "holding company," or an "affiliate," of a
"holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
1.6
1.7 Proper Filing of Tax Returns, Payment of Taxes Due .
The Borrower and its Subsidiaries have duly and properly filed
their United States income tax returns and all other tax
returns which are required to be filed and have paid all taxes
due except such as are being contested in good faith and as to
which adequate provisions and disclosures have been made. The
respective charges and reserves on the books of the Borrower
and its Subsidiaries with respect to taxes and other
governmental charges are adequate.
1.8
1.9 Refunds . Except as described on Exhibit V under the
heading "Refunds," no orders of, proceedings pending before, or
other requirements of, the Federal Energy Regulatory
Commission, the Texas Railroad Commission, or any other
Governmental Authority exist which could result in the Borrower
or any of its Subsidiaries being required to refund any
material portion of the proceeds received or to be received
from the sale of hydrocarbons constituting part of the
Mortgaged Property and such refund would have a Material
Adverse Effect.
1.10
1.11 Intellectual Property . The Borrower or its
Subsidiaries own or are licensed to use all Intellectual
Property necessary to conduct all business material to their
respective condition (financial or otherwise), business, or
operations as such business is currently conducted. No claim
has been asserted or is pending by any Person with respect to
the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any such
Intellectual Property that would have a Material Adverse
Effect; and the Borrower knows of no valid basis for any such
claim. The use of such Intellectual Property by the Borrower
or any of its Subsidiaries does not infringe on the rights of
any Person, except for such claims and infringements as do not,
in the aggregate, give rise to any material liability on the
part of the Borrower or any of its Subsidiaries.
1.12
1.13 Casualties or Taking of Property . Except as
disclosed on Exhibit V under the heading "Casualties," since
December 31, 1997, neither the business nor any Property of the
Borrower or any of its Subsidiaries has been materially
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.
1.14
1.15 Locations of Borrower . The principal place of
business and chief executive office of the Borrower is located
at the address of the Borrower set forth in Section 11.3 or at
such other location as the Borrower may have, by proper written
notice hereunder, advised the Administrative Agent; provided
that such other location is within a state in which appropriate
financing statements from the Borrower in favor of the
Administrative Agent have been filed.
1.16
1.17 Locations of Subsidiaries . The principal place of
business and chief executive office of each Subsidiary of the
Borrower is located at the address set forth in Exhibit V under
the heading "Subsidiaries", or at such other location as such
Subsidiary may have, by proper written notice hereunder,
advised the Administrative Agent; provided that such other
location is within a state in which appropriate financing
statements from the Subsidiary in favor of the Administrative
Agent have been filed.
1.18
1.19 Subsidiaries . Borrower has no Subsidiaries except
those described on Exhibit V under the heading "Subsidiaries".
1.20
1.21 Purchase Agreement. The closing of the transactions
contemplated by the Purchase Agreement has or will occur
simultaneously with the funding of the initial Loans hereunder
and neither the Borrower nor MGS has waived nor shall waive, or
in any way amend, without the prior written consent of the
Lenders, the terms of the Purchase Agreement, including any
condition to the obligations to close as so set forth therein.
A true and complete copy of the Purchase Agreement (including
all exhibits, schedules and amendments thereto) has been
delivered to the Lenders, and a true and complete copy of each
document delivered at the closing of the Purchase Agreement
will be delivered to Lenders on the Closing Date. MGS is not
in default under the Purchase Agreement or under any instrument
or document to be delivered in connection with the Purchase
Agreement. The representations and warranties made in the
Purchase Agreement by MGS will be true and correct in all
material respects (except for changes expressly provided for
therein or herein) on and as of the Closing Date as though made
on and as of such date.
1.22
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1
ARTICLE AFFIRMATIVE COVENANTS
2 So long as any Obligation remains outstanding or
unpaid or any Commitment exists, the Borrower shall:
3
3.1 Maintenance and Access to Records . Keep adequate
records, in accordance with GAAP, of all its and its
Subsidiaries' transactions so that at any time, and from time
to time, its and its Subsidiaries' true and complete financial
condition may be readily determined, and promptly following the
reasonable request of the Administrative Agent, make such
records available for inspection by the Administrative Agent
and, at the expense of the Borrower, allow the Administrative
Agent to make and take away copies thereof.
3.2
(a) Quarterly Financial Statements; Compliance
Certificates . Deliver to the Administrative Agent, on or
before the 90th day after the close of each of the first three
quarterly periods of each fiscal year of the Borrower, a copy
of the unaudited consolidated Financial Statements of the
Borrower and its Subsidiaries as at the close of such quarterly
period and from the beginning of such fiscal year to the end of
such period, such Financial Statements to be certified by a
Responsible Officer of the Borrower as having been prepared in
accordance with GAAP consistently applied and as a fair
presentation of the condition of the Borrower and its
Subsidiaries, subject to changes resulting from normal year-end
audit adjustments, and on or before the 60th day after the
close of each fiscal quarter, a Compliance Certificate.
(b)
3.3 Annual Financial Statements . Deliver to the
Administrative Agent, on or before the 120th day after the
close of each fiscal year of the Borrower, a copy of the annual
audited consolidated Financial Statements of the Borrower.
3.4
3.5 Year 2000 Compliance . Borrower shall perform all
acts reasonably necessary (and will cause its Subsidiaries to
perform all acts reasonably necessary) to ensure that Borrower
and its Subsidiaries and any business in which Borrower or its
Subsidiaries holds a substantial interest become Year 2000
Compliant in a timely manner. Such acts shall include, without
limitation, performing a comprehensive review and assessment of
all of Borrower's and its Subsidiaries' systems and adopting a
detailed plan, with itemized budget, for the remediation,
monitoring and testing of such systems. As used in this
paragraph, "Year 2000 Compliant" shall mean, in regard to any
entity, that all software, hardware, firmware, equipment, goods
or systems utilized by or material to the business operations
or financial condition of such entity, will properly perform
date sensitive functions before, during and after the year
2000. Borrower shall, immediately upon request, provide to the
Administrative Agent such certifications or other evidence of
Borrower's compliance with the terms of this paragraph as the
Administrative Agent may from time to time require.
3.6
3.7 Notices of Certain Events . Deliver to the
Administrative Agent, immediately upon having knowledge of the
occurrence of any of the following events or circumstances, a
written statement with respect thereto, signed by a Responsible
Officer of the Borrower and setting forth the relevant event or
circumstance and the steps being taken by the Borrower with
respect to such event or circumstance:
(a) any Default or Event of Default;
(a) any default or event of default under any contractual
obligation of the Borrower, or any of its Subsidiaries, or any
litigation, investigation, or proceeding between the Borrower
and any of its Subsidiaries and any Governmental Authority
which, in either case, if not cured or if adversely determined,
as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(a) any litigation or proceeding involving the Borrower or any
of its Subsidiaries as a defendant or in which any Property of
the Borrower or any of its Subsidiaries is subject to a claim
and in which the amount involved is $500,000 or more and which
is not covered by insurance or in which injunctive or similar
relief is sought;
(a) the receipt by the Borrower or any of its Subsidiaries of
any Environmental Complaint;
(a) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority or other Person
reasonably likely to have a Material Adverse Effect concerning
the environmental condition of, or relating to, any Property of
the Borrower or any of its Subsidiaries or adjacent to any
Property of the Borrower or any of its Subsidiaries following
any allegation of a violation of any Requirement of Law;
(a) any Release of Hazardous Substances by the Borrower or any
of its Subsidiaries from, affecting, or related to any Property
of the Borrower or any of its Subsidiaries, or adjacent to any
Property of the Borrower or any of its Subsidiaries, reasonably
likely to have a Material Adverse Effect except in accordance
with applicable Requirements of Law or the terms of a valid
permit, license, certificate, or approval of the relevant
Governmental Authority, or the violation of any Environmental
Law, or the revocation, suspension, or forfeiture of, or
failure to renew, any permit, license, registration, approval,
or authorization which could reasonably be expected to have a
Material Adverse Effect;
(a) any change in the senior management of the Borrower;
(a) any other event or condition which could reasonably be
expected to have a Material Adverse Effect; and
(a) any Reportable Event or imminently expected Reportable
Event with respect to any Plan; any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer
Plan; the institution of proceedings or the taking of any other
action by the PBGC, the Borrower or any Commonly Controlled
Entity or Multiemployer Plan with respect to the withdrawal
from, or the termination, Reorganization or Insolvency of, any
Single Employer Plan or Multiemployer Plan; or any Prohibited
Transaction in connection with any Plan or any trust created
thereunder and the action being taken by the Internal Revenue
Service with respect thereto.
1.1 Additional Information . (a) Furnish to the
Administrative Agent, within five days after any material
report (other than financial statements) or other communication
is sent by the Borrower to its stockholders or filed by the
Borrower with the Securities and Exchange Commission or any
successor or analogous Governmental Authority, copies of such
report or communication and, promptly upon the request of the
Administrative Agent, such additional financial or other
information concerning the assets, liabilities, operations, and
transactions of the Borrower and its Subsidiaries as the
Administrative Agent may from time to time request; and notify
the Administrative Agent not less than ten Business Days prior
to the occurrence of any condition or event that may change the
proper location for the filing of any financing statement or
other public notice or recording for the purpose of perfecting
a Lien in any Collateral, including, without limitation, any
change in a name or the location of a principal place of
business or chief executive office; and upon the request of the
Administrative Agent, execute such additional Security
Instruments as may be necessary or appropriate in connection
therewith.
1.2
1.3 (b) The Borrower agrees to furnish to the
Administrative Agent within a time period as the Administrative
Agent may reasonably request such additional information and
statements, lists of assets and liabilities, tax returns,
financial statements, reporting statements or any other reports
with respect to the Borrower's and/or any Guarantor's financial
condition, business operations, and properties as
Administrative Agent may request from time to time.
1.4
1.5 Compliance with Laws . Except to the extent the
failure to comply or cause compliance would not have a Material
Adverse Effect, comply with all applicable Requirements of Law,
including, without limitation, (a) the Natural Gas Policy Act
of 1978, as amended, (b) ERISA, (c) Environmental Laws, and (d)
all permits, licenses, registrations, approvals, and
authorizations (i) related to any natural or environmental
resource or media located on, above, within, in the vicinity
of, related to or affected by any Property of the Borrower or
any of its Subsidiaries, (ii) required for the performance of
the operations of the Borrower and its Subsidiaries, or (iii)
applicable to the use, generation, handling, storage,
treatment, transport, or disposal of any Hazardous Substances;
and cause all employees, crew members, agents, contractors,
subcontractors, and future lessees (pursuant to appropriate
lease provisions) of the Borrower and its Subsidiaries, while
such Persons are acting within the scope of their relationship
with the Borrower or such Subsidiary, to comply with all such
Requirements of Law as may be necessary or appropriate to
enable the Borrower or such Subsidiary to so comply.
1.6
1.7 Payment of Assessments and Charges . Pay all taxes,
assessments, governmental charges, rent, and other Indebtedness
which, if unpaid, might become a Lien against the Property of
the Borrower or any of its Subsidiaries, except any of the
foregoing being contested in good faith and as to which
adequate reserves in accordance with GAAP have been established
or unless failure to pay would not have a Material Adverse
Effect.
1.8
1.9 Maintenance of Corporate Existence and Good Standing
. Maintain Borrower's and each of its Subsidiary's corporate
existence or qualification and good standing in its respective
jurisdiction of incorporation and in all jurisdictions wherein
the Property now owned or hereafter acquired by it or business
now or hereafter conducted by it necessitates same.
1.10
1.11 Payment of Notes; Performance of Obligations . Pay
the Notes according to the reading, tenor, and effect thereof,
and do and perform every act and discharge all of its other
Obligations.
1.12
1.13 Further Assurances . Promptly cure any defects in
the execution and delivery of any of the Loan Documents and all
agreements contemplated thereby, and execute, acknowledge, and
deliver such other assurances and instruments as shall, in the
opinion of the Administrative Agent, be necessary to fulfill
the terms of the Loan Documents.
1.14
1.15 Initial Fees and Expenses of Counsel to
Administrative Agent . Upon request by the Administrative
Agent, promptly reimburse the Administrative Agent for all
reasonable fees and expenses of Brown, Parker & Leahy, L.L.P.,
special counsel to the Administrative Agent, in connection with
the preparation of this Agreement and all documentation
contemplated hereby, the satisfaction of the conditions
precedent set forth herein, the filing and recordation of
Security Instruments, and the consummation of the transactions
contemplated in this Agreement.
1.16
1.17 Subsequent Fees and Expenses of Administrative Agent
. Upon request by the Administrative Agent, promptly reimburse
the Administrative Agent (to the fullest extent permitted by
law) for all amounts reasonably expended, advanced, or incurred
by or on behalf of the Administrative Agent to satisfy any
obligation of the Borrower under any of the Loan Documents; to
collect the Obligations; to ratify, amend, restate, or prepare
additional Loan Documents, as the case may be; for the filing
and recordation of Security Instruments; to enforce the rights
of the Administrative Agent under any of the Loan Documents;
and to protect the Properties or business of the Borrower and
its Subsidiaries including, without limitation, the Collateral,
which amounts shall be deemed compensatory in nature and
liquidated as to amount upon notice to the Borrower by the
Administrative Agent and which amounts shall include, but not
be limited to (a) all court costs, (b) reasonable attorneys'
fees, (c) reasonable fees and expenses of auditors and
accountants incurred to protect the interests of the
Administrative Agent, (d) fees and expenses incurred in
connection with the participation by the Administrative Agent
as a member of the creditors' committee in a case commenced
under any Insolvency Proceeding, (e) fees and expenses incurred
in connection with lifting the automatic stay prescribed in
362 of Title 11 of the United States Code, and (f) fees and
expenses incurred in connection with any action pursuant to
1129 of Title 11 of the United States Code, all reasonably
incurred by the Administrative Agent in connection with the
collection of any sums due under the Loan Documents, together
with interest at the per annum interest rate equal to the
Floating Rate, calculated on a basis of a calendar year of 365
or 366 days, as the case may be, counting the actual number of
days elapsed, on each such amount from the date of demand for
payment by the Administrative Agent until the date it is repaid
to the Administrative Agent, with the obligations under this
Section surviving the non-assumption of this Agreement in a
case commenced under any Insolvency Proceeding and being
binding upon the Borrower and/or a trustee, receiver,
custodian, or liquidator of the Borrower appointed in any such
case.
1.18
1.19 Operation of Properties . Develop, maintain, and
operate its Properties (and cause its Subsidiaries to develop,
maintain and operate their Properties) in a prudent and
workmanlike manner in accordance with industry standards.
1.20
1.21 Maintenance and Inspection of Properties . Maintain
all of its tangible Properties (and cause its Subsidiaries to
maintain all of their tangible Properties) in good repair and
condition, ordinary wear and tear excepted; make all necessary
replacements thereof; and permit any authorized representative
of the Administrative Agent to visit and inspect any tangible
Property of the Borrower or any of its Subsidiaries.
1.22
1.23 Maintenance of Insurance . Maintain insurance with
respect to its and its Subsidiaries' Properties and businesses
against such liabilities, casualties, risks, and contingencies
as is customary in the relevant industry and sufficient to
prevent a Material Adverse Effect, all such insurance to be in
amounts and from insurers acceptable to the Administrative
Agent, and, upon any renewal of any such insurance and at other
times upon request by the Administrative Agent, furnish to the
Administrative Agent evidence, satisfactory to the
Administrative Agent, of the maintenance of such insurance.
The Administrative Agent shall have the right to collect, and
the Borrower and each Subsidiary hereby assigns to the
Administrative Agent, any and all monies that may become
payable under any policies of insurance relating to business
interruption or by reason of damage, loss, or destruction of
any of the Collateral. In the event of any damage, loss, or
destruction for which insurance proceeds relating to business
interruption or Collateral exceed $500,000, the Administrative
Agent may, at its option, apply all such sums or any part
thereof received by it toward the payment of the Obligations,
whether matured or unmatured, application to be made first to
interest and then to principal, and shall deliver to the
Borrower the balance, if any, after such application has been
made. In the event of any such damage, loss, or destruction
for which insurance proceeds are $500,000 or less; provided
that no Default or Event of Default has occurred and is
continuing, the Administrative Agent shall deliver any such
proceeds received by it to the Borrower. In the event the
Administrative Agent receives insurance proceeds not
attributable to Collateral or business interruption, the
Administrative Agent shall deliver any such proceeds to the
Borrower.
1.24
1.25 Additional Subsidiaries . The Borrower will
immediately cause any Person that becomes a Subsidiary of the
Borrower subsequent to the Closing Date to (i) execute a
Subsidiary Guarantor Counterpart and to deliver same to the
Administrative Agent and (ii) deliver such other Security
Instruments as the Administrative Agent requests.
1.26
1.27 INDEMNIFICATION . INDEMNIFY AND HOLD THE
ADMINISTRATIVE AGENT, LENDERS AND THEIR RESPECTIVE
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE
BENEFIT OF ADMINISTRATIVE AGENT OR THE LENDERS UNDER ANY
SECURITY INSTRUMENT (THE "INDEMNIFIED PARTIES") HARMLESS FROM
AND AGAINST ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES,
FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL
PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS,
REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS
AND EXPENSES INCURRED IN CONNECTION THEREWITH (INCLUDING,
WITHOUT LIMITATION, ATTORNEYS' FEES AND EXPENSES), ARISING
DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY
PROPERTY OF THE BORROWER OR ANY OF ITS SUBSIDIARIES, WHETHER
PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON
OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER OR ANY OF
ITS SUBSIDIARIES, WHETHER PRIOR TO OR DURING THE TERM HEREOF,
AND WHETHER BY THE BORROWER, ANY OF ITS SUBSIDIARIES OR ANY
PREDECESSOR IN TITLE, EMPLOYEE, AGENT, CONTRACTOR, OR
SUBCONTRACTOR OF THE BORROWER, ANY OF ITS SUBSIDIARIES OR ANY
OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY,
IN CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE,
DECONTAMINATION, CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER
SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY
PROPERTY OF THE BORROWER OR ANY OF ITS SUBSIDIARIES, (D) ANY
CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN
CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE
BORROWER OR ANY OF ITS SUBSIDIARIES OR ANY EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OF ITS
SUBSIDIARIES WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF
THEIR RELATIONSHIP WITH THE BORROWER OR ANY OF ITS
SUBSIDIARIES, IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES
WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE
REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF
ANY LOAN DOCUMENT, ANY ALLEGATION BY ANY BENEFICIARY OF A
LETTER OF CREDIT OF A WRONGFUL DISHONOR BY THE ISSUING LENDER
OF A CLAIM OR DRAFT PRESENTED THEREUNDER, OR ANY OTHER ACT OR
OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT
LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF THE
ADMINISTRATIVE AGENT, THE LENDERS OR ANY OF THEIR RESPECTIVE
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT
OF THE ADMINISTRATIVE AGENT OR THE LENDERS UNDER ANY SECURITY
INSTRUMENT, PROVIDED THAT BORROWER SHALL NOT BE LIABLE TO THE
INDEMNIFIED PARTIES AND THIS INDEMNITY SHALL NOT EXTEND TO ANY
PORTION OF THE FOREGOING CAUSED BY OR RESULTING FROM THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT OF THE INDEMNIFIED PARTIES;
WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT, UNLESS ALL
SUCH OBLIGATIONS HAVE BEEN SATISFIED WHOLLY IN CASH FROM THE
BORROWER AND NOT BY WAY OF REALIZATION AGAINST ANY COLLATERAL
OR THE CONVEYANCE OF ANY PROPERTY IN LIEU THEREOF, PROVIDED
THAT SUCH INDEMNITY SHALL NOT EXTEND TO ANY ACT OR OMISSION BY
THE ADMINISTRATIVE AGENT OR THE LENDERS WITH RESPECT TO ANY
PROPERTY SUBSEQUENT TO THE ADMINISTRATIVE AGENT OR THE LENDERS
BECOMING THE OWNER OF SUCH PROPERTY AND WITH RESPECT TO WHICH
PROPERTY SUCH CLAIM, LOSS, DAMAGE, LIABILITY, FINE, PENALTY,
CHARGE, PROCEEDING, ORDER, JUDGMENT, ACTION, OR REQUIREMENT
ARISES SUBSEQUENT TO THE ACQUISITION OF TITLE THERETO BY THE
ADMINISTRATIVE AGENT OR THE LENDERS.
1.28
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1
ARTICLE NEGATIVE COVENANTS
2 So long as any Obligation remains outstanding or
unpaid or any Commitment exists, the Borrower will not:
3
3.1 Indebtedness . Except as otherwise provided in
Section 7.2, create, incur, assume, or suffer to exist (or
permit any of its Subsidiaries to create, incur, assume or
suffer to exist) any Indebtedness, whether by way of loan or
otherwise; provided, however, the foregoing restriction shall
not apply to (a) the Obligations, (b) unsecured accounts
payable incurred in the ordinary course of business, which are
not unpaid in excess of 60 days beyond invoice date or are
being contested in good faith and as to which such reserve as
is required by GAAP has been made, (c) purchase money
Indebtedness not to exceed $100,000 in the aggregate incurred
solely for the purpose of financing the acquisition of fixed
assets, including any extensions, renewals and replacements
thereof, (d) Indebtedness in the form of reimbursement
obligations (whether contingent or otherwise) in respect of
letters of credit, bankers, acceptances, surety or other bonds
and similar instruments incurred in the ordinary course of
business, (e) Indebtedness which has been subordinated to the
obligations in form and substance and upon terms satisfactory
to the Administrative Agent; and (f) inter-company
Indebtedness.
3.2
3.3 Contingent Obligations . Create, incur, assume, or
suffer to exist (or permit any of its Subsidiaries to create,
incur, assume or suffer to exist) any Contingent Obligation;
provided, however, the foregoing restriction shall not apply to
(a) performance guarantees and performance surety or other
bonds provided in the ordinary course of business, (b) trade
credit incurred or operating leases entered into in the
ordinary course of business, (c) existing guaranties to Pan
Grande Joint Venture and Starr County Gathering System, which
guaranties cannot be increased, or (d) guaranties of the
Borrower of Indebtedness of the Subsidiaries which has been
incurred in the ordinary course of business.
3.4
3.5 Liens . Create, incur, assume, or suffer to exist
any Lien on any of its Properties (or permit any of its
Subsidiaries to create, incur, assume or suffer to exist any
Lien on any of their Properties), whether now owned or
hereafter acquired; provided, however, the foregoing
restrictions shall not apply to Permitted Liens.
3.6
3.7 Sales of Assets . Without the prior written consent
of the Administrative Agent, sell, transfer, or otherwise
dispose of (or permit any of its Subsidiaries to sell,
transfer, or otherwise dispose of), assets, whether now owned
or hereafter acquired, except for (a) sales, transfers or
dispositions in the ordinary course of business not to exceed
$500,000, or (b) transfers of assets from the Borrower to a
Subsidiary or from Subsidiary to Subsidiary in an amount not to
exceed $500,000 in any twelve month period.
3.8
3.9 Leasebacks . Enter into (or permit any of its
Subsidiaries to enter into) any agreement to sell or transfer
any Property and thereafter rent or lease as lessee such
Property or other Property intended for the same use or purpose
as the Property sold or transferred.
3.10
3.11 Loans or Advances . Except as otherwise provided in
Section 7.7, make or agree to make or allow to remain
outstanding (or permit any of its Subsidiaries to make or agree
to make or allow to remain outstanding) any loans or advances
to any Person; provided, however, the foregoing restrictions
shall not apply to (a) advances or extensions of credit in the
form of accounts receivable incurred in the ordinary course of
business and upon terms common in the industry for such
accounts receivable, (b) advances to employees of the Borrower
or any of its Subsidiaries for the payment of expenses in the
ordinary course of business, (c) loans or advances by Borrower
to any Guarantor or by one Guarantor to another Guarantor or to
any of their respective Subsidiaries, or (d) loans or advances
to joint ventures in amounts not to exceed $10,000,000;
provided that within three (3) Business Days of making such
investment, the Borrower provides the Agent with written notice
thereof which will include a detailed explanation of the
business purpose for such investment.
3.12
3.13 Investments . Except as otherwise provided in
Section 7.6, acquire Investments in, or purchase or otherwise
acquire all or substantially all of the assets of (or permit
any of its Subsidiaries to acquire Investments in, or purchase
or otherwise acquire all or substantially all of the assets
of), any Person; provided, however, the foregoing restriction
shall not apply to the purchase or acquisition of (a) stock or
assets of pipeline, processing plant or gathering line entities
and oil and gas properties, (b) Investments in the form of (i)
debt securities issued or directly and fully guaranteed or
insured by the United States Government or any agency or
instrumentality thereof, with maturities of no more than one
year, (ii) commercial paper of a domestic issuer rated at the
date of acquisition at least P-2 by Moody's Investor Service,
Inc. or A2 by Standard & Poor's Corporation and with maturities
of no more than one year from the date of acquisition, or (iii)
repurchase agreements covering debt securities or commercial
paper of the type permitted in this Section, certificates of
deposit, demand deposits, eurodollar time deposits, overnight
bank deposits and bankers' acceptances, with maturities of no
more than one year from the date of acquisition, issued by or
acquired from or through the Administrative Agent, any Lender
or any bank or trust company organized under the laws of the
United States or any state thereof and having capital surplus
and undivided profits aggregating at least $100,000,000, (c)
other short-term Investments similar in nature and degree of
risk to those described in clause (b) of this Section, (d)
money-market funds, (e) stocks, bonds, notes or other
securities accepted from customers in connection with good
faith work-outs of past due receivables or in bankruptcy or
insolvency proceedings, or (f) interests in joint ventures as
to which the Borrower or any of its Subsidiaries is a venturer,
so long as such joint venture is engaged in the same line of
business as the Borrower (or such Subsidiary) as of the date
hereof.
3.14
3.15 Dividends and Distributions . Declare, pay, or make,
whether in cash or Property of the Borrower, any dividend or
distribution on, or purchase, redeem, or otherwise acquire for
value, any share of any class of the Borrower's capital stock
at any time that a Default or Event of Default exists.
3.16
3.17 Issuance of Stock; Changes in Corporate Structure .
Permit any of its Subsidiaries to issue or agree to issue
additional shares of capital stock, in one or any series of
transactions.
3.18
3.19 Transactions with Affiliates . Directly or
indirectly, enter into any transaction (or permit any of its
Subsidiaries to enter into any transaction) (including the
sale, lease, or exchange of Property or the rendering of
service) with any of its or their Affiliates, other than upon
fair and reasonable terms no less favorable than could be
obtained in an arm's length transaction with a Person which was
not an Affiliate, and if such transactions are on less than an
arm's length basis, the Borrower will provide the
Administrative Agent with a detailed explanation of the
business purpose therefore; provided, however, the foregoing
shall not apply to transactions between the Borrower and any
Guarantor or between Guarantors.
3.20
3.21 Lines of Business . Expand, on its own or through
any Subsidiary, into any line of business other than those in
which the Borrower and its Subsidiaries are engaged as of the
date hereof and other businesses reasonably related thereto.
3.22
3.23 ERISA Compliance . To the extent that a Material
Adverse Effect would result, permit any Plan maintained by it
or any Commonly Controlled Entity to (a) engage in any
Prohibited Transaction, (b) incur any "accumulated funding
deficiency," as such term is defined in Section 302 of ERISA,
or (c) terminate in a manner which could result in the
imposition of a Lien on any Property of the Borrower or any of
its Subsidiaries pursuant to Section 4068 of ERISA; or assume
an obligation to contribute to any Multiemployer Plan; or
acquire any Person or the assets of any Person which has now or
has had at any time an obligation to contribute to any
Multiemployer Plan.
3.24
3.25 Cash Flow Coverage . Permit Cash Flow for any fiscal
year (plus the Cash Flow of any acquired company) to be less
than 1.40 times interest plus the greater of (i) current
maturities of funded long term bank debt; or (ii) 1/10th of the
principal balance of the Loans. Such test shall begin
September 30, 1998 and for the immediately preceding four
quarters and shall continue on a quarterly basis thereafter
looking back to the immediately preceding four quarters. For
purposes of this covenant, the Cash Flow of an acquired company
shall be the prior four calendar quarters' Cash Flow of such
acquired company immediately prior to its acquisition by
Borrower, with the oldest quarter being replaced by each
succeeding quarter after such acquired company is acquired by
Borrower. Also for purposes of this covenant, if a division or
group of assets is acquired, the term "acquired company" shall
refer to such division or such group of assets and its or their
related Cash Flow.
3.26
3.27 Total Debt . Permit total debt including current
maturities to be more than 65% of total capitalization. Total
capitalization shall mean the sum of total debt plus
stockholder equity as determined in accordance with GAAP.
3.28
3.29 Current Ratio . Permit the ratio of Current Assets
to Current Liabilities to be less than 1.00 to 1.00 at any
time.
3.30
3.31 Tangible Net Worth . Permit Tangible Net Worth as of
the close of any fiscal quarter to be less than the sum of (a)
$50,000,000, plus (b) 50% of positive Net Income for all fiscal
periods ending subsequent to March 31, 1998, plus (c) the net
proceeds of any equity offering of the Borrower.
3.32
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1
ARTICLE GUARANTY
1.1 Guaranty . (a) In consideration of, and in order to
induce the Lenders to make the Loans and the Issuing Lender to
issue Letters of Credit hereunder, each of Magnolia Pipeline,
H&W, Magnolia Resources, Magnolia Gathering, Midcoast Holdings,
Midcoast Gas Pipeline, Nugget, Midcoast Marketing (individually
and as successor to Atemco, MLM and MLESCO), Trigas, Mid LA and
MLT hereby absolutely, unconditionally and irrevocably, jointly
and severally reaffirms, ratifies and confirms that each was
originally liable as a co-maker under the Original Credit
Agreement. Each Guarantor hereby, jointly and severally,
guarantees the punctual payment and performance when due,
whether at stated maturity, by acceleration or otherwise, of
the Obligations, and all other obligations and covenants of the
Borrower now or hereafter existing under this Agreement, the
Notes and the other Loan Documents to which the Borrower is a
party whether for principal, interest (including interest
accruing or becoming owing both prior to and subsequent to the
commencement of any proceeding against or with respect to the
Borrower under any chapter of Title 11 of the United States
Code, as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"), fees, commissions, expenses (including
reasonable attorneys' fees and expenses) or otherwise, subject
however to the limitation set forth in Section 2.17 (all such
obligations being the "Guaranteed Obligations"). Each
Guarantor agrees to pay any and all reasonable and necessary
expenses incurred by each Lender and the Administrative Agent
in enforcing this Guaranty against such Guarantor.
1.2
1.3 (b) Each Guarantor agrees that the Obligations may
at any time and from time to time exceed the limitations set
forth in Section 2.17 without impairing this Guaranty or
affecting the rights and remedies of the Administrative Agent
and the Lenders hereunder.
1.4
1.5 (c) This Guaranty is an absolute, unconditional,
present and continuing guaranty of payment and not of
collectibility and is in no way conditioned upon any attempt to
collect from the Borrower, any other Person, any Collateral or
any other action, occurrence or circumstance whatsoever. This
Guaranty does not in any way cancel, amend, discharge or limit
any other guaranty executed by any Guarantor in favor of the
Administrative Agent for the benefit of the Lenders, including,
without limitation, the co-maker liability created pursuant to
the Original Credit Agreement.
1.6
1.7 Continuing Guaranty . (a) Each Guarantor guarantees
that the Obligations and the Guaranteed Obligations will be
paid strictly in accordance with the terms of this Agreement,
the Notes and the other Loan Documents. Each Guarantor agrees
that, to the maximum extent permitted by applicable law, the
Obligations, Guaranteed Obligations and Loan Documents may be
extended or renewed, and Loans repaid and reborrowed in whole
or in part, without notice to or assent by such Guarantor, and
that it will remain bound upon this Guaranty notwithstanding
any extension, renewal or other alteration of any Obligations,
Guaranteed Obligations or Loan Documents, or any repayment and
reborrowing of Loans. To the maximum extent permitted by
applicable law, except as otherwise expressly provided in this
Agreement or any other Loan Document to which such Guarantor is
a party, the obligations of each Guarantor under this Guaranty
shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms hereof under
any circumstances whatsoever, including:
1.8
(i) any modification, amendment, supplement,
renewal, extension for any period, increase, decrease,
alteration or rearrangement of all or any part of the
Obligations or the Guaranteed Obligations, or of the
Notes, or this Agreement or any other Loan Document
executed in connection herewith, or any contract or
understanding among the Borrower, any Guarantor, the
Administrative Agent and/or the Lenders, or any other
Person, pertaining to the Guaranteed Obligations;
(ii) any adjustment, indulgence, forbearance or
compromise that might be granted or given by the Lenders
to the Borrower or any Guarantor or any other Person
liable on the Obligations or the Guaranteed Obligations;
(iii) the insolvency, bankruptcy, arrangement,
adjustment, composition, liquidation, disability,
dissolution or lack of power of the Borrower, any
Guarantor or any other Person at any time liable for the
payment of all or part of the Guaranteed Obligations; or
any dissolution of the Borrower or any Guarantor, or any
sale, lease or transfer of any or all of the assets of the
Borrower or any Guarantor, or any changes in the equity
holders of the Borrower or any Guarantor; or any
reorganization of the Borrower or any Guarantor;
(iv) the invalidity, illegality or unenforceability
of all or any part of the Obligations, the Guaranteed
Obligations, or any document or agreement executed in
connection with the Obligations or the Guaranteed
Obligations, for any reason whatsoever, including, without
limitation, the fact that (A) the Obligations or the
Guaranteed Obligations, or any part thereof, exceeds the
amount permitted by law, (B) the act of creating the
Obligations, the Guaranteed Obligations or any part
thereof is ultra vires, (C) the officers or
representatives executing the documents or otherwise
creating the Obligations or the Guaranteed Obligations
acted in excess of their authority, (D) the Obligations or
the Guaranteed Obligations or any part thereof violate
applicable usury laws, (E) the Borrower or any Guarantor
has valid defenses, claims and offsets (whether at law or
in equity, by agreement or by statute) which render the
Obligations or the Guaranteed Obligations wholly or
partially uncollectible from the Borrower or such
Guarantor, (F) the creation, performance or repayment of
the Obligations or the Guaranteed Obligations (or
execution, delivery and performance of any document or
instrument representing part of the Obligations or the
Guaranteed Obligations or executed in connection with the
Obligations or the Guaranteed Obligations, or given to
secure the repayment of the Obligations or the Guaranteed
Obligations) is illegal, uncollectible, legally impossible
or unenforceable, or (G) this Agreement, any other Loan
Document, or any other document or instrument pertaining
to the Obligations or the Guaranteed Obligations has been
forged or otherwise is irregular or not genuine or
authentic;
(v) any full or partial release of the liability of
the Borrower or any Guarantor on the Obligations, the
Guaranteed Obligations or any part thereof, or any other
Person now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally,
to pay, perform, guarantee or assure the payment of the
Obligations, the Guaranteed Obligations or any part
thereof, it being recognized, acknowledged and agreed by
each Guarantor that such Guarantor may be required to pay
the Obligations or the Guaranteed Obligations in full
without assistance or support of any other Person, and
such Guarantor has not been induced to enter into this
Guaranty on the basis of a contemplation, belief,
understanding or agreement that any other Person will be
liable to perform the Obligations or the Guaranteed
Obligations, or that the Administrative Agent or any
Lender will look to any other Person to perform the
Guaranteed Obligations;
(vi) the taking or accepting of any other security,
collateral or guaranty, or other assurance of payment, for
all or any part of the Obligations or the Guaranteed
Obligations;
(vii) any release, surrender, exchange,
subordination, deterioration, waste, loss or impairment of
any collateral, property or security, at any time existing
in connection with, or assuring or securing payment of,
all or any part of the Obligations or the Guaranteed
Obligations;
(viii) the failure of the Administrative Agent,
the Lenders or any other Person to exercise diligence or
reasonable care in the preservation, protection,
enforcement, sale or other handling or treatment of all or
any part of such collateral, property or security;
(ix) the fact that any collateral, security or Lien
contemplated or intended to be given, created or granted
as security for the repayment of the Obligations or the
Guaranteed Obligations shall not be properly perfected or
created, or shall prove to be unenforceable or subordinate
to any other Lien; it being recognized and agreed by each
Guarantor that such Guarantor is not entering into this
Guaranty in reliance on, or in contemplation of the
benefits of, the validity, enforceability, collectibility
or value of any of the Collateral for the Obligations or
the Guaranteed Obligations;
(x) any payment by the Borrower or any Guarantor to
the Administrative Agent or any Lender is held to
constitute a preference under bankruptcy laws, or for any
reason either the Administrative Agent or any Lender is
required to refund such payment or pay such amount to the
Borrower or any other Person; or
(xi) any other action taken or omitted to be taken
with respect to this Agreement, any other Loan Document,
the Obligations, the Guaranteed Obligations, or the
security and collateral therefor, whether or not such
action or omission prejudices any Guarantor or increases
the likelihood that any Guarantor will be required to pay
the Obligations or the Guaranteed Obligations pursuant to
the terms hereof, it is the unambiguous and unequivocal
intention of each Guarantor that such Guarantor shall be
obligated to pay the Obligations or the Guaranteed
Obligations when due, notwithstanding any occurrence,
circumstance, event, action, or omission whatsoever,
whether contemplated or uncontemplated, and whether or not
otherwise or particularly described herein, except for the
full and final payment and satisfaction of the Obligations
or the Guaranteed Obligations after the termination of the
Commitments of all Lenders and the expiration or
termination of all Letters of Credit.
(b) Each Guarantor further agrees that, as between such
Guarantor, on the one hand, and the Lenders and the
Administrative Agent, on the other hand, (i) the maturity of
the Guaranteed Obligations may be accelerated as provided in
Article IX for the purposes of this Guaranty, notwithstanding
any stay, injunction or other prohibition preventing such
acceleration of the Obligations or the Guaranteed Obligations,
and (ii) in the event of any acceleration of the Obligations as
provided in Article IX, the Guaranteed Obligations (whether or
not due and payable) shall forthwith become due and payable by
each Guarantor for the purpose of this Guaranty.
1.1 Effect of Debtor Relief Laws . If after receipt of
any payment of, or proceeds of any security applied (or
intended to be applied) to the payment of all or any part of
the Obligations or the Guaranteed Obligations, the
Administrative Agent or any Lender is for any reason compelled
to surrender or voluntarily surrenders, such payment or
proceeds to any Person (a) because such payment or application
of proceeds is or may be avoided, invalidated, declared
fraudulent, set aside, determined to be void or voidable as a
preference, fraudulent conveyance, fraudulent transfer,
impermissible set-off or a diversion of trust funds or (b) for
any other reason, including (i) any judgment, decree or order
of any court or administrative body having jurisdiction over
the Administrative Agent, any Lender or any of their respective
properties or (ii) any settlement or compromise of any such
claim effected by the Administrative Agent or any Lender with
any such claimant (including the Borrower), then the
Obligations, the Guaranteed Obligations or part thereof
intended to be satisfied shall be reinstated and continue, and
this Guaranty shall continue in full force as if such payment
or proceeds had not been received, notwithstanding any
revocation thereof or the cancellation of any Note or any other
instrument evidencing any of the Obligations or Guaranteed
Obligations or otherwise; and the Guarantors, jointly and
severally, shall be liable to pay the Administrative Agent and
the Lenders, and hereby do indemnify the Administrative Agent
and the Lenders and hold them harmless for the amount of such
payment or proceeds so surrendered and all reasonable expenses
(including reasonable attorneys' fees, court costs and expenses
attributable thereto) incurred by the Administrative Agent or
any Lender in the defense of any claim made against it that any
payment or proceeds received by the Administrative Agent or any
Lender in respect of all or part of the Obligations or the
Guaranteed Obligations must be surrendered; provided that, the
Guarantors shall not indemnify or hold harmless the
Administrative Agent or any Lender for any payments, claims or
expenses arising from the Administrative Agent's or a Lender's
gross negligence, willful misconduct or violation of law. The
provisions of this paragraph shall survive the termination of
this Guaranty, and any satisfaction and discharge of the
Borrower by virtue of any payment, court order or any federal
or state law.
1.2
1.3 General Limitation on Guaranteed Obligations . In
any action or proceeding involving any state corporate law, or
any state or federal bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the
obligations of any Guarantor under Section 8.1 would otherwise,
taking into account the provisions of Section 8.5, be held or
determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account
of the amount of its liability under Section 8.1, then,
notwithstanding any other provision hereof to the contrary, the
amount of such liability shall, without any further action by
such Guarantor, any Lender, the Administrative Agent or any
other Person, be automatically limited and reduced to the
highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in
such action or proceeding.
1.4 Rights of Contribution . The Guarantors hereby
agree, as between themselves, that if any Guarantor shall
become an Excess Funding Obligor (as defined below) by reason
of the payment by such Guarantor of any Guaranteed Obligations,
each other Guarantor shall, on demand of such Excess Funding
Obligor (but subject to the next sentence), pay to such Excess
Funding Obligor an amount equal to such Guarantor's Pro Rata
Share (as defined below and determined, for this purpose,
without reference to the properties, debts and liabilities of
such Excess Funding Obligor) of the Excess Payment (as defined
below) in respect of such Guaranteed Obligations.
1.5
1.6 For purposes of this Section 8.5, (i) "Excess Funding
Obligor" shall mean, in respect of any Guaranteed Obligations,
a Guarantor that has paid an amount in excess of its Pro Rata
Share of such Guaranteed Obligations, (ii) "Excess Payment"
shall mean, in respect of any Guaranteed Obligations, the
amount paid by an Excess Funding Obligor in excess of its Pro
Rata Share of such Guaranteed Obligations and (iii) "Pro Rata
Share" shall mean, for any Guarantor, the ratio (expressed as a
percentage) of (x) the amount by which the aggregate fair
saleable value of all properties of such Guarantor on the date
of this Agreement exceeds the amount of all the debts and
liabilities of such Guarantor (including contingent,
subordinated, unmatured and unliquidated liabilities, but
excluding the obligations that have been guaranteed by such
Guarantor in Section 8.1) to (y) the amount by which the
aggregate fair saleable value of all assets of the Borrower and
all the Guarantors exceeds the amount of all the debts and
liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of the
Borrower and the Guarantors hereunder) of the Borrower and all
the Guarantors, all as of the Closing Date.
1.7
1.8 Subrogation . Notwithstanding any payment or
payments made by any Guarantor hereunder, or any set-off or
application by the Administrative Agent or any Lender of any
security or of any credits or claims, no Guarantor will assert
or exercise any rights of the Administrative Agent or any
Lender or of such Guarantor against the Borrower to recover the
amount of any payment made by such Guarantor to the
Administrative Agent or any Lender hereunder by way of any
claim, remedy or subrogation, reimbursement, exoneration,
contribution, indemnity, participation or otherwise arising by
contract, by statute, under common law or otherwise, and such
Guarantor shall not have any right of recourse to or any claim
against assets or property of the Borrower in respect thereof,
until all of the Guaranteed Obligations are paid in full after
the termination of the Commitments of all Lenders and the
expiration or termination of all Letters of Credit. If any
such amount shall nevertheless be paid to a Subsidiary
Guarantor by the Borrower or another Guarantor prior to payment
in full of the Obligations, such amount shall be held in trust
for the benefit of the Administrative Agent and the Lenders and
shall forthwith be paid to the Administrative Agent to be
credited and applied to the Guaranteed Obligations, whether
matured or unmatured. The provisions of this paragraph shall
survive the termination of this Guaranty, and any satisfaction
and discharge of the Borrower by virtue of any payment, court
order or any federal or state law.
1.9
1.10 Subordination . If any Guarantor becomes the holder
of any indebtedness payable by the Borrower or another
Guarantor, each Guarantor hereby subordinates all indebtedness
owing to it from the Borrower or such other Guarantor to all
indebtedness of the Borrower or such other Guarantor to the
Administrative Agent and the Lenders, and agrees that it shall
not accept any payment on the same until payment in full of the
Obligations of the Borrower under this Agreement and the other
Loan Documents after the termination of the Commitments of the
Lenders and the termination or expiration of the Letters of
Credit, the Notes and all other Loan Documents, and, shall in
no circumstance whatsoever attempt to set-off or reduce any
obligations hereunder because of such indebtedness. If any
amount shall nevertheless be paid to a Guarantor by the
Borrower or another Guarantor prior to payment in full of the
Guaranteed Obligations, such amount shall be held in trust for
the benefit of the Administrative Agent and the Lenders and
shall forthwith be paid to the Administrative Agent to be
credited and applied to the Guaranteed Obligations, whether
matured or unmatured.
1.11
1.12 Waiver . To the extent permitted by applicable law,
each Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Guaranty and waives
presentment, demand for payment, notice of intent to
accelerate, notice of acceleration, notice of dishonor or
nonpayment and any requirement that the Administrative Agent or
any Lender institute suit, collection proceedings or take any
other action to collect the Guaranteed Obligations, including
any requirement that the Administrative Agent or any Lender
protect, secure, perfect or insure any Lien against any
property subject thereto or exhaust any right or take any
action against the Borrower or any other Person or any
Collateral (it being the intention of the Administrative Agent,
the Lenders and each Guarantor that this Guaranty is to be a
guaranty of payment and not of collection). It shall not be
necessary for the Administrative Agent or any Lender, in order
to enforce any payment by any Guarantor hereunder, to institute
suit or exhaust its rights and remedies against the Borrower,
any other Guarantor or any other Person, including others
liable to pay any Guaranteed Obligations, or to enforce its
rights against any security ever given to secure payment
thereof. Each Guarantor hereby expressly waives to the maximum
extent permitted by applicable law each and every right to
which it may be entitled by virtue of the suretyship laws of
the State of Texas or any other state in which it may be
located, including any and all rights it may have pursuant to
Rule 31, Texas Rules of Civil Procedure, Section 17.001 of the
Texas Civil Practice and Remedies Code and Chapter 34 of the
Texas Business and Commerce Code. To the extent permitted by
applicable law, each Guarantor hereby waives marshaling of
assets and liabilities, notice by the Administrative Agent or
any Lender of any indebtedness or liability to which such
Lender applies or may apply any amounts received by such
Lender, and of the creation, advancement, increase, existence,
extension, renewal, rearrangement or modification of the
Guaranteed Obligations. Each Guarantor expressly waives, to
the extent permitted by applicable law, the benefit of any and
all laws providing for exemption of property from execution or
for valuation and appraisal upon foreclosure.
1.13
1.14 Full Force and Effect . This Guaranty is a
continuing guaranty and shall remain in full force and effect
until all of the Guaranteed Obligations under this Agreement
and the other Loan Documents and all other amounts payable
under this Guaranty have been paid in full (after the
termination of the Commitments of the Lenders and the
termination or expiration of the Letters of Credit). All
rights, remedies and powers provided in this Guaranty may be
exercised, and all waivers contained in this Guaranty may be
enforced, only to the extent that the exercise or enforcement
thereof does not violate any provisions of applicable law which
may not be waived.
1.15
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1
ARTICLE EVENTS OF DEFAULT
1.1 Enumeration of Events of Default . Any of the
following events shall constitute an Event of Default:
1.2
(a) default shall be made in the payment when due of any
installment of principal or interest under this Agreement or
the Notes or in the payment when due of any fee or other sum
payable under any Loan Document and such default as to interest
or fees only shall have continued for three days;
(b)
(c) default shall be made by the Borrower or any
Guarantor in the due observance or performance of any of its
obligations under the Loan Documents, and such default shall
continue for 30 days after the earlier of notice thereof to the
Borrower by the Administrative Agent or knowledge thereof by
the Borrower;
(d)
(e) any representation or warranty made by the Borrower
or any Guarantor in any of the Loan Documents proves to have
been untrue in any material respect or any representation,
statement (including Financial Statements), certificate, or
data furnished or made to the Administrative Agent or any
Lender in connection herewith proves to have been untrue in any
material respect as of the date the facts therein set forth
were stated or certified;
(f)
(g) default shall be made by the Borrower (as principal
or guarantor or other surety) in the payment or performance of
any bond, debenture, note, or other Indebtedness or under any
credit agreement, loan agreement, indenture, promissory note,
or similar agreement or instrument,executed in connection with
any of the foregoing, and such default shall remain unremedied
for in excess of the period of grace, if any, with respect
thereto;
(h)
(i) the Borrower shall be unable to satisfy any condition
or cure any circumstance specified in Article IV, the
satisfaction or curing of which is precedent to the right of
the Borrower to obtain a Loan or the issuance of a Letter of
Credit, and such inability shall continue for a period in
excess of 30 days;
(j)
(k) the Borrower or any of its Subsidiaries shall (i)
apply for or consent to the appointment of a receiver, trustee,
or liquidator of it or all or a substantial part of its assets,
(ii) file a voluntary petition commencing an Insolvency
Proceeding, (iii) make a general assignment for the benefit of
creditors, (iv) be unable, or admit in writing its inability,
to pay its debts generally as they become due, or (v) file an
answer admitting the material allegations of a petition filed
against it in any Insolvency Proceeding;
(l)
(m) an order, judgment, or decree shall be entered
against the Borrower or any of its Subsidiaries by any court of
competent jurisdiction or by any other duly authorized
authority, on the petition of a creditor or otherwise, granting
relief in any Insolvency Proceeding or approving a petition
seeking reorganization or an arrangement of its debts or
appointing a receiver, trustee, conservator, custodian, or
liquidator of it or all or any substantial part of its assets,
and such order, judgment, or decree shall not be dismissed or
stayed within 60 days;
(n)
(o) the levy against any significant portion of the
Property of the Borrower or any of its Subsidiaries, or any
execution, garnishment, attachment, sequestration, or other
writ or similar proceeding which is not permanently dismissed
or discharged within 30 days after the levy;
(p)
(q) a final and non-appealable order, judgment, or decree
shall be entered against the Borrower or any of its
Subsidiaries for money damages and/or Indebtedness due in an
amount in excess of $500,000, and such order, judgment, or
decree shall not be satisfied, dismissed or stayed within 30
days;
(r)
(s) any charges are filed or any other action or
proceeding is instituted by any Governmental Authority against
the Borrower or any of its Subsidiaries under the Racketeering
Influence and Corrupt Organizations Statute (18 U.S.C. 1961
et seq.), the result of which could be the forfeiture or
transfer of any material Property of the Borrower or any of its
Subsidiaries subject to a Lien in favor of the Administrative
Agent for the benefit of the Lenders without (i) satisfaction
or provision for satisfaction of such Lien, or (ii) such
forfeiture or transfer of such Property being expressly made
subject to such Lien;
(t)
(u) the Borrower or any of its Subsidiaries shall have
(i) concealed, removed, or diverted, or permitted to be
concealed, removed, or diverted, any part of its Property, with
intent to hinder, delay, or defraud its creditors or any of
them, (ii) made or suffered a transfer of any of its Property
which may be fraudulent under any bankruptcy, fraudulent
conveyance, or similar law, (iii) made any transfer of its
Property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid, or (iv)
shall have suffered or permitted, while insolvent, any creditor
to obtain a Lien upon any of its Property through legal
proceedings or distraint which is not vacated within 30 days
from the date thereof;
(v)
(w) any Security Instrument shall for any reason not, or
cease to, create valid and perfected first-priority Liens
against the Collateral purportedly covered thereby and the
failure to create or maintain such first-priority Lien shall
materially and adversely affect the value of the Collateral
taken as a whole; and
(x)
(y) the occurrence of a Material Adverse Effect and the
same shall remain unremedied for in excess of 30 days after
notice given by the Administrative Agent.
(z)
(aa) Remedies . Upon the occurrence of an Event of
Default specified in Sections 9.1(f) or 9.1(g), immediately and
without notice, (i) all obligations shall automatically become
immediately due and payable, without presentment, demand,
protest, notice of protest, default, or dishonor, notice of
intent to accelerate maturity, notice of acceleration of
maturity, or other notice of any kind, except as may be
provided to the contrary elsewhere herein, all of which are
hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until
reinstated by the Administrative Agent in writing; and (iii)
the Lenders are hereby authorized at any time and from time to
time, without notice to the Borrower or any Guarantor (any such
notice being expressly waived by the Borrower and each
Guarantor), to set-off and apply any and all deposits (general
or special, time or demand, provisional or final) held by such
Lender and any and all other indebtedness at any time owing by
such Lender to or for the credit or account of the Borrower or
such Guarantor against any and all of the Obligations.
(bb)
(cc) Upon the occurrence of any Event of Default other
than those specified in Sections 9.1(f) or 9.1(g), (i) the
Administrative Agent may, by notice to the Borrower, declare
all Obligations immediately due and payable, without
presentment, demand, protest, notice of protest, default, or
dishonor, notice of intent to accelerate maturity, notice of
acceleration of maturity, or other notice of any kind, except
as may be provided to the contrary elsewhere herein, all of
which are hereby expressly waived by the Borrower; (ii) the
Commitment shall immediately cease and terminate unless and
until reinstated by the Administrative Agent in writing; and
(iii) each Lender is hereby authorized at any time and from
time to time, without notice to the Borrower or any Guarantor
(any such notice being expressly waived by the Borrower and
each Guarantor), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) held
by such Lender and any and all other indebtedness at any time
owing by such Lender to or for the credit or account of the
Borrower or such Guarantor against any and all of the
Obligations although such Obligations may be unmatured.
(dd)
(ee) Upon the occurrence of any Event, of Default, the
Administrative Agent may, in addition to the foregoing in this
Section, exercise any or all of its rights and remedies
provided by law or pursuant to the Loan Documents.
(ff)
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1
ARTICLE THE ADMINISTRATIVE AGENT
1.1 Authorization and Action . Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to
act on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are specifically
delegated to or required of the Administrative Agent by the
terms hereof, together with such powers as are reasonably
incidental thereto. The Administrative Agent may perform any
of its duties hereunder by or through its agents and employees.
The duties of the Administrative Agent shall be mechanical and
administrative in nature; the Administrative Agent shall not
have by reason of this Agreement or any other Loan Documents a
fiduciary relationship in respect of any Lender; and nothing in
this Agreement or any other Loan Document, expressed or
implied, is intended to, or shall be so construed as to, impose
upon the Administrative Agent any obligations in respect of
this Agreement or any other Loan Document except as expressly
set forth herein or therein. As to any matters not expressly
provided for by this Agreement, the Notes or the other Loan
Documents (including enforcement or collection of the Notes),
the Administrative Agent shall not be required to exercise any
discretion or take any action but shall be required to act or
to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the
Lenders, and such instructions shall be binding upon the
Lenders and all holders of Notes and the Obligations; provided,
that the Administrative Agent shall not be required to take any
action which exposes the Administrative Agent to personal
liability or which is contrary to this Agreement or applicable
law.
1.2
1.3 Administrative Agent's Reliance . (a) Neither the
Administrative Agent nor any of its directors, officers, agents
or employees shall be liable to any of the Lenders for any
action taken or omitted to be taken by it or them under or in
connection with this Agreement, the Notes or any of the other
Loan Documents (i) with the consent or at the request of the
Lenders or (ii) in the absence of its or their own gross
negligence or willful misconduct, it being the express
intention of the parties hereto that the Administrative Agent
and its directors, officers, agents and employees shall have no
liability for actions and omissions under this Section
resulting from their sole ordinary or contributory negligence.
1.4
1.5 (b) Without limitation of the generality of the
foregoing, the Administrative Agent: (i) may consult with legal
counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (ii) makes no
warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement,
any Note or any other Loan Document; (iii) except as otherwise
expressly provided herein, shall not have any duty to any
Lender to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this
Agreement, any Note or any other Loan Document or to inspect
the property (including the books and records) of the Borrower;
(iv) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, collectibility,
genuineness, sufficiency or value of this Agreement, any Note,
any other Loan Document or any other instrument or document
furnished pursuant hereto or thereto; (v) shall not be
responsible to any Lender for the perfection or priority of any
Lien securing the Obligations; and (vi) shall incur no
liability to any Lender under or in respect of this Agreement,
any Note or any other Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may
be by telegram, telecopier, cable or telex) reasonably believed
by it to be genuine and signed or sent by the proper party or
parties.
1.6
1.7 Administrative Agent and Affiliates; Bank One and
Affiliates . Without limiting the right of any other Lender
to engage in any business transactions with the Borrower or any
of its Affiliates, with respect to their Commitments, the Loans
made by them and the Notes issued to them, Bank One and each
other Lender who may become the Administrative Agent shall have
the same rights and powers under this Agreement and its Notes
as any other Lender and may exercise the same as though it were
not the Administrative Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include
Bank One and any such other Lender, in their individual
capacities. Bank One, each other Person who becomes the
Administrative Agent and their respective Affiliates may be
engaged in, or may hereafter engage in, one or more loan,
letter of credit, leasing or other financing activity not the
subject of this Agreement (collectively, the "Other
Financings") with the Borrower, any Guarantor or any of its
Affiliates, or may act as trustee on behalf of, or depositary
for, or otherwise engage in other business transactions with
the Borrower, any Guarantor or any of its Affiliates (all Other
Financings and other such business transactions being
collectively, the "Other Activities") with no responsibility to
account therefor to the Lenders. Without limiting the rights
and remedies of the Lenders specifically set forth herein, no
other Lender by virtue of being a Lender hereunder shall have
any interest in (a) any Other Activities, (b) any present or
future guaranty by or for the account of the Borrower not
contemplated or included herein, (c) any present or future
offset exercised by the Administrative Agent in respect of any
such Other Activities, (d) any present or future property taken
as security for any such Other Activities, or (e) any property
now or hereafter in the possession or control of the
Administrative Agent which may be or become security for the
Obligations of the Borrower hereunder and under the Notes by
reason of the general description of indebtedness secured, or
of property contained in any other agreements, documents or
instruments related to such Other Activities; provided,
however, that if any payment in respect of such guaranties or
such property or the proceeds thereof shall be applied to
reduction of the Obligations evidenced hereunder and by the
Notes, then each Lender shall be entitled to share in such
application according to its pro rata portion of such
Obligations.
1.8
1.9 Lender Credit Decision . Each Lender acknowledges
and agrees that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on the
financial statements referred to in Section 5.6 and such other
documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges and agrees that it
will, independently and without reliance upon the
Administrative 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 credit decisions in taking or
not taking action under this Agreement and the other Loan
Documents.
1.10
1.11 Administrative Agent's Indemnity . (a) The
Administrative Agent shall not be required to take any action
hereunder or to prosecute or defend any suit in respect of this
Agreement, the Notes or any other Loan Document unless
indemnified to the Administrative Agent's satisfaction by the
Lenders against loss, cost, liability and expense. If any
indemnity furnished to the Administrative Agent shall become
impaired, it may call for additional indemnity and cease to do
the acts indemnified against until such additional indemnity is
given. In addition, the Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed by the
Borrower), ratably according to the respective aggregate
principal amounts of the Notes then held by each of them (or if
the Loan Balance at the time is zero, ratably according to the
respective amounts of the Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement or any action
taken or omitted by the Administrative Agent under this
Agreement, the Notes and the other Loan Documents. Without
limitation of the foregoing, each Lender agrees to reimburse
the Administrative Agent promptly upon demand for its ratable
share of any out-of-pocket expenses (including reasonable
counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, administration, or
enforcement of, or legal advice in respect of rights or
responsibilities under, this Agreement, the Notes and the other
Loan Documents to the extent that the Administrative Agent is
not reimbursed for such expenses by the Borrower. The
provisions of this Section shall survive the termination of
this Agreement, the payment of the Obligations and/or the
assignment of any of the Notes.
1.12
1.13 (b) Notwithstanding the foregoing, no Lender shall
be liable under this Section to the Administrative Agent for
any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements due to the Administrative Agent resulting from
the Administrative Agent's gross negligence or willful
misconduct. Each Lender agrees, however, that it expressly
intends, under this Section, to indemnify the Administrative
Agent ratably as aforesaid for all such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements arising out of or
resulting from the Administrative Agent's sole ordinary or
contributory negligence.
1.14
1.15 Successor Administrative Agent . The Administrative
Agent may resign at any time by giving written notice thereof
to the Lenders and the Borrower and may be removed as
Administrative Agent under this Agreement, the Notes and the
other Loan Documents at any time with or without cause by the
unanimous action of the Lenders not acting as the
Administrative Agent. Upon any such resignation or removal,
the Lenders shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent
shall have been so appointed by the Lenders, and shall have
accepted such appointment, within 30 calendar days after the
retiring Administrative Agent's giving of notice of resignation
or the Lenders removal of the retiring Administrative Agent,
then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent, which shall
be a commercial bank organized under the laws of the United
States of America or of any state thereof and having a combined
capital and surplus of at least $100,000,000.00. Upon the
acceptance of any appointment as Administrative Agent hereunder
and under the Notes and the other Loan Documents by a successor
Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations under this
Agreement, the Notes and the other Loan Documents. After any
retiring Administrative Agent's resignation or removal as
Administrative Agent hereunder and under the Notes and the
other Loan Documents, the provisions of this Article X shall
inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this
Agreement, the Notes and the other Loan Documents.
1.16
1.17 Notice of Default . The Administrative Agent shall
not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder unless the
Administrative Agent shall have received notice from a Lender
or the Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a
"notice of default." If the Administrative Agent receives such
notice, the Administrative Agent shall give notice thereof to
the Lenders; provided, however, if such notice is received from
a Lender, the Administrative Agent also shall give notice
thereof to the Borrower. The Administrative Agent shall be
entitled to take action or refrain from taking action with
respect to such Default or Event of Default as provided in
Section 9.2.
1.18
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1
ARTICLE MISCELLANEOUS
1.1 Transfers; Participations . Any Lender may, at any
time, sell, transfer, assign, or grant participations in the
Obligations or any portion thereof; and any Lender may forward
to each Transferee and prospective Transferee all documents and
information relating to such Obligations, whether furnished by
the Borrower or otherwise obtained, as such Lender determines
necessary or desirable. The Borrower agrees that each
Transferee, regardless of the nature of any transfer to it, may
exercise all rights (including, without limitation, rights of
set-off) with respect to the portion of the Obligations held by
it as fully as if such Transferee were the direct holder
thereof, subject to any agreements between such Transferee and
the transferor to such Transferee.
1.2
1.3 Survival of Representations, Warranties, and
Covenants . All representations and warranties of the Borrower
and all covenants and agreements herein made shall survive the
execution and delivery of the Notes and the Security
Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
1.4
1.5 Arbitration Provision . Each Lender, the Borrower
and its Subsidiaries agree that upon the written demand of
either party, whether made before or within thirty (30) days
after the perfection of service of process in any legal
proceedings, all disputes, claims and controversies between
them, whether individual, joint, or class in nature, arising
from this Agreement, any Loan Document or otherwise., including
without limitation contract disputes and tort claims., shall be
resolved by binding arbitration pursuant to the Commercial
Rules of the American Arbitration Association ("AAA"). Any
arbitration proceeding held pursuant to this arbitration
provision shall be conducted in the city nearest the Borrower's
address having an AAA regional office, or at any other place
selected by mutual agreement of the parties. No act to take or
dispose of any Collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration
agreement. This arbitration provision shall not limit the
right of either party during any dispute, claim or controversy
to seek, use, and employ ancillary, or preliminary rights
and/or remedies., judicial or otherwise., for the purposes of
realizing upon, preserving, protecting, foreclosing upon or
proceeding under forcible entry and detainer for possession of,
any real or personal property, and any such action shall not be
deemed an election of remedies. Such remedies include, without
limitation, obtaining injunctive relief or a temporary
restraining order, invoking a power of sale under any deed of
trust or mortgage, obtaining a writ of attachment or imposition
of a receivership, or exercising any rights relating to
personal property, including exercising the right of set-off,
or taking or disposing of such property with or without
judicial process pursuant to the Uniform Commercial Code. Any
disputes, claims or controversies concerning the lawfulness or
reasonableness of an act, or exercise of any right or remedy
concerning any Collateral, including any claim to rescind,
reform or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated; provided, however that no
arbitrator shall have the right or the power to enjoin or
restrain any act of either party. Judgment upon any award
rendered by any arbitrator may be entered in any court having
jurisdiction. The statute of limitations, estoppel, waiver,
laches and similar doctrines which would otherwise be
applicable in an action brought by a party shall be applicable
in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of any
action for these purposes. The Federal Arbitration Act (Title
9 of the United States Code) shall apply to the construction,
interpretation, and enforcement of this arbitration provision.
1.6
1.7 Intentionally Omitted .
1.8
1.9 Notices and Other Communications . Except as to oral
notices expressly authorized herein, which oral notices shall
be confirmed in writing, all notices, requests, and
communications hereunder shall be in writing (including by
telecopy). Unless otherwise expressly provided herein, any
such notice, request, demand, or other communication shall be
deemed to have been duly given or made when delivered by hand,
or, in the case of delivery by mail, when deposited in the
mail, certified mail, return receipt requested, postage
prepaid, or, in the case of telecopy notice, when receipt
thereof is acknowledged orally or by written confirmation
report, addressed as follows:
1.10
(a) if to the Administrative Agent, to:
(b)
(c) Bank One, Texas, National Association
(d) 910 Travis, 6th Floor
(e) Houston, Texas 77002-5860
(f) Attention: Energy Group, 6th Floor
(g) (or for notice by mail, to:
(h) P.O. Box 2629
(i) Houston, Texas 77252-2629
(j) Attention: Energy Group, 6th Floor
(k) Telecopy: (713) 751-3544
(l)
(m) if to CIBC, to:
(n)
(o) Two Paces West, Suite 1200
(p) 2727 Paces Ferry Road
(q) Atlanta, GA 30339
(r) Attention: Pluria Howell
(s) Telephone: (770) 319-4814
(t) Telecopy: (770) 319-4950
(u)
(v) if to NationsBank, to:
(w) 700 Louisiana
Houston, Texas 77002
Attention: Energy Finance Division
Telecopy: (713) 247-6432
(a) if to the Borrower or any Guarantor or
Subsidiary, to:
(b)
(c) Midcoast Energy Resources, Inc.
(d) 1100 Louisiana, Suite 2950
(e) Houston, Texas 77002
(f) Attention: Richard A. Robert
(g) Telecopy: (713) 650-3232
Any party may, by proper written notice hereunder to the
others, change the individuals or addresses to which such
notices to it shall thereafter be sent.
1.1 Parties in Interest . Subject to the restrictions on
changes in corporate structure set forth in Section 7.9 and
other applicable restrictions contained herein, all covenants
and agreements herein contained by or on behalf of the
Borrower, any Subsidiary, any Guarantor or any Lender shall be
binding upon and inure to the benefit of the Borrower, any
Subsidiary, any Guarantor or any Lender, as the case may be,
and their respective legal representatives, successors, and
assigns.
1.2
1.3 Rights of Third Parties . All provisions herein are
imposed solely and exclusively for the benefit of the Lenders
and the Borrower. No other Person shall have any right,
benefit, priority, or interest hereunder or as a result hereof
or have standing to require satisfaction of provisions hereof
in accordance with their terms, and any or all of such
provisions may be freely waived in whole or in part by the
Administrative Agent with the consent of the Majority Lenders
at any time if it deems it advisable to do so.
1.4
1.5 Renewals; Extensions . All provisions of this
Agreement relating to the Notes shall apply with equal force
and effect to each promissory note hereafter executed which in
whole or in part represents a renewal or extension of any part
of the Indebtedness of the Borrower under this Agreement, the
Notes, or any other Loan Document.
1.6
1.7 No Waiver; Rights Cumulative . No course of dealing
on the part of the Administrative Agent, its officers or
employees, nor any failure or delay by the Administrative Agent
with respect to exercising any of its rights under any Loan
Document shall operate as a waiver thereof. The rights of the
Administrative Agent under the Loan Documents shall be
cumulative and the exercise or partial exercise of any such
right shall not preclude the exercise of any other right.
Neither the making of any Loan nor the issuance of a Letter of
Credit shall constitute a waiver of any of the covenants,
warranties, or conditions of the Borrower contained herein. In
the event the Borrower is unable to satisfy any such covenant,
warranty, or condition, neither the making of any Loan nor the
issuance of a Letter of Credit shall have the effect of
precluding the Administrative Agent from thereafter declaring
such inability to be an Event of Default as hereinabove
provided.
1.8
1.9 Survival Upon Unenforceability . In the event any
one or more of the provisions contained in any of the Loan
Documents or in any other instrument referred to herein or
executed in connection with the obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall
not affect any other provision of any Loan Document or of any
other instrument referred to herein or executed in connection
with such Obligations.
1.10 Amendments; Waivers . Neither this Agreement nor any
provision hereof may be amended, waived, discharged, or
terminated orally, but only by an instrument in writing signed
by the party against whom enforcement of the amendment, waiver,
discharge, or termination is sought.
1.11
1.12 Controlling Agreement . In the event of a conflict
between the provisions of this Agreement and those of any other
Loan Document, the provisions of this Agreement shall control.
1.13
1.14 Disposition of Collateral . Notwithstanding any term
or provision, express or implied, in any of the Security
Instruments, upon the occurrence of an Event of Default, the
realization, liquidation, foreclosure, or any other disposition
on or of any or all of the Collateral by the Administrative
Agent shall be in the order and manner and determined in the
sole discretion of the Administrative Agent; provided, however,
that in no event shall the Administrative Agent violate
applicable law or exercise rights and remedies other than those
provided in such Security Instruments or otherwise existing at
law or in equity.
1.15
1.16 Pro Rata Treatment . (a) Except as otherwise
specifically permitted hereunder, each payment or prepayment of
principal, if permitted under this Agreement, and each payment
of interest with respect to a Loan shall be made pro rata among
the Lenders.
1.17
1.18 (b) Each Lender agrees that if, through the exercise
of a right of banker's lien, setoff or claim of any kind
against the Borrower as a result of which the unpaid principal
portion of the Notes and the Obligations held by it shall be
proportionately less than the unpaid principal portion of the
Notes and Obligations held by any other Lender, it shall be
deemed to have simultaneously purchased from such other Lender
a participation in the Notes and Obligations held by such other
Lender, in the amount required to render such amounts
proportional; provided, however, that if any such purchase or
purchases or adjustments shall be made pursuant to this Section
and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price
or prices or adjustments restored without interest.
1.19
1.20 No Control . None of the terms of this Agreement or
of any other Loan Document shall, or shall be deemed to, give
the Administrative Agent or any Lender the rights or powers to
exercise control over the business or affairs of the Borrower,
any of its Subsidiaries, the Guarantors, or any Person acting
for, or on behalf of, any of the foregoing referenced Persons.
Neither the execution of this Agreement or any other Loan
Document, nor the delivery of any of them, nor the effect,
operation, performance or enforcement of any term or provision
in this Agreement or any other Loan Document, is intended to be
or to create, and the foregoing shall not be construed to be,
any partnership, joint venture or other joint enterprise
between Administrative Agent and Lenders on the one hand and
the Borrower, its Subsidiaries, and the Guarantors on the other
hand. The relationship between the Borrower and the
Administrative Agent and Lenders created by this Agreement and
each of the other Loan Documents is only that of debtor-
creditor and the powers of the Administrative Agent and Lenders
hereunder are limited to the right to receive payment of the
Obligations and Indebtedness owed to it or them hereunder or in
connection herewith and to exercise the rights and remedies
provided herein and in any other Loan Document.
1.21
1.22 GOVERNING LAW . THIS AGREEMENT AND THE NOTES SHALL
BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS
WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW; EXCEPT THAT, (A) CHAPTER 346 OF THE TEXAS
FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN
ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY AND
(B) IF AT ANY TIME THE LAWS OF THE UNITED STATES OF AMERICA OR
ANY STATE THEREOF APPLICABLE TO A LENDER PERMIT SUCH LENDER TO
CONTRACT FOR, TAKE, RESERVE, CHARGE OR RECEIVE A HIGHER RATE OF
INTEREST THAN IS ALLOWED BY THE LAWS OF THE STATE OF TEXAS,
THEN SUCH OTHER LAWS SHALL TO SUCH EXTENT GOVERN AS TO THE RATE
OF INTEREST WHICH SUCH LENDER IS ALLOWED TO CONTRACT FOR, TAKE,
RESERVE, CHARGE OR RECEIVE UNDER THIS AGREEMENT AND SUCH
LENDER'S NOTE.
1.23
1.24 JURISDICTION AND VENUE . ALL ACTIONS OR PROCEEDINGS
WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION
WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND
ELECTION OF THE ADMINISTRATIVE AGENT, IN COURTS HAVING SITUS IN
HOUSTON, HARRIS COUNTY, TEXAS. THE BORROWER AND EACH GUARANTOR
HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR
FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND
HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE
JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY
THE ADMINISTRATIVE AGENT IN ACCORDANCE WITH THIS SECTION.
1.25
1.26 ENTIRE AGREEMENT . THIS AGREEMENT CONSTITUTES THE
ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN
THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE
CORRESPONDENCE DATED July 8, 1998, FROM THE ADMINISTRATIVE
AGENT TO THE BORROWER AND THE TERM SHEET ENCLOSED THEREWITH.
FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER
WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL
AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG SUCH PARTIES.
1.27
1.28 Counterparts . For the convenience of the parties,
this Agreement may be executed in multiple counterparts, each
of which for all purposes shall be deemed to be an original,
and all such counterparts shall together constitute but one and
the same Agreement.
1.29
Remainder of this page intentionally left blank.
IN WITNESS WHEREOF, this Agreement is deemed executed
effective as of the date first above written.
ADMINISTRATIVE AGENT:
BANK ONE, TEXAS,
NATIONAL ASSOCIATION
By:
Charles T. Kingswell-
Smith
Senior Vice President
BORROWER:
MIDCOAST ENERGY RESOURCES,
INC.
By:
Richard A. Robert
Chief Financial Officer
and
Treasurer
GUARANTORS:
MAGNOLIA PIPELINE CORPORATION H&W PIPELINE CORPORATION
By:_____________________ By:_____________________
Richard A. Robert Richard A. Robert
Treasurer Treasurer
MAGNOLIA RESOURCES, INC. MAGNOLIA GATHERING, INC.
By:_____________________ By:_____________________
Richard A. Robert Richard A. Robert
Treasurer Treasurer
MIDCOAST HOLDINGS NO. ONE, INC. MIDCOAST GAS PIPELINE, INC.,
a Texas corporation
By:_____________________ By:_____________________
Richard A. Robert Richard A. Robert
Treasurer Treasurer
NUGGET DRILLING CORPORATION MIDCOAST MARKETING, INC.
By:_____________________ By:_____________________
Richard A. Robert Richard A. Robert
Treasurer Treasurer
MIDCOAST GAS PIPELINE, INC., TENNESSEE RIVER INTRASTATE
a Delaware corporation GAS COMPANY, INC.
By:_____________________ By: ______________________
Richard A. Robert Richard A. Robert
Treasurer Treasurer
MID LOUISIANA GAS COMPANY CREOLE GAS PIPELINE
CORPORATION
By:_____________________ By;
Richard A. Robert Richard A. Robert
Treasurer Treasurer
MID LOUISIANA GAS TRANSMISSION MIDCOAST INTERSTATE
COMPANY TRANSMISSION, INC.
By:_____________________ By:_____________________
Richard A. Robert Richard A. Robert
Treasurer Treasurer
MIDCOAST GAS SERVICES, INC. MIDCOAST ENERGY MARKETING,
INC.
By:_____________________ By: ________________________
Richard A. Robert Richard A. Robert
Treasurer Treasurer
LENDERS:
Commitments: BANK ONE, TEXAS, NATIONAL
ASSOCIATION
Initial Commitment: $33,333,333.34
Maximum Commitment: $50,000,000.00 By:
Charles T. Kingswell-
Smith
Senior Vice President
Address:
Energy Group
Bank One, Texas, N.A.
910 Travis, 6th Floor
Houston, Texas 77002
Telephone No. (713) 751-7803
Telecopy No. (713) 751-3544
CIBC, INC.
Initial Commitment: $33,333,333.33
Maximum Commitment: $50,000,000 By:
Name:
Title:
Address:
Two Paces West, Suite 1200
2727 Paces Ferry Road
Atlanta, GA 30339
Attention: Pluria Howell
Telephone No. (770) 319-4814
Telecopy No. (770) 319-4950
NATIONSBANK, N.A.
Initial Commitment: $33,333,333.33
Maximum Commitment: $50,000,000.00 By:
Name:
Title:
Address:
700 Louisiana
Energy Finance Division
Houston, Texas 77002
Telephone No.(713) 247-6833
Telecopy No.(713) 247-6432
EXHIBIT I
[FORM OF NOTE]
$50,000,000.00 Houston, Texas August _, 1998
This Note is executed and delivered in renewal,
replacement, enlargement and extension (and not in
extinguishment) of the indebtedness, both unpaid principal and
accrued unpaid interest, as of August _, 1998, on (i) that
certain Promissory Note dated October 31, 1997 in the principal
amount of $100,000,000.00 (as renewed, rearranged and extended,
the "Original Note"), which Original Note was executed by
Borrower, Magnolia Pipeline Corporation, H&W Pipeline
Corporation, Magnolia Resources, Inc., Magnolia Gathering,
Inc., Midcoast Holdings No. One, Inc., Midcoast Gas Pipeline,
Inc., Nugget Drilling Corporation, Midcoast Marketing, Inc.,
Alatenn Energy Marketing company, Tennessee River Intrastate
Gas Co., Mid Louisiana Gas Company, Mid Louisiana Marketing
Company, Mid Louisiana Gas Transmission Company and Midla
Energy Services Company payable to the order of Bank One,
Texas, National Association ("Bank One") and (ii) that certain
Promissory Note dated May 30, 1997 in the principal amount of
$5,000,000.00 (as renewed, rearranged and extended, the
"Original MIT Note"; the Original Note and the Original MIT
Note collectively called the "Original Notes"), which Original
MIT Note was executed by Alabama Tennessee Natural Gas Company,
predecessor by merger to Midcoast Interstate Transmission,
Inc., payable to the order of Bank One. All liens, security
interests, pledges, collateral assignments and guaranties
securing and/or guaranteeing payment of the Original Notes are
hereby ratified, confirmed, renewed, extended and brought
forward as security and/or guaranty for the payment hereof.
FOR VALUE RECEIVED and WITHOUT GRACE, MIDCOAST ENERGY
RESOURCES, INC. ("Borrower") promises to pay to the order of
_______________ ("Payee"), at the Principal Office of the
Administrative Agent in Houston, Harris County, Texas, the sum
of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00) or so much
thereof as may be advanced against this Note pursuant to the
Amended and Restated Credit Agreement dated of even date
herewith by and among Borrower, Bank One, Texas, National
Association, individually and as administrative agent, CIBC,
Inc., individually and as syndication agent and NationsBank,
N.A., individually and as documentation agent (as amended,
restated, or supplemented from time to time, the "Credit
Agreement"), together with interest at the rates and calculated
as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for
matters governed thereby, including, without limitation,
certain events which will entitle the holder hereof to
accelerate the maturity of all amounts due hereunder.
Capitalized terms used but not defined in this Note shall have
the meanings assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is one of the "Notes"
under, and is payable as provided in the Credit Agreement.
Subject to compliance with applicable provisions of the Credit
Agreement, Borrower may at any time pay the full amount or any
part of this Note without the payment of any premium or fee,
but such payment shall not, until this Note is fully paid and
satisfied, excuse the payment as it becomes due of any payment
on this Note provided for in the Credit Agreement.
Without being limited thereto or thereby, this Note is
secured by the Security Instruments.
As noted above, this Note has been made and given in
renewal, replacement, enlargement and extension (and not in
extinguishment) of the unpaid principal balance of the Original
Notes. All liens, guaranties, security interests and
agreements securing payment of the Original Notes shall
continue to secure payment of all indebtedness evidenced by
this Note.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW; EXCEPT THAT, (A) CHAPTER
346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS)
SHALL NOT APPLY AND (B) IF AT ANY TIME THE LAWS OF THE UNITED
STATES OF AMERICA OR ANY STATE THEREOF APPLICABLE TO PAYEE
PERMIT PAYEE TO CONTRACT FOR, TAKE, RESERVE, CHARGE OR RECEIVE
A HIGHER RATE OF INTEREST THAN IS ALLOWED BY THE LAWS OF THE
STATE OF TEXAS, THEN SUCH OTHER LAWS SHALL TO SUCH EXTENT
GOVERN AS TO THE RATE OF INTEREST WHICH SUCH PAYEE IS ALLOWED
TO CONTRACT FOR, TAKE, RESERVE, CHARGE OR RECEIVE UNDER THIS
NOTE.
MIDCOAST ENERGY RESOURCES, INC.
By:
Richard A. Robert
Chief Financial Officer and
Treasurer
EXHIBIT II
[FORM OF BORROWING REQUEST]
Bank One, Texas, National Association,
Administrative Agent
910 Travis
Houston, Texas 77002-5860
Attention: Energy Group, 6th Floor
Re: Amended and Restated Credit Agreement dated as of
August 31, 1998, by and among Midcoast Energy
Resources, Inc. ("Borrower"), Bank One, Texas,
National Association, individually and as
administrative agent, CIBC, Inc., individually and as
syndication agent and NationsBank, N.A., individually
and as documentation agent (as amended, restated, or
supplemented from time to time, the "Credit
Agreement")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby
makes the requests indicated below:
? 1. Loans
(a) Amount of new Loan: $
(b) Requested funding date: _______________, 19___
(c) $_______________ of such Loan is to be a
Floating Rate Loan;
and
(d) Requested Interest Period for LIBO Rate Loan:
___ months
? 2. $_______________ of such Loan is to be a LIBO
Rate Loan maturing on ________________:
(a) Amount to be continued as a LIBO Rate Loan is
$____________________, with an Interest Period
of ___ months;
(b) Amount to be converted to a Floating Rate Loan
is $_______________; and
? 3. Conversion of Floating Rate Loan:
(a) Requested conversion date: __________________,
19___.
(b) Amount to be converted to a LIBO Rate Loan is
$______________ with an Interest Period of ____
months.
The undersigned certifies that [s]he is the
[_________________] of the Borrower, has obtained all consents
necessary, and as such [s]he is authorized to execute this
request on behalf of the Borrower. The undersigned further
certifies, represents, and warrants on behalf of the Borrower
that the Borrower is entitled to receive the requested
borrowing, continuation, or conversion under the terms and
conditions of the Credit Agreement.
Each capitalized term used but not defined herein shall
have the meaning assigned to such term in the Credit Agreement.
Very truly yours,
MIDCOAST ENERGY RESOURCES, INC.
By:
Printed Name:
Title:
EXHIBIT III
[FORM OF COMPLIANCE CERTIFICATE]
______________________, 19___
Bank One, Texas, National Association,
as Administrative Agent
910 Travis
Houston, Texas 77002-5860
Attention: Energy Group, 6th Floor
Re: Amended and Restated Credit Agreement dated as of
August 31, 1998, by and among Midcoast Energy
Resources, Inc. ("Borrower"), Bank One, Texas,
National Association, individually and as
administrative agent, CIBC, Inc., individually and as
syndication agent and NationsBank, N.A., individually
and as documentation agent (as amended, restated, or
supplemented from time to time, the "Credit
Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit
Agreement, the undersigned, as a Responsible Officer of the
Borrower, hereby certifies to you the following information as
true and correct as of the date hereof or for the period
indicated, as the case may be:
[1. To the best of the knowledge of the undersigned, no
Default or Event of Default exists as of the date
hereof or has occurred since the date of our previous
certification to you, if any.]
[1. To the best of the knowledge of the undersigned, the
following Defaults or Events of Default exist as of
the date hereof or have occurred since the date of
our previous certification to you, if any, and the
actions set forth below are being taken to remedy
such circumstances:]
2. The compliance of the Borrower with the financial
covenants of the Credit Agreement, as of the close of
business on _________________________, is evidenced
by the following:
(a) Section 7.13: Cash Flow Coverage.
Permit Cash Flow for any fiscal year (plus the
Cash Flow of any acquired company) to be less
than 1.40 times interest plus the greater of (i)
current maturities of funded long term bank
debt; or (ii) 1/10th of the principal balance of
the Loans. Such test shall begin September 30,
1998 and for the immediately preceding four
quarters and shall continue on a quarterly basis
thereafter looking back to the immediately
preceding four quarters. For purposes of this
covenant, the Cash Flow of an acquired company
shall be the prior four calendar quarters' Cash
Flow of such acquired company immediately prior
to its acquisition by Borrower, with the oldest
quarter being replaced by each succeeding
quarter after such acquired company is acquired
by Borrower. Also for purposes of this
covenant, if a division or group of assets is
acquired, the term "acquired company" shall
refer to such division or such group of assets
and its or their related Cash Flow.
Actual
(b) Section 7.14: Total Debt.
Permit total debt including current maturities
to be more than 65% of total capitalization.
Total capitalization shall mean the sum of total
debt plus stockholder equity as determined in
accordance with GAAP.
Actual
(c) Section 7.15: Current Ratio.
Permit the ratio of Current Assets to Current
Liabilities to be less than 1.00 to 1.00 at any
time.
Actual
(d) Section 7.16: Tangible Net Worth.
Permit Tangible Net Worth as of the close of any
fiscal quarter to be less than the sum of (a)
$50,000,000, plus (b) 50% of positive Net Income
for all fiscal periods ending subsequent to
March 31, 1998, plus (c) the net proceeds of any
equity offering of the Borrower.
Actual
3. No Material Adverse Effect has occurred since the
date of the Financial Statements dated as of
_______________________________________.
Each capitalized term used but not defined herein shall
have the meaning assigned to such term in the Credit Agreement.
Very truly yours,
MIDCOAST ENERGY RESOURCES, INC.
By:
Printed Name:
Title:
EXHIBIT IV
[FORM OF OPINION OF COUNSEL]
[Closing Date)
Bank One, Texas, NA
PO Box 2629
Houston, TX 77252-2629
Ladies and Gentlemen:
I am General Counsel of Midcoast Energy Resources, Inc., a
Nevada corporation, ("Borrower") and served as counsel to
Borrower, and its Affiliates, in connection with the execution
and delivery of the Loan Documents. This opinion is delivered
to you pursuant to the Credit Agreement. Capitalized terms
used herein and not otherwise defined shall have the meanings
assigned to them in the Amended and Restated Credit Agreement
among Borrower, Borrower's Affiliates, Bank One, Texas,
National Association, as Administrative Agent, CIBE, Inc., as
Syndication Agent, and NationsBank, N.A., as Documentation
Agent, dated August 31, 1998.
A. Documents Examined. In preparing this opinion, I have
examined:
(1) The Loan Documents;
(2) Secretary's certificates of Borrower and its
Affiliates, dated as of August 31, 1998, certifying
that attached thereto are true and correct copies of
(a) the Certificate of Incorporation, (b) the Bylaws,
(c) the resolutions of the Board of Directors
authorizing the transactions contemplated by the Loan
Documents, and (d) the incumbency and signatures of
certain officers;
(3) Certificates of Existence and Good Standing of
Borrower and its Affiliates doing business in the
state of Delaware issued by the Secretary of State of
the State of Delaware;
(4) Certificates of good standing and authority to
do business of Borrower and its Affiliates doing
business in the state of Louisiana, issued by the
Secretary of State of the State of Louisiana;
(5) Certificate of good standing and authority to do
business of Borrower and its Affiliates doing
business in the state of Mississippi, issued by the
Secretary of State of the State of Mississippi;
(6) Certificate of authority to do business of
Borrower and its Affiliates doing business in the
state of Texas, issued by the Secretary of State of
the State of Texas;
(7) Certificate of good standing of Borrower and its
Affiliates doing business in the state of Texas,
issued by the Comptroller of Public Accounts of the
State of Texas;
(8) Certificate of good standing and authority to do
business of Borrower and its Affiliates doing
business in the state of Alabama, issued by the
Secretary of State of the State of Alabama;
(9) Certificate of good standing and authority to do
business of Borrower and its Affiliates doing
business in the state of Minnesota, issued by the
Secretary of State of the State of Minnesota;
In rendering the opinions expressed below, I have examined
the originals or photostatic conformed copies of all such
agreements and or corporate records, as applicable, of Borrower
and its Affiliates, certificates of public officials and such
other documents and records and such matters of law as I have
deemed necessary or appropriate as a basis for the opinions
hereinafter expressed. Except as expressed below, I have made
no special investigation or review of any laws, rules,
regulations, judgments, decrees, franchises, certificates,
permits or the like and have made no independent search of the
records of any judicial authority or governmental agency. In
rendering the opinions set forth below, I have relied as to
factual matters, to the extent I deemed appropriate, upon
factual representations made by Borrower and its Affiliates in
the Loan Documents and I have relied, when relevant facts were
not independently established by me, on certificates or other
written or oral advice of an officer or other authorized
representative of the particular governmental authority,
corporation, or other person or entity concerned.
B. Opinion. Based upon and subject to the comments,
assumptions, limitations, qualifications, and exceptions
hereinafter set forth, I am of the opinion that:
(1) Borrower, a Nevada corporation, is the parent
company of the Affiliates listed below and owns the
stock of it Affiliates, as indicated below:
ARCADIA/MIDCOAST PIPELINE OF NEW YORK, LLC,
New York Limited Liability Company,
Owned 50% by Borrower
CREOLE GAS PIPELINE CORPORATION,
Louisiana corporation,
Owned 100% by Mid Louisiana Gas Transmission Company
H&W PIPELINE CORPORATION,
Alabama corporation,
Owned 100% by Borrower
MAGNOLIA GATHERING, INC.,
Alabama corporation,
Owned 100% by Borrower
MAGNOLIA PIPELINE CORPORATION,
Alabama corporation,
Owned 100% by Borrower
MAGNOLIA RESOURCES, INC.,
Mississippi corporation,
Owned 100% by Borrower
MID LOUISIANA GAS COMPANY,
Delaware corporation,
Owned 100% by Borrower
MID LOUISIANA GAS TRANSMISSION COMPANY,
Delaware corporation,
Owned 100% by Borrower
MIDCOAST ENERGY MARKETING, INC.,
Delaware corporation,
Owned 100% by Borrower
MIDCOAST GAS PIPELINE, INC.,
Texas corporation,
Owned 100% by Borrower
MIDCOAST GAS PIPELINE, INC.,
Delaware corporation,
Owned 100% by Borrower
MIDCOAST GAS SERVICES, INC.,
Delaware Corporation,
Owned 1000/o by Borrower
MIDCOAST HOLDINGS NO. ONE, INC.,
Delaware corporation,
Owned 100% Borrower
MIDCOAST INTERSTATE TRANSMISSION, INC.,
Alabama corporation,
Owned 100% by Borrower
MIDCOAST MARKETING, INC.,
Texas corporation,
Owned 100% by Borrower
NUGGET DRILLING CORPORATION,
Minnesota corporation,
Owned 100% by Borrower
PAN GRANDE PIPELINE, LLC,
Texas Limited Liability Company,
Owned 50% by Borrower
STAR COUNTY GATHERING SYSTEM,
Joint Venture,
Owned 60% by Borrower
TENNESSEE RIVER INTRASTATE GAS COMPANY, INC.,
Alabama corporation,
Owned 100% by Borrower
(2) Borrower and its Affiliates are validly existing
and in good standing under the laws of the State of
their incorporation as indicated in (1) above.
(3) Borrower and its Affiliates (i) have all
requisite corporate power to own and operate their
properties and assets and to carry on their business
as presently conducted, and (ii) are duly qualified
as a foreign corporation and in good standing under
the laws of the states of in which they are doing
business.
(4) The Borrower and its Affiliates have the
corporate power and authority to execute, deliver and
perform the Loan Documents to which each is a party.
The Loan Documents have been duly authorized by all
necessary corporate action on the part Borrower and
its Affiliates and have been duly executed and
delivered on behalf of each, and constitute valid and
binding obligations, enforceable in accordance with
their terms.
(5) Except for the filing of the Financing
Statements, routine filings required pursuant to
state or federal securities laws, other routine
corporate filings required to be made after the date
hereof to maintain good standing and to maintain or
renew licenses or permits required by Borrower and
its Affiliates, no consent, approval, authorization
or other action by, or filing with, any Federal,
Texas or Delaware governmental authority which has
not been obtained, is required in connection with the
execution, delivery and performance of the Loan
Documents or obligations thereunder.
(6) To my knowledge, there is no action, suit or
proceeding at law or in equity or by or before any
governmental or regulatory authority or agency, now
pending or threatened against or affecting Borrower
or its Affiliates (a) with respect to the Loan
Documents, or any of the transactions contemplated
thereby or (b) which, if adversely determined, would
have a material adverse effect on the financial
condition, operations, business or properties of
Borrower.
(7) The execution, delivery, and performance by
Borrower and its Affiliates of the Loan Documents to
which each is a party do not and will not contravene
or violate their respective regulations, certificates
of incorporation, bylaws, and other governing
instruments, or any indenture, loan, or credit
agreement or any material agreement or contractual
obligation of which I am aware or, any state or
federal laws and regulations, any order, judgment,
decree, rule, injunction or permit applicable to or
binding upon Borrower or its Affiliates or any of
their respective properties or assets and will not
result in the creation or imposition of any lien on
any of their respective properties or assets pursuant
to the provisions of any indenture, loan, or credit
agreement or contractual obligation of which I am
aware other than the liens created under the Security
Instruments and, to my knowledge, under any order,
judgment, decree, rule, injunction or permit
applicable to or binding upon Borrower and its
Affiliates or any of their respective properties or
assets. Except for any requirements of applicable
securities laws relating to the sale of securities,
approvals required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (including the
rules and regulations promulgated thereunder), if
applicable, and Federal Energy Regulatory Commission
("FERC") approvals as set forth below, federal law
does not require any approvals or consents for the
Lender to exercise its rights under the Loan
Documents. In connection with Mid LA and MIT, the
sale, transfer or other disposition (which would
include the sale, transfer or other disposition
through foreclosure) of FERC certificated facilities
will require authorization from the FERC for
abandonment authorization pursuant to Section 7(b) of
the NGA, 15 U.S.C. 717f(b). An order authorizing
the requested abandonment must be received prior to
the sale or transfer of the facilities. The entity
acquiring the facilities from the certificate holder
must file an application with the FERC seeking an NGA
Section 7(c) certificate to acquire and operate the
facilities and may not operate the facilities nor
provide service through the facilities until a
certificate has been issued by the FERC. 15 U.S.C.
717f(c).
(8) The Security Instruments, when properly filed in
accordance with the laws of the state in which they
are filed, create a legal, valid, and enforceable
security interest in favor of the Lender in Borrower
and its Affiliates' right, title and interest,
respectively, in the Collateral (as defined in the
respective Security Instruments) including any
collateral constituting accounts, general
intangibles, inventory and mobile goods (the
"Collateral"), as security for the obligations being
secured thereby. The perfection of the security
interests created by the Security Instruments will be
terminated (i) as to any Collateral acquired, more
than four months after borrower changes its name,
identity, or corporate structure so as to make the
Financing Statements seriously misleading, unless new
appropriate financing statements indicating the new
name, identity, or corporate structure are properly
filed before the expiration of such four months and
(ii) as to any Collateral consisting of mobile goods,
accounts and general intangibles (other than any
accounts and general intangibles described in Section
9.103(e) of the Texas UCC), four months after an
entity changes its chief executive office to a new
jurisdiction outside the State of Texas unless such
security interests are perfected in such new
jurisdiction before that termination. Continuation
of perfection in any proceeds which are part of the
property now or hereafter subject to a security
interest or after-acquired property may, if such
proceeds or after-acquired property consists of
property of a type in which a perfected security
interest cannot be obtained by filing a financing
statement, require additional compliance with
applicable provisions of the Texas UCC, other than
the filing of financing statements, and I express no
opinion as to the perfection and effectiveness of any
security interest in any proceeds from the Collateral
initially subject to the security interests in favor
of the Lender or after acquired property to the
extent that the perfection or effectiveness depends
on such additional compliance.
(9) Assuming that Lender takes possession of the
certificates representing the stock of Borrower's
Affiliates, the security interest in such stock
constitutes a valid, perfected security interest
subject to no equal or prior liens, encumbrances,
charges or other security interest (as defined in
Section 1-201(37) of the Texas UCC) as security for
the obligations so long as the Lender retains
possession of the certificates representing the
stock. To my knowledge, after due inquiry, the
following stock certificate represent all of the
issued and outstanding shares of the Affiliate, as
designated, and has been duly authorized and fully
paid and are non- assessable.
STOCK BORROWER'S
CERTIFICATE AFFILIATE'S
NUMBER NAME
15 Creole Gas Pipeline Corporation,
Louisiana corp.
1 Midcoast Energy Marketing, Inc.,
Delaware corp.
1 Midcoast Gas Pipeline, Inc., Delaware
corp.
1 Midcoast Gas Services, Inc., Delaware
corp.
(10) Mid LA and MIT are each a "natural gas company"
within the meaning of the Natural Gas Act of 1938
("NGA"), 15 U. S. C. 717 et seq., as determined by
the Federal Power Commission, the predecessor agency
to the FERC, by order issued January 29, 1963, 29 FPC
162 (1963), and is subject to the jurisdiction of the
FERC, the regulatory body charged with implementation
of the NGA pursuant to Section l(b) of the NGA, 15 U.
S. C. 717 (b). Section l(b) of the NGA confers
upon the FERC exclusive jurisdiction over three
areas: the transportation of natural gas in
interstate commerce, the sale for resale of natural
gas in interstate commerce, and natural gas companies
engaged in such transportation or sale. 15 U. S. C.
717 (b). See Northern Natural Gas Co. v. State
Corp. Comm'n of Kansas, 372 U.S. 84, 89 (1963).
State regulation of the matters reserved for the
FERC's exclusive jurisdiction by the NGA is
preempted. See Schneidewind v. ANR Pipeline Co. and
ANR Storage Co., 485 U.S. 293, 300-301 (1988).
C. Comments, Assumptions, Limitations, Qualifications and
Exception. The foregoing opinions are subject to the following
comments, assumptions, limitations, qualifications, and
exceptions:
(1) With respect to all legal issues involving the
laws of states other than Texas, other than the
qualification of the Borrower or its Affiliates to do
business and good standing in those states, you
should not rely on this opinion.
(2) I express no opinion herein as to the laws of
any jurisdiction other than the State of Texas.
(3) In rendering the opinions set forth above, I
have assumed (a) the genuineness of all signatures,
the authenticity of all documents submitted to us as
originals, the conformity to original documents of
all documents submitted to us as certified or
photostatic copies thereof, and the authenticity of
the originals Of such certified or photostatic
copies; (b) the due authorization, execution, and
delivery of all agreements and documents by all
parties thereto with respect to the Loan Documents;
(c) the legal right and power of Lender and Borrower
and its Affiliates to execute, deliver, and perform
the documents to which they are a party and that the
Loan Documents constitute valid and binding
obligations of the Lender and the Borrower and its
Affiliates, enforceable against Lender and the
Borrower and its Affiliates, in accordance with their
respective terms; (d) that no fraud or dishonesty
exists with respect to any of the matters relevant to
our opinions; (e) the absence of any requirement of
consent, approval, or authorization by any person or
by any governmental authority with respect to Lender
or the Borrower and its Affiliates which has not been
obtained; (f) the mental competency of all
individuals executing the Loan Documents and the
Security Instruments; (g) Borrower has received or
will receive from the Lender the consideration for
which the Loan Documents are issued to the Lender;
and (h) the Lender will comply with the terms of the
Loan Documents and the Security Instruments.
(4) The enforceability of the Loan Documents and the
Security Instruments may be limited by and subject to
(a) applicable liquidation, conservatorship,
bankruptcy, insolvency, reorganization, fraudulent
transfer or conveyance, moratorium or other similar
laws affecting creditors' rights from time to time in
effect; (b) general principles of equity (regardless
of whether applied in a .proceeding in equity or at
law), including commercial reasonableness, existence
of good faith and conscionability; (c) the power of
the courts to award damages in lieu of equitable
remedies; (d) the qualification that certain
provisions of the Loan Documents may not be
enforceable in whole or in part under the laws of the
State of Texas or the United States, but the
inclusion of such provisions does not affect the
validity of the security interests and liens granted
by the Security Instruments in the Collateral, and
the Security Instruments contain adequate provisions
for enforcing payment of the obligations, and for the
practical realization of the rights and benefits
afforded thereby, except for the economic
consequences of any judicial, administrative or other
delay or procedure which may be imposed by applicable
federal and state law, rules, regulations and court
decisions and by constitutional requirements in and
of the State of Texas and the United States; and (e)
the limitation that the right to indemnification and
contribution contained in the Loan Documents and the
Security Instruments may be limited by federal or
state laws or the policies underlying such laws.
(5) I express no opinion as to the enforceability of
any provisions contained in the Loan Documents or the
Security Instruments purporting to (i) allow the
acceleration of the maturity of any indebtedness, the
institution of foreclosure proceedings or the set-off
or exercise of any other rights, all without notice;
(ii) provide for specific performance; (iii) grant to
the Lender an irrevocable power of attorney; (iv)
restrict access to legal or equitable remedies, or
covenant not to assert, legal or equitable remedies,
setoffs, claims, counterclaims, defects, causes of
action or other rights (including, without
limitation, proper jurisdiction and venue and trial
by jury to the extent of trial by jury in Texas); (v)
covenants to take actions, the taking of which are
discretionary with or subject to the approval of a
third party or which are otherwise subject to a
contingency, the fulfillment of which is not within
the control of the party so covenanting; (vi) relate
to delay or failure by the Lender to exercise any
right, remedy, or option under the Loan Documents not
operating as a waiver; (vii) establish, as to third
parties, nonculpability for actions taken by a
lienholder; (viii) establish evidentiary standards;
(ix) set off against Borrower's or its Affiliates'
accounts, any amounts belonging to a third party or
otherwise held in a fiduciary capacity; or (x) retain
liability against any debtor for a deficiency after
foreclosures to the extent that such foreclosures are
not conducted in accordance with applicable laws. In
addition, I express no opinion as to the
enforceability of any provision which seeks to
indemnify any Lender for its own negligence or as to
any provision contained in the Loan Documents that a
specific number of days constitutes reasonable notice
under the Texas UCC. Also, I express no opinion as
to the enforceability of (a) any provisions of the
Loan ,Documents which purport to permit the Lender to
sell, lease, or assign any collateral for credit
without assuming any credit risk therefor or to
retain cash proceeds received upon the realization of
any of the collateral as collateral for any
obligation rather than applying such cash proceeds to
the obligations thereunder or (b) any provisions of
the Security Instruments which purport to permit the
Lender to file financing statements without the
signature of Borrower or other obligor thereon for
the purposes of perfecting a security interest in the
collateral covered thereby.
(6) In rendering the opinion set forth in Section B.
as to the due qualification of the Borrower and its
Affiliates to do business and the good standing of
the Borrower and its Affiliates in the jurisdictions
specified, I have relied solely upon the certificates
referenced in Section A. above.
(7) I have not examined title to any collateral and
express no opinion as to title. I have further
assumed that (i) Borrower and its Affiliates, each
own or have rights in the collateral covered by the
Security Instruments, (ii) the Lender have and will
maintain possession of all the items of the
collateral which may be perfected only by the secured
party's taking possession thereof, including, without
limitation, instruments and money, (iii) that all
documents and instruments, and goods (other than
mobile goods as defined in the Texas UCC)
constituting part of the Collateral are and will be
located in the State of Texas for all periods of time
pertinent to this opinion, (iv) the Lender will make
timely filings of all financing statements, mortgages
and other recordable liens, and (v) the chief
executive office and the principal place of business
of Borrower and its Affiliates are located in
Houston, Texas.
(8) I express no opinion as to:
(i) the priority of any security interest
sought to be created in any collateral;
(ii) the validity or perfection of any
security interest sought to be created in any of
the collateral consisting of items which are
subject to a certificate of title statute;
(iii) the perfection Of any security
interest sought to be created in any interest in
or claim in or under any policy of insurance
(except as such may be proceeds);
(iv) the validity or perfection of any
security interest sought to be created in
deposit accounts or any property interests which
are excluded from the coverage of Article 9 of
the Texas UCC, or any accounts receivable to the
extent that they are subject to the Federal
Assignment of Claims Act;
(v) the perfection of any security
interest in any collateral which consists of
consumer goods, equipment used in farming
operations, farm products, crops, timber to be
cut or accounts resulting from the sale thereof,
or minerals, or accounts resulting from the sale
thereof at the wellhead, fixtures, letters of
credit, patents or trademarks; or
(vi) the validity or perfection of any
security interest sought to be created in
goodwill.
(9) I express no opinion with respect to any
provision contained in the Loan Documents prohibiting
oral amendments to or waivers of provisions of such
documents or limiting the effect of a course of
dealing between the parties thereto.
(10) I have not reviewed the basis on which the
Lender has elected to extend credit to the Borrower
and, accordingly, I express no opinion as to whether
the assets described in the Loan Documents are those
assets that were evaluated by the Lender as
constituting security for the loans to be made under
the Credit Agreement.
(11) The opinions expressed above are qualified to
the extent that the following matters relating to the
Loan Documents or rights or obligations of any party
thereunder may be affected by laws of jurisdictions
other than Texas; (i) title to assets, the due
formation and existence of the Borrower and its
Affiliates, their respective power to enter into the
Loan Documents, as applicable, their respective
authorization, by all necessary action, to enter into
Loan Documents and similar matters governed by the
applicable corporate laws of the States of Delaware,
Texas, Louisiana, Mississippi, Alabama, and
Minnesota; (ii) certain representations and
warranties may be governed by the applicable
corporate laws of the States of Delaware, Texas,
Louisiana, Mississippi, Alabama, and Minnesota, and
(iii) Delaware procedural laws and rules and matters
with respect to service of process, necessary
parties, prior exhaustion of remedies as against
principals, rights of subrogation and similar matters
that may be considered to be governed by the
procedural laws and rules of the States of Delaware,
Texas, Louisiana, Mississippi, Alabama, and
Minnesota.
(12) I wish to point out that Section 9-103 of the
Texas UCC provides certain rules governing the
perfection and the effect of perfection or
non-perfection of security interests in multiple
state transactions and will determine the
enforceability of any choice of law provisions
included in the Loan Documents.
(13) Inasmuch as Lender has had its own counsel in
connection with the transactions contemplated by the
Loan Documents, I have relied upon, and the opinions
set forth below are subject to, the correctness of my
understanding that the Lender's counsel has knowledge
of no fact or circumstance that makes any of the
opinions expressed herein incorrect.
(14) Any reference in the opinion to "the best of my
knowledge" or any similar phrase, shall mean and
refer solely to my present actual knowledge in the
representation of the Borrower and its Affiliates.
This opinion is furnished to you in connection with the
transactions contemplated by the Credit Agreement and related
documents executed on August 31, 1998 and may not be relied
upon in connection with any other transaction or by any person
other than you and your counsel or furnished to any other
person without our express written consent. No opinion is
expressed herein as to the effect of any future acts of the
parties or changes in existing law. I undertake no
responsibility to advise you of any changes after the date
hereof in the law or the facts presently in effect that would
alter the scope or substance of the opinions herein addressed.
Very truly yours,
Chris Kaitson, as General Counsel of
Midcoast Energy Resources, Inc. and its Affiliates
EXHIBIT V
DISCLOSURES
Section 5.8 Liabilities
None
Litigation
None
Section 5.10 Compliance
Section 5.12 Environmental Matters
None
Section 5.17
Refunds
None
Section.5.19
Casualties
None
Section 5.21
Subsidiaries
Magnolia Pipeline
Corporation
H&W Pipeline Corporation
Magnolia Resources, Inc.
Magnolia Gathering, Inc.
Midcoast Holdings No. One,
Inc.
Midcoast Gas Pipeline, Inc.,
a Texas corporation
Midcoast Gas Pipeline, Inc.,
a Delaware corporation
Midcoast Marketing, Inc.
(inactive) Nugget
Drilling Corporation (inactive)
Tennessee River Intrastate
Gas Company, Inc.
Mid Louisiana Gas Company
Creole Gas Pipeline
Corporation
Mid Louisiana Gas
Transmission Company
Midcoast Interstate
Transmission, Inc.
Midcoast Gas Services, Inc.
Midcoast Energy Marketing,
Inc.
EXHIBIT VI
[SUBSIDIARY GUARANTOR COUNTERPART]
________________, 1998
To the Lenders and Administrative Agent Referenced Below
c/o Administrative Agent
____________________
_______, _______ ____
Ladies and Gentlemen:
Reference is made to the Amended and Restated Credit
Agreement dated as of August 31, 1998 (as modified,
supplemented, and in effect from time-to-time) (the "Credit
Agreement"), among Midcoast Energy Resources, Inc. (the
"Company"), the Subsidiary Guarantors defined therein, the
Lenders party thereto (the "Lenders"), Bank One, Texas,
National Association (the "Administrative Agent"), CIBC, Inc.
(the "Syndication Agent"), and NationsBank, N.A. (the
"Documentation Agent"). All capitalized terms used but not
defined herein shall have the meaning set forth in the Credit
Agreement.
The Company and ____________________, a ________ (the "New
Subsidiary Guarantor"):
(i) confirm that the New Subsidiary Guarantor is wholly
owned by the Company; and
(ii) make the representations and warranties as to
the New Subsidiary Guarantor contained in Article V
of the Credit Agreement.
The New Subsidiary Guaranty hereby:
(i) agrees to be bound in all respects by the terms
of the Credit Agreement;
(ii) ratifies and confirms the Guaranty with respect
to the Guaranteed Obligations (subject to the
provisions of Sections 8.4 and 8.5 of the Credit
Agreement; and
(iii) agrees to perform all of the obligations of
a Guarantor thereunder.
The address to which communications to the New Subsidiary
Guarantor under the Credit Agreement should be directed is the
address for the Company shown in Section 11.3 of the Credit
Agreement.
This instrument shall be construed in accordance with and
governed by the laws of the State of Texas.
Upon execution of this Subsidiary Guarantor Counterpart by
the Company and the New Subsidiary Guarantor and the acceptance
by the Administrative Agent, the New Subsidiary Guarantor shall
become a Guarantor under the Credit Agreement as though it were
an original party thereto.
Very truly yours,
MIDCOAST ENERGY RESOURCES,
INC.
By:
________________________________
Name:
__________________________
Title:
___________________________
NEW SUBSIDIARY GUARANTOR
By:
________________________________
Name:
__________________________
Title:
___________________________
ACCEPTED as of the date first above-written:
By: ________________________________
Name: __________________________
Title: ___________________________
AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
MIDCOAST ENERGY RESOURCES, INC.
AS BORROWER
SUBSIDIARIES OF THE BORROWER LISTED AS GUARANTORS HEREIN
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AS
ADMINISTRATIVE AGENT
CIBC, INC
AS
SYNDICATION AGENT
AND
NATIONSBANK, N.A.
AS
DOCUMENTATION AGENT
DATED AS OF AUGUST 31, 1998
$150,000,000 REVOLVING LINE OF CREDIT
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above 3
1.2 Additional Defined Terms 3
1.3 Undefined Financial Accounting Terms 17
1.4 References 17
1.5 Articles and Sections 17
1.6 Number and Gender 17
1.7 Incorporation of Exhibits 17
ARTICLE II
TERMS OF FACILITY
2.1 Loans 18
2.2 Letter of Credit Facility 18
2.3 Use of Loan Proceeds and Letters of Credit 19
2.4 Commitment Amount Increase 19
2.5 Interest 19
2.6 Repayment of Loans and Interest 20
2.7 Outstanding Amounts 20
2.8 Time, Place, and Method of Payments 20
2.9 Voluntary Prepayments and Conversions of
Loans 20
2.10 Arrangement Fee 21
2.11 Respective Agent's Fees 21
2.12 Commitment Fees 21
2.13 Facility Fees 21
2.14 Letter of Credit Fees 22
2.15 Loans to Satisfy Obligations of Borrower 22
2.16 Security Interest in Accounts: Right of
Offset 22
2.17 General Provisions Relating to Interest 23
2.18 Limitation on Types of Loans 24
2.19 Illegality 24
2.20 Regulatory Change 24
2.21 Limitations on Interest Periods 25
ARTICLE III
STATUS OF LOANS; WAIVER
3.1 Status of Loans 26
3.2 Waiver 26
ARTICLE IV
CONDITIONS
4.1 Receipt of Loan Documents and Other Items 27
4.2 Each Loan and Letter of Credit 30
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Due Authorization 32
5.2 Corporate Existence 32
5.3 Valid and Binding Obligations 32
5.4 Security Instruments 32
5.5 Title to Assets 32
5.6 Scope and Accuracy of Financial Statements 32
5.7 No Material Misstatements 33
5.8 Liabilities, Litigation, and Restrictions 33
5.9 Authorizations; Consents 33
5.10 Compliance with Laws 33
5.11 ERISA 33
5.12 Environmental Laws 34
5.13 Compliance with Federal Reserve Regulations 34
5.14 Investment Company Act Compliance 34
5.15 Public Utility Holding Company Act Compliance 35
5.16 Proper Filing of Tax Returns, Payment of
Taxes Due 35
5.17 Refunds 35
5.18 Intellectual Property 35
5.19 Casualties or Taking of Property 35
5.20 Locations of Borrower 35
5.21 Locations of Subsidiaries 35
5.22 Subsidiaries 36
5.23 Purchase Agreement 36
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1 Maintenance and Access to Records 37
6.2 Quarterly Financial Statements; Compliance
Certificates 37
6.3 Annual Financial Statements 37
6.4 Year 2000 Compliance 37
6.5 Notices of Certain Events 37
6.6 Additional Information 38
6.7 Compliance with Laws 39
6.8 Payment of Assessments and Charges 39
6.9 Maintenance of Corporate Existence and Good
Standing 39
6.10 Payment of Notes; Performance of Obligations 39
6.11 Further Assurances 39
6.12 Initial Fees and Expenses of Counsel to
Administrative Agent 40
6.13 Subsequent Fees and Expenses of
Administrative Agent 40
6.14 Operation of Properties 40
6.15 Maintenance and Inspection of Properties 40
6.16 Maintenance of Insurance 40
6.17 Additional Subsidiaries 41
6.18 INDEMNIFICATION 41
ARTICLE VII
NEGATIVE COVENANTS
7.1 Indebtedness 43
7.2 Contingent Obligations 43
7.3 Liens 43
7.4 Sales of Assets 43
7.5 Leasebacks 43
7.6 Loans or Advances 43
7.7 Investments 44
7.8 Dividends and Distributions 44
7.9 Issuance of Stock; Changes in Corporate
Structure 44
7.10 Transactions with Affiliates 44
7.11 Lines of Business 45
7.12 ERISA Compliance 45
7.13 Cash Flow Coverage 45
7.14 Total Debt 45
7.15 Current Ratio 45
7.16 Tangible Net Worth 45
ARTICLE VIII
GUARANTY
8.1 Guaranty 46
8.2 Continuing Guaranty 46
8.3 Effect of Debtor Relief Laws 49
8.4 General Limitation on Guaranteed Obligations 49
8.5 Rights of Contribution 49
8.6 Subrogation 50
8.7 Subordination 50
8.8 Waiver 51
8.9 Full Force and Effect 51
ARTICLE IX
EVENTS OF DEFAULT
9.1 Enumeration of Events of Default 52
9.2 Remedies 53
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1 Authorization and Action 55
10.2 Administrative Agent's Reliance 55
10.3 Administrative Agent and Affiliates; Bank One
and Affiliates 56
10.4 Lender Credit Decision 56
10.5 Administrative Agent's Indemnity 56
10.6 Successor Administrative Agent 57
10.7 Notice of Default 58
ARTICLE XI
MISCELLANEOUS
11.1 Transfers; Participations 59
11.2 Survival of Representations, Warranties, and
Covenants 59
11.3 Arbitration Provision 59
11.4 Intentionally Omitted 60
11.5 Notices and Other Communications 60
11.6 Parties in Interest 61
11.7 Rights of Third Parties 61
11.8 Renewals; Extensions 61
11.9 No Waiver; Rights Cumulative 61
11.10 Survival Upon Unenforceability 61
11.11 Amendments; Waivers 61
11.12 Controlling Agreement 61
11.13 Disposition of Collateral 62
11.14 Pro Rata Treatment 62
11.15 No Control 62
11.16 GOVERNING LAW 62
11.17 JURISDICTION AND VENUE 63
11.18 ENTIRE AGREEMENT 63
11.19 Counterparts 63
_______________________________
1DOCUMENT MARKED FOR AUTO PARA NUMBERING LEVEL 1 = I, LEVEL 2 =
.1, LEVEL 3 = (a) AND LEVEL 4 = (i); ALSO MARKED FOR AUTO TABLE
OF CONTENTS ON 2 LEVELS
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0
0
<COMMON> 57,000
<OTHER-SE> 65,519,000
<TOTAL-LIABILITY-AND-EQUITY> 163,980,000
<SALES> 167,185,000
<TOTAL-REVENUES> 167,185,000
<CGS> 151,357,000
<TOTAL-COSTS> 157,912,000
<OTHER-EXPENSES> (86,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,043,000
<INCOME-PRETAX> 7,316,000
<INCOME-TAX> 1,247,000
<INCOME-CONTINUING> 6,069,000
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,069,000
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.03
</TABLE>
