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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8094
Seagull Energy Corporation
(Exact name of registrant as specified in its charter)
Texas 74-1764876
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
1001 Fannin, Suite 1700
Houston, Texas 77002-6714
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (713) 951-4700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $.10 per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
As of March 9, 1998, the aggregate market value of the outstanding shares
of Common Stock of the Company held by non-affiliates (based on the closing
price of these shares on the New York Stock Exchange) was approximately
$997,089,000.
As of March 9, 1998, 63,021,232 shares of Common Stock, par value $0.10 per
share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
(1) Annual Report to Shareholders for PARTS I and II
year ended December 31, 1997
(2) Proxy Statement for Annual Meeting PART III
of Shareholders to be held on May 13, 1998
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<PAGE>
<TABLE>
<CAPTION>
Index
Page
Part I
<S> <C> <C>
Item 1. Business:
Oil and Gas Operations............................................... 1
Alaska Transmission and Distribution................................. 13
Corporate............................................................ 16
Environmental Matters................................................ 17
Employees............................................................ 19
Executive Officers of the Company.................................... 20
Item 2. Properties....................................................... 21
Item 3. Legal Proceedings................................................ 21
Item 4. Submission of Matters to a Vote of Security Holders.............. 22
Part II
Item 5. Market for Registrant's Common Stock and Related Shareholder
Matters................................................. 22
Item 6. Selected Financial Data.......................................... 23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................... 23
Item 8. Financial Statements and Supplementary Data...................... 23
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................... 23
Part III
Item 10. Directors and Executive Officers of the Registrant.............. 23
Item 11. Executive Compensation.......................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 24
Item 13. Certain Relationships and Related Transactions.................. 24
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 24
Signatures................................................................ 29
</TABLE>
<PAGE>
PART I
Item 1. Business
Seagull Energy Corporation (the "Company" or "Seagull") is an international
oil and gas company engaged primarily in exploration and development activities
in the United States, Egypt, Cote d'Ivoire, Indonesia and the Russian Republic
of Tatarstan. The Company also transports, distributes and markets natural gas,
liquids products and petrochemicals. Seagull's long-range goal is to grow its
reserve base and its crude oil and natural gas production capacity. The Company
seeks a balanced approach of growing through its internal drilling efforts
complemented by strategic acquisitions of additional oil and gas assets in its
core operating areas. The Company's desire to grow more through internal
drilling has led it to broaden its exploration focus beyond the Gulf Coast
offshore area where Seagull originally concentrated its exploration efforts.
Seagull also has endeavored to bring more balance to its mix of crude oil and
natural gas assets, thereby lessening its dependence upon natural gas and
increasing (i) the percentage of crude oil represented in the Company's total
portfolio of proved reserves, (ii) its capacity to produce those reserves, and
(iii) the international orientation of its reserve base. To these ends, the
Company completed two business combinations in 1996 that reflect this shift in
strategy - the purchase of two Egyptian concessions from Exxon Corporation and
the merger of Global Natural Resources Inc.
These business combinations brought a substantial number of exploratory
prospects to the Company, complementing its large portfolio of long-lived
domestic natural gas producing properties and its large, stable cash flow base
generated from oil and gas sales and non-exploration and production activities.
These combinations have increased the Company's ability to generate growth in
both its proved reserves and its crude oil and natural gas production capacity.
For financial information relating to industry segments, see Note 13 of
Notes to Consolidated Financial Statements of Seagull Energy Corporation and
Subsidiaries (the "Consolidated Financial Statements") included in the Company's
1997 Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Items 1, 3 and 7 of this document include forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Although Seagull
believes that such forward-looking statements are based on reasonable
assumptions, it can give no assurance that its expectations will in fact occur.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements include political developments in
foreign countries, federal and state regulatory developments, the timing and
extent of changes in commodity prices, the timing and extent of success in
discovering, developing and producing or acquiring oil and gas reserves, the
availability of skilled personnel, materials and equipment, operating hazards
attendant to the industry and conditions of the capital and equity markets
during the periods covered by the forward-looking statements.
OIL AND GAS OPERATIONS
Revenues from the Oil and Gas Operations ("O&G") segment accounted for 83%,
81% and 76% of the Company's consolidated revenues for 1997, 1996 and 1995,
respectively. Production of gas and liquids for 1997 averaged 357 MMcf per day
("Mcf/d") and 20,711 Bbl per day ("Bbl/d"), respectively, compared to 392 MMcf/d
and 13,409 Bbl/d, respectively, in 1996. Oil production in 1997 increased from
the prior year primarily as a result of increased production in Egypt. In
October 1997, the
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<PAGE>
Company sold all of its Canadian oil and gas operations. In September 1995, the
Company sold substantially all of its gas gathering and processing assets. With
the sale of the gas gathering and processing assets, Seagull's former
Exploration and Production segment and the Pipeline and Marketing segment were
reclassified into Oil and Gas Operations.
Seagull's principal oil and gas producing areas include the following:
<TABLE>
<CAPTION>
Proved Reserves at December 31, 1997
--------------------------------------------------------------------------------------
Gas (MMcf) (1) Oil (Mbbl) (2) MBOE (3)
-------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
UNITED STATES:
Arkoma Basin.................. 169,318 1 28,221
Arklatex Area................. 306,520 7,233 58,320
Mid-Continent Area............ 180,171 7,329 37,358
Offshore Gulf of Mexico....... 84,441 2,757 16,830
Gulf Coast Onshore............ 34,234 722 6,427
Other......................... 5,362 499 1,393
-------------------------- ------------------------- -------------------------
780,046 18,541 148,549
EGYPT:
East Beni Suef................ - 3,368 3,368
East Zeit..................... - 15,760 15,760
Qarun......................... 1,786 12,098 12,396
South Hurghada................ - 2,647 2,647
West Abu Gharadig............. - 1,130 1,130
-------------------------- ------------------------- -------------------------
1,786 35,003 35,301
COTE D'IVOIRE................... 24,835 1,212 5,351
TATARSTAN....................... - 16,455 16,455
INDONESIA....................... 61,324 1,074 11,294
-------------------------- ------------------------- -------------------------
867,991 72,285 216,950
========================== ========================= =========================
</TABLE>
(1) Gas is stated in million cubic feet ("MMcf"). It may also be stated herein
in billion cubic feet ("Bcf"), or thousand cubic feet ("Mcf").
(2) Oil,condensate and natural gas liquids ("NGL") are stated in thousands of
barrels ("Mbbl"). It may also be stated herein in barrels ("Bbl"). As used
in this Annual Report on Form 10-K, liquids means oil, condensate and
natural gas liquids, unless otherwise indicated or the context otherwise
suggests.
(3) MBOE and BOE represent one thousand barrels of oil equivalent and one
barrel of oil equivalent, respectively, with six Mcf of gas converted to
one barrel of liquid.
For additional information relating to the Company's oil and gas reserves,
based substantially upon reports of DeGolyer and MacNaughton, Netherland, Sewell
& Associates, Inc. and Ryder Scott Company, independent petroleum engineers
(collectively the "Engineers"), see Note 15 of Notes to Consolidated Financial
Statements included in the Company's 1997 Annual Report to Shareholders and as
part of Exhibit 13 attached hereto. All information in Note 15 not provided by
the Engineers was supplied by the Company. The Company's reserve estimates in
Indonesia have been obtained from a public source which, although not
independently verified, the Company believes to be reliable. As required,
Seagull also files estimates of oil and gas reserve data with various
governmental regulatory authorities and agencies. These estimates were not
materially different from the reserve estimates reported in the Consolidated
Financial Statements.
The future results of the O&G segment will be affected by the market prices
of oil and natural gas and the Company's exploration and exploitation success.
The availability of a ready market for oil, natural gas and liquids products in
the future will depend on numerous factors beyond the control of the Company,
including weather, the Company's ability to hire and retain skilled personnel,
production of other crude oil, natural gas and liquids products, imports,
marketing of competitive fuels, proximity and capacity of oil, gas and liquids
pipelines and other transportation facilities, demand for storage refills,
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<PAGE>
any oversupply or undersupply of gas and liquids products, operating hazards
attendant to the oil and gas business, the availability and cost of material and
equipment, the regulatory environment and other regional, international and
political events, none of which can be predicted with certainty.
United States
In excess of 65% of the Company's proved oil and gas reserves and annual
production are contributed by properties in the United States. These domestic
properties are generally located in three geographic areas -- the Mid-South,
Mid-Continent and Gulf Coast regions. The Company's capital program for 1998 is
designed to maintain domestic reserves and deliverability at approximately
year-end 1997 levels. In addition, Seagull will continue to pursue strategic
acquisitions to increase its domestic reserves and deliverability. Capital
expenditures, excluding any acquisitions, for the Company's domestic activities
are expected to be approximately $151 million for 1998, including $47 million
for exploration, $83 million for development and $21 million for leasehold.
Mid-South -- The CompanY's Mid-South properties are situated generally in
the Arkoma Basin of eastern Oklahoma and western Arkansas and the Arklatex area
of east Texas and northwest Louisiana. The Company's interests in Mid-South
provide production from long-lived assets where ongoing activities are devoted
principally to exploitation. These development activities in 1997 were
particularly successful in the Arkoma Basin of western Arkansas with the
completion of 13 successful development wells. The Company's 3-D seismic survey
in this area was one of the earliest 3-D applications to be attempted in this
relatively mature part of the Arkoma Basin. It has been successful in
identifying untested reservoirs and new pay intervals. Capital expenditures in
the Mid-South region for 1998 are expected to be near 1997's $51 million and
will continue to focus on 3-D seismic surveys and development activities.
Mid-Continent -- The Company's Mid-Continent properties are situated
generally in the Anadarko Basin of the Texas Panhandle and western Oklahoma. The
Mid-Continent region also provides production from long-lived assets where
ongoing activities are devoted principally to exploitation. Capital expenditures
in this region during 1997, which totaled $19 million, were devoted primarily to
development activities. Plans for 1998 call for a somewhat lower level of
capital spending but it will again be focused on developing existing reserves
through drilling and 3-D seismic surveys.
Gulf Coast -- The Company's Gulf Coast properties are located onshore in
south Texas and south Louisiana and offshore in the Gulf of Mexico off the
coasts of the same two states. Both exploration and exploitation activities are
conducted in this region. In 1997, the Company purchased its first interests in
the Deep Water Gulf of Mexico play where the Company plans to be an active
participant in the future. Seagull also completed two successful exploratory
wells in the Frio/Wilcox play in a tertiary trend in onshore Texas. These two
exploratory wells confirmed the Lower Wilcox can be highly productive. The
second well, the Zeidman Trust #2, tested nearly 22 MMcf/d of natural gas with
very strong pressures from the bottom third of a 1,500-foot Lower Wilcox
interval.
The Company has been evaluating the Zeidman Trust #2 since its completion,
observing flow rates and pressures and dealing with mechanical problems while
formulating plans for further drilling in 1998. The Company has a 45% interest
in some 16,000 acres in the immediate vicinity of the discovery.
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<PAGE>
During 1997, Seagull's capital expenditures totaled some $71 million in the
Gulf Coast region, primarily for exploratory wells but also for development
drilling and the acquisition of offshore leases. Plans for 1998 will continue
this focus on exploratory drilling but once again will have some development
drilling and acquisition of offshore leases.
Egypt
The Company's Egyptian operations consist of working interests in six
concessions -- Qarun, East Beni Suef, East Zeit, South Hurghada, West Abu
Gharadig and Darag. The interest in West Abu Gharadig was purchased in 1997
while the East Zeit and South Hurghada interests were purchased in 1996. The
Company's interests in Qarun, East Beni Suef and Darag were acquired in the
Global merger. With 1997 production of 3,383 MBOE, the Company's Egyptian assets
contributed approximately 12% of total production. Capital expenditures for 1997
were approximately $83 million in Egypt and are expected to be $94 million in
1998.
Each concession is governed by a concession agreement (collectively, the
"Egyptian Concession Agreements") between the working interest partners and the
Egyptian national oil company ("EGPC"). Under the Egyptian Concession
Agreements, the working interest partners pay 100% of capital and operating
costs and production is split between EGPC and the working interest partners.
Working interest partners recover costs from a percentage, ranging from 25% to
40% depending upon the concession, of the oil and gas produced and sold from the
applicable concession ("Cost Recovery Petroleum"). Cost Recovery Petroleum forms
a single unified pool for the entire concession from which costs of all fields,
zones, products and types may be recovered without differentiation, except that
operating costs are recovered prior to the recovery of any capital costs.
Capital costs (which include exploration, development and other equipment and
facilities costs) are amortized for recovery over four to five years while
operating expenses are recoverable on a current basis. To the extent that the
costs eligible for recovery in any quarter exceed the amount of Cost Recovery
Petroleum produced and sold in that quarter, such costs are recoverable from
Cost Recovery Petroleum in future quarters with no limit on the ability to carry
forward such costs.
The remaining oil and gas produced and sold is divided between EGPC and the
working interest partners. Depending on the concession and varying with
production levels, the working interest partners receive 12% to 30% of the
remaining oil and up to 29% of the remaining gas. Included in EGPC's share of
this remaining oil or gas are all Egyptian government royalties as well as the
applicable Egyptian income taxes of the working interest partners.
Qarun -- The Company has a 25% non-operated working interest in the Qarun
Concession Agreement. The concession covers approximately 1.9 million gross
acres located 45 miles southwest of Cairo, Egypt. Initial oil production, via
trucking, began in late 1995 while conventional production facilities became
fully operational in 1997. With the completion of these production facilities,
Qarun became one of the Company's largest producing concessions. While 1998
capital expenditures are expected to decrease significantly from 1997's $35
million due to the completion of the production facilities, the expenditures
will continue to be split between additional exploratory wells, seismic work and
development activities.
East Beni Suef -- Seagull, as the operator, has a 50% working interest in
the East Beni Suef Concession Agreement. The concession covers approximately 6.8
million gross acres lying adjacent and
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<PAGE>
to the south of the Qarun concession. Thefirst exploratory well was successfully
completed in late 1997 and the Company expects to begin trucking production in
the first half of 1998.
East Zeit -- The Company, as the operator, has a 100% working interest in
the East Zeit concession which is located offshore in the Gulf of Suez. The
Company acquired its interest primarily as a producing concession and it
continues to be one of the largest producing concessions among the Company's
Egyptian interests. With this emphasis on production, capital expenditures of
approximately $27 million in 1997 were concentrated in development wells and
activities and capital expenditures are expected to be in this same range for
1998.
South Hurghada -- Seagull, as the operator, has a 100% working interest in
the 61,000-acre concession, located onshore on the coast of the Gulf of Suez
approximately 250 miles south of Cairo. After the completion of two successful
exploratory wells in mid-1997, oil production was trucked to the nearby East
Zeit production terminal. While the 1997 capital expenditures of $10 million
were concentrated on exploratory drilling, expected 1998 capital expenditures of
about this same amount will reflect the beginning of development activities.
West Abu Gharadig -- In October 1997, the Company purchased a 30%
non-operating working interest in the West Abu Gharadig concession, covering 3.5
million gross acres in upper Egypt. While three exploratory wells were producing
by year-end, the Company has identified more than 10 exploratory leads. Seagull
expects exploratory drilling will continue in this concession in 1998 or 1999.
Darag -- The Company has a 50%, non-operated working interest in the Darag
block, which is located in the northern portion of the Gulf of Suez, and covers
460,000 gross acres. Future plans for this concession are uncertain as the
working interest owners and EGPC have been unable to secure the necessary
drilling permits from marine authorities. At the end of 1997, Seagull had
approximately $5 million in capitalized costs associated with this concession.
The working interest owners and EGPC are discussing ways for the working
interest owners to recover the costs associated with the Darag concession,
however, there can be no guarantee that these discussions will be successful in
recovering the costs of the working interest owners.
Cote d'Ivoire
Seagull's operations in Cote d'Ivoire, West Africa consist of working
interests in three blocks- CI-11, CI-12 and CI-104. The CI-11 concession, where
the Company has a nearly 13% unitized working interest, extends from the western
coast to approximately eight miles offshore Cote d'Ivoire. The Company has an
almost 17% working interest in CI-12, which lies adjacent to and west of block
CI-11, and a 100% working interest in block CI-104, which lies adjacent to and
west of block CI-12.
Each block is subject to a production sharing contract whereby the working
interest partners pay 100% of capital and operating costs, and production is
split between the Ivorian government and the working interest partners. Working
interest partners recover costs from a percentage, ranging from 40% to 75%
depending upon the concession, of produced and sold petroleum. The remaining oil
and gas produced and sold, and any portion of cost recovery not used to recover
costs, is divided between the Ivorian government and the working interest
partners. Included in the Ivorian government's share of remaining petroleum are
all Ivorian government royalties as well as the applicable Ivorian income taxes
for the working interest partners.
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<PAGE>
Tatarstan
Through its 90% owned subsidiary, Texneft, the Company has a net 45%
interest in a joint venture in Tatarstan, a republic in the Russian Federation
located west of the Ural Mountains and east of the Volga River. The joint
venture is with Tatneft, a Russian closed joint stock company. The joint
venture, Tatex, operates various oil fields in Tatarstan. Under the terms of the
joint venture and various supplemental agreements, the funding for the joint
venture is supplied by Texneft and Tatneft through various credit agreements.
The joint venture's activities currently include three projects: (i) vapor
recovery, (ii) the development and operation of the Onbysk field, near the city
of Almetyevsk, and (iii) the upcoming development and operation of the Demkinsky
field, located 110 kilometers southwest of Almetyevsk. Texneft's share of
capital spending for 1998 is approximately $8 million, primarily for development
drilling and facilities.
Indonesia
Seagull has a 1.7% interest in the Indonesia Joint Venture ("IJV") for the
exploration, development and production of oil and gas in East Kalimantan,
Indonesia, under a production sharing contract with the state petroleum
enterprise of Indonesia ("Pertamina"). The majority of the revenue derived from
the IJV results from the sale of liquefied natural gas ("LNG"). Under the terms
of the PSC with Pertamina, the IJV is authorized to explore for, develop and
produce petroleum reserves in an approximately 1.1 million acre area in East
Kalimantan.
The IJV participants are entitled to recover cumulative operating and
certain capital costs out of the oil and gas produced each year, and to receive
a share of the remaining oil production and a share of the remaining revenues
from the sale of gas on an after Indonesian tax basis.
Oil and Gas Drilling Activities
Seagull's oil and gas exploratory and developmental drilling activities are
as follows for the periods indicated. A well is considered productive for
purposes of the following table if it justifies the installation of permanent
equipment for the production of oil or gas. The term "gross wells" means the
total number of wells in which Seagull owns an interest, while the term "net
wells" means the sum of the fractional working interests Seagull owns in gross
wells. The information should not be considered indicative of future
performance, nor should it be assumed that there is necessarily any correlation
between the number of productive wells drilled, quantities of reserves found or
economic value.
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<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------------
1997 1996 1995
---------------------- ---------------------- -----------------------
Gross Net Gross Net Gross Net
--------- --------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES:
Exploratory Drilling:
Productive Wells................. 18 9.5 14 6.2 9 5.7
Dry Holes........................ 12 4.2 15 6.6 14 7.5
Development Drilling:
Productive Wells................. 142 73.9 123 54.2 64 29.0
Dry Holes........................ 12 6.3 13 8.2 4 1.1
CANADA: (*)
Exploratory Drilling:
Productive Wells................. 3 1.7 5 0.8 3 1.0
Dry Holes........................ 1 1.0 2 2.0 3 3.0
Development Drilling:
Productive Wells................. 57 28.9 17 8.6 7 1.9
Dry Holes........................ 1 0.3 2 1.5 1 0.5
EGYPT:
Exploratory Drilling:
Productive Wells................. 4 2.8 2 0.5 2 0.5
Dry Holes........................ 11 3.0 5 1.3 1 0.3
Development Drilling:
Productive Wells................. 14 3.5 14 3.5 4 1.0
Dry Holes........................ - - - - 1 0.3
COTE D'IVOIRE:
Exploratory Drilling:
Productive Wells................. 1 0.1 2 0.3 - -
Dry Holes........................ 2 0.3 1 0.1 - -
Development Drilling:
Productive Wells................. 3 0.4 1 0.1 4 0.6
Dry Holes........................ - - - - - -
TATARSTAN:
Exploratory Drilling:
Productive Wells................. 1 0.5 - - 1 0.5
Dry Holes........................ - - - - - -
Development Drilling:
Productive Wells................. 21 10.5 20 10.0 17 8.5
Dry Holes........................ - - - - - -
OTHER INTERNATIONAL:
Exploratory Drilling:
Productive Wells................. - - - - - -
Dry Holes........................ 1 0.2 - - 2 0.4
TOTAL:
Exploratory Drilling:
Productive Wells................. 27 14.6 23 7.8 14 7.2
Dry Holes........................ 27 8.7 23 10.0 21 11.7
Development Drilling:
Productive Wells................. 237 117.2 175 76.4 96 41.0
Dry Holes........................ 13 6.6 15 9.7 6 1.9
</TABLE>
(*) All of the Company's Canadian oil and gas operations were sold in October
1997.
The Company had 14 gross (4.3 net) exploratory wells and 12 gross (5.5 net)
development wells in progress at December 31, 1997. Wells classified as "in
progress" at year-end represent wells where drilling activity is ongoing, wells
awaiting installation of permanent equipment and wells awaiting the drilling of
additional delineation wells.
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Production
The following table summarizes the Company's production, average sales
prices and operating costs for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1997 1996 1995
---------------- ----------------- --------------
<S> <C> <C> <C>
UNITED STATES:
Net Production:
Gas (MMcf)................................................ 110,595 116,238 113,482
Oil, condensate and NGL (Mbbl)............................ 1,763 1,561 1,403
Average sales price: (1)
Gas (per Mcf)............................................. $ 2.34 $ 2.17 $ 1.62
Oil, condensate and NGL (per Bbl)......................... $ 17.60 $ 19.03 $ 15.84
Average operating costs (per BOE) (2)....................... $ 3.75 $ 3.27 $ 3.04
CANADA:(3)
Net Production:
Gas (MMcf)................................................ 13,510 21,203 22,057
Oil, condensate and NGL (Mbbl)............................ 243 361 399
Average sales price: (1)
Gas (per Mcf)............................................. $ 1.63 $ 1.32 $ 1.07
Oil, condensate and NGL (per Bbl)......................... $ 16.46 $ 16.77 $ 13.01
Average operating costs (per BOE) (2)....................... $ 3.42 $ 3.57 $ 3.17
EGYPT:
Net Oil Production (Mbbl)................................... 3,383 1,305 25
Average Oil Sales Price (per Bbl) (1)....................... $ 18.26 $ 21.56 $ 17.97
Average operating costs (per BOE) (2)....................... $ 3.46 $ 4.45 $ 2.24
COTE D'IVOIRE:
Net Production:
Gas (MMcf)................................................ 2,245 1,445 203
Oil (Mbbl)................................................ 603 511 261
Average sales price: (1)
Gas (per Mcf)............................................. $ 1.93 $ 1.77 $ 1.61
Oil (per Bbl)............................................. $ 19.34 $ 20.04 $ 15.51
Average operating costs (per BOE) (2)....................... $ 3.95 $ 3.56 $ 4.75
TATARSTAN:
Net Oil Production (Mbbl)................................... 1,512 1,117 1,062
Average Oil Sales Price (per Bbl) (1)....................... $ 14.26 $ 13.98 $ 15.11
Average operating costs (per BOE) (2)....................... $ 9.25 $ 10.17 $ 8.35
INDONESIA AND OTHER:
Net Production:
Gas (MMcf)................................................ 3,965 4,429 3,933
Oil (Mbbl)................................................ 56 51 45
Average sales price: (1)
Gas (per Mcf)............................................. $ 3.18 $ 3.36 $ 2.96
Oil (per Bbl)............................................. $ 19.31 $ 19.58 $ 17.38
Average operating costs (per BOE ) (2)...................... - - -
</TABLE>
(1) Average sales prices are before deduction of production, severance, and
other taxes.
(2) Operating costs represent costs incurred to operate and maintain wells and
related equipment and facilities. These costs include, among other things,
repairs and maintenance, workover expenses, labor, materials, supplies,
property taxes, insurance, severance taxes, transportation costs and
general operating expenses.
(3) All of the Company's Canadian oil and gas operations were sold in October
1997.
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<PAGE>
The following table sets forth information regarding the number of
productive wells in which the Company held a working interest at December 31,
1997. Productive wells are either producing wells or wells capable of commercial
production although currently shut-in. One or more completions in the same
borehole are counted as one well.
<TABLE>
<CAPTION>
Gross Wells Net Wells
----------------------------------------------- ----------------------------------------------------
Multiple Multiple
Gas Oil Total Completions Gas Oil Total Completions
--------- --------- --------- -------------- ---------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States.... 2,641 1,713 4,354 264 1,074.5 185.4 1,259.9 144.0
Egypt............ - 52 52 11 - 24.4 24.4 2.8
Cote d'Ivoire.... 2 11 13 2 0.3 1.4 1.7 0.3
Tatarstan........ - 196 196 57 - 98.0 98.0 28.5
--------- --------- --------- -------------- ---------- -------- ---------- ---------------
2,643 1,972 4,615 334 1,074.8 309.2 1,384.0 175.6
========= ========= ========= ============== ========== ======== ========== ===============
</TABLE>
Developed and Undeveloped Oil and Gas Acreage
As of December 31, 1997, the Company owned working interests in the
following developed and undeveloped oil and gas acreage:
<TABLE>
<CAPTION>
Developed Undeveloped
--------------------------------------- --------------------------------------
Gross Net (*) Gross Net (*)
---------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
UNITED STATES:
Onshore:
Oklahoma..................... 278,753 130,038 25,215 12,735
Texas........................ 208,133 101,987 111,748 33,851
Arkansas..................... 210,071 71,225 12,645 8,177
Louisiana.................... 44,663 21,905 5,765 2,809
Montana...................... 1,175 228 161,306 147,928
Other........................ 28,397 9,882 57,291 27,686
Bays and State Waters.......... 2,609 722 9,618 6,402
Federal Offshore:
Texas........................ 156,379 64,071 309,402 214,020
Louisiana.................... 59,675 28,991 250,426 139,919
EGYPT:
Darag.......................... - - 459,606 229,803
East Beni Suef................. - - 6,819,960 3,409,980
East Zeit...................... 6,672 6,672 - -
Qarun.......................... 407,213 101,803 1,080,130 270,033
South Hurghada................. 26,934 26,934 34,627 34,627
West Abu Gharadig.............. 15,419 4,626 4,725,615 1,417,684
COTE D'IVOIRE:
CI-11.......................... 11,860 1,537 180,329 23,443
CI-12.......................... - - 393,634 65,618
CI-104......................... - - 250,300 250,300
TATARSTAN........................ 12,630 6,315 12,107 6,053
INDONESIA........................ 97,000 1,663 1,156,780 19,827
OTHER INTERNATIONAL.............. - - 2,790,298 395,615
---------------- --------------- --------------- --------------
1,567,583 578,599 18,846,802 6,716,510
================ =============== =============== ==============
</TABLE>
(*) When describing acreage on drilling locations, the term "net" refers to the
total acres on drilling locations in which the Company has a working
interest, multiplied by the percentage working interest owned by the
Company.
Additionally, as of December 31, 1997, the Company owned mineral and/or
royalty interests in 591,032 gross (41,334 net) developed and 2,846,585
gross (105,751 net) undeveloped oil and gas acres, located primarily in the
United States.
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For additional information relating to oil and gas producing activities,
see Note 15 of Notes to the Consolidated Financial Statements included in the
Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached
hereto.
Regulation
The availability of a ready market for oil and natural gas production
depends upon numerous regulatory factors beyond the Company's control. These
factors include regulation of oil and natural gas production, federal and state
regulations governing environmental quality and pollution control and state
limits on allowable rates of production by a well or proration unit. State and
federal regulations generally are intended to prevent waste of oil and natural
gas, protect rights to produce oil and natural gas between owners in a common
reservoir, control the amount of oil and natural gas produced by assigning
allowable rates of production and control contamination of the environment.
Regulation of Oil and Natural Gas Exploration and Production. Exploration
and production operations of the Company are subject to various types of
regulation at the federal, state and local levels. Such regulation includes
requiring permits for the drilling of wells, maintaining bonding requirements in
order to drill or operate wells, and regulating the location of wells, the
method of drilling and casing wells, the surface use and restoration of
properties upon which wells are drilling and the plugging and abandonment of
wells. The Company's operations are also subject to various conservation laws
and regulations. These include the regulation of the size of drilling and
spacing units or proration units and the density of wells which may be drilled
and unitization or pooling of oil and gas properties. In this regard, some
states allow the forced pooling or integration of tracts to facilitate
exploration while other states rely on voluntary pooling of lands and leases. In
addition, state conservation laws establish maximum rates of production
requirements regarding the ratability of production.
Natural Gas Marketing and Transportation. Although maximum selling prices
of natural gas were formerly regulated, the Natural Gas Wellhead Decontrol Act
of 1989 ("Decontrol Act") terminated wellhead price controls on all domestic
natural gas on January 1, 1993, and amended the Natural Gas Policy Act of 1978
to remove completely by January 1, 1993 price and nonprice controls for all
"first sales" of natural gas, which will include all sales by the Company of its
own production. Consequently, sales of the Company's natural gas currently may
be made at market prices, subject to applicable contract provisions. The
jurisdiction of the Federal Energy Regulatory Commission (the "FERC") over
natural gas transportation was unaffected by the Decontrol Act.
The FERC regulates interstate natural gas transportation rates and service
conditions, which affect the marketing of natural gas produced by the Company,
as well as the revenues received by the Company for sales of such natural gas.
Since the latter part of 1985, the FERC has endeavored to make interstate
natural gas transportation more accessible to gas buyers and sellers on an open
and nondiscriminatory basis. The FERC's efforts have significantly altered the
marketing and pricing of natural gas. Commencing in April 1992, the FERC issued
Order Nos. 636, 636-A and 636-B (collectively, "Order No. 636"), which, among
other things, require interstate pipelines to "restructure" to provide
transportation separate or "unbundled" from the pipelines' sales of gas. Also,
Order No. 636 requires pipelines to provide open-access transportation on a
basis that is equal for all gas supplies.
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<PAGE>
Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress, the FERC, state
regulatory bodies and the courts. The Company cannot predict when or if any such
proposals might become effective, or their effect, if any, on the Company's
operations. The natural gas industry historically has been very heavily
regulated; therefore, there is no assurance that the less stringent regulatory
approach recently pursued by the FERC and Congress will continue indefinitely
into the future. State regulation of gathering facilities generally includes
various transportation, safety, environmental, and nondiscriminatory purchase
and transport requirements, but does not generally entail rate regulation.
Offshore Leasing. Certain operations the Company conducts are on federal
oil and gas leases, which the Mineral Management Service ("MMS") administers.
The MMS issues such leases through competitive bidding. These leases contain
relatively standardized terms and require compliance with detailed MMS
regulations and orders pursuant to the Outer Continental Shelf Lands Act
("OCSLA") (which are subject to change by the MMS). For offshore operations,
lessees must obtain MMS approval for exploration plans and development and
production plans prior to the commencement of such operations. In addition to
permits required from other agencies (such as the Coast Guard, the Army Corps of
Engineers and the Environmental Protection Agency), lessees must obtain a permit
from the MMS prior to the commencement of drilling. The MMS has promulgated
regulations requiring offshore production facilities located on the Outer
Continental Shelf ("OCS") to meet stringent engineering and construction
specifications, and has recently proposed additional safety-related regulations
concerning the design and operating procedures for OCS production platforms and
pipelines. The MMS also has issued regulations to prohibit the flaring of liquid
hydrocarbons and oil without prior authorization. Similarly, the MMS has
promulgated other regulations governing the plugging and abandonment of wells
located offshore and the removal of all production facilities. To cover the
various obligations of lessees on the OCS, the MMS generally requires that
lessees post substantial bonds or other acceptable assurances that such
obligations will be met.
The MMS recently adopted a rule detailing the kinds of natural gas
marketing and transportation services that should be considered part of a
producer's duty to market. The rule, which is currently under appeal, may
prevent producers from deducting from royalties the full cost of transporting
and marketing natural gas to the marketplace. The Company cannot predict how it
might be affected by this rule, or the disposition of such rule on appeal.
In addition, the MMS is conducting an inquiry into certain contract
settlement agreements from which producers on MMS leases have received
settlement proceeds that are royalty bearing and the extent to which producers
have paid the appropriate royalties on those proceeds. The restructuring of oil
and gas markets has resulted in a shifting of markets downstream from the wells.
Deregulation has altered the marketplace such that lessors, including the MMS,
are challenging the methods of valuation of gas for royalty purposes.
The MMS has issued a notice of proposed rulemaking in which it proposes to
amend its regulations governing the calculation of royalties and the valuation
of oil and natural gas produced from federal leases. The principal feature in
the amendments, as proposed, would establish an alternative market-index based
method to calculate royalties on certain natural gas production sold to
affiliates or pursuant to non-arms'-length sales contracts. The MMS has proposed
this rulemaking to facilitate royalty valuation in light of changes in the gas
marketing environment. The Company cannot predict what action the MMS will take
on these matters, nor can it predict at this stage of the rulemaking proceedings
how the Company might be affected by amendments to the regulations.
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<PAGE>
Pipeline, Marketing and Other
The Company's O&G segment also includes pipeline and marketing operations
involving (i) the transportation and marketing of Seagull's own and third-party
gas, oil and natural gas liquids; (ii) gas gathering and processing; and (iii)
pipeline engineering, design, construction and operation.
The Company actively provides marketing services geared toward matching gas
supplies available in the major producing areas with attractive markets
available in the Midwest, Northeast, Mid-Atlantic, Appalachian and
Texas/Louisiana Gulf Coast areas. The matching process includes arranging
transportation on a network of open-access pipelines on a firm or interruptible
basis. Seagull contracts to provide oil and natural gas to various customers and
aggregates supplies from various sources including third-party producers,
marketing companies, pipelines, financial institutions and the Company's own
production. Marketing profit margins are often small due to competition, and
results can vary significantly from period to period. Large amounts of working
capital are involved for relatively small net margins, which makes working
capital management critical. The Company has policies and procedures in place
that are designed to minimize any potential risk of loss from these
transactions. These policies and procedures are reviewed and updated
periodically by the Company's management.
Most of the Company's natural gas is transported through gas gathering
systems and gas pipelines which are not owned by the Company. Transportation
space on such gathering systems and pipelines is occasionally limited and at
times unavailable due to repairs or improvements being made to such facilities
or due to such space being utilized by other gas shippers with priority
transportation agreements. While the Company has not experienced any inability
to market its natural gas, if transportation space is restricted or is
unavailable, the Company's cash flow from the affected properties could be
adversely affected.
In late 1995, Seagull initiated a risk management program for a portion of
its own E&P production and third-party activities, utilizing such derivative
financial instruments as futures contracts, options and swaps. In early 1997,
the Company closed substantially all of its derivative financial instruments
related to equity production and focused its risk management efforts on reducing
price and basis risk for its third-party marketing activities. Seagull accounts
for its commodity derivative contracts as hedging activities and, accordingly,
the effect is included in revenues when the commodities are produced. See Note 2
of Notes to the Company's Consolidated Financial Statements and Oil and Gas
Operations in Management's Discussion and Analysis of Financial Condition and
Results of Operations, both of which are included in the Company's 1997 Annual
Report to Shareholders and as part of Exhibit 13 attached hereto.
Pipeline Operations and Construction -- Seagull operates certain pipelines
owned by other companies. In some cases the operating agreements provide for
reimbursement of expenses incurred in connection with operations plus a profit
margin. In other cases the Company receives a negotiated annual fee. The Company
also builds pipelines for other companies for which it receives construction
fees that are fixed, cost-plus or a combination of both. The Company currently
has one ongoing construction project for an existing customer and plans to
continue its pursuit of additional operating and construction opportunities.
-12-
<PAGE>
Competition
The Company's competitors in oil and gas exploration, development,
production and marketing include major oil companies, as well as numerous
independent oil and gas companies, individuals and drilling programs. Some of
these competitors have financial and personnel resources substantially in excess
of those available to the Company and, therefore, the Company may be placed at a
competitive disadvantage. The Company's success in discovering reserves will
depend on its ability to select suitable prospects for future exploration in
today's competitive environment.
The Company's gas marketing activities are in competition with numerous
other companies offering the same services. Some of these competitors are
affiliates of companies with extensive pipeline systems that are used for
transportation from producers to end-users. The Company believes its ability to
compete depends upon building strong relationships with producers and end-users
by consistently purchasing and supplying gas at competitive prices.
The Company actively competes with numerous other companies for the
construction and operation of short and medium length pipelines. The Company's
competitors include oil companies, other pipeline companies, natural gas
gatherers and petrochemical transporters, many of which have financial
resources, staffs and facilities substantially larger than those of the Company.
In addition, many of the Company's gas purchasers are also competitors or
potential competitors in the sense that they have extensive pipeline-building
capabilities and experience and generally operate large pipeline systems of
their own. Seagull believes that its ability to compete will depend primarily on
its ability to complete pipeline projects quickly and cost effectively, and to
operate pipelines efficiently.
International Operations
Seagull's interests in countries outside the United States are subject to
the various risks inherent in foreign operations. These risks may include, among
other things, currency restrictions and exchange rate fluctuations, loss of
revenue, property and equipment as a result of expropriation, nationalization,
war, insurrection and other political risks, risks of increases in taxes and
governmental royalties, renegotiation of contracts with governmental entities,
changes in laws and policies governing operations of foreign-based companies,
restrictions on drilling permits (such as those facing the Darag concession) and
other uncertainties arising out of foreign government sovereignty over the
Company's international operations. The Company's international operations may
also be adversely affected by laws and policies of the United States affecting
foreign trade, taxation and investment. In addition, in the event of a dispute
arising from foreign operations, the Company may be subject to the exclusive
jurisdiction of foreign courts or may not be successful in subjecting foreign
persons to the jurisdiction of the courts of the United States. The Company
seeks to manage these risks by among other things, concentrating its
international exploration efforts in areas where the Company believes that the
existing government is stable and favorably disposed towards United States
exploration and production companies.
ALASKA TRANSMISSION AND DISTRIBUTION
The Company operates in Alaska as a single business unit, ENSTAR Alaska,
which is regulated by the Alaska Public Utilities Commission (the "APUC").
ENSTAR Alaska engages in the intrastate transmission of natural gas in
South-Central Alaska and the distribution of natural gas in Anchorage and
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<PAGE>
other nearby communities in Alaska. Revenues from ENSTAR Alaska accounted for
17%, 19% and 24% of the Company's consolidated revenues for 1997, 1996 and 1995,
respectively.
Gas Transmission System
ENSTAR Alaska owns and operates the only natural gas transmission lines in
its service area that are operated for utility purposes. The pipeline
transmission system is composed of approximately 277 miles of 12 to 20-inch
diameter pipeline and approximately 74 miles of smaller diameter pipeline. The
system's present design delivery capacity is approximately 410 MMcf/d. The
average throughput of the system in 1997, 1996 and 1995 was 124, 131 and 122
MMcf/d, respectively.
Gas Distribution System
ENSTAR Alaska distributes natural gas through approximately 2,114 miles of
gas mains to approximately 96,800 residential, commercial, industrial and
electric power generation customers within the cities and environs of Anchorage,
Eagle River, Palmer, Wasilla, Girdwood, Whittier, Soldotna, Kenai and the
Nikiski area of the Kenai Peninsula, Alaska. During the year ended December 31,
1997, ENSTAR Alaska added approximately 63 miles of new gas distribution mains,
installed 2,500 new service lines and added approximately 2,700 net customers.
ENSTAR Alaska anticipates relatively modest growth in its residential customer
base and will install additional main and service lines to accommodate this
growth.
ENSTAR Alaska distributes gas to its customers under tariffs and contracts
which provide for varying delivery priorities. ENSTAR Alaska's business is
seasonal with approximately 65-70% of its revenues earned in the first and
fourth quarters of each year.
In 1997, purchase/resale volumes represented 51% of ENSTAR Alaska's
throughput and 78% of ENSTAR Alaska's operating margin. The remaining volumes
are transported for power, industrial and large commercial customers for a
transportation fee. Under tariffs approved by the APUC, ENSTAR Alaska's
transportation fees approximate ENSTAR Alaska's purchase/resale margin.
Gas Supply
ENSTAR Alaska has an APUC-approved gas purchase contract (the "Marathon
Contract") with Marathon Oil Company ("Marathon") that is a "requirements"
contract with no specified daily deliverability or annual take-or-pay
quantities. ENSTAR Alaska has agreed to purchase and Marathon has agreed to
deliver all of ENSTAR Alaska's gas requirements in excess of those provided for
in other presently existing gas supply contracts, subject to certain exceptions,
until the commitment has been exhausted and without limit as to time; however,
Marathon's delivery obligations are subject to certain specified annual
limitations after 2001. The contract has a base price, subject to annual
adjustment based on changes in the price of certain traded oil futures
contracts, of $1.55 per Mcf plus reimbursements for any severance taxes and
other charges. During 1997, the cost of gas purchased under the Marathon
Contract averaged $1.89 per Mcf, including reimbursements for severance taxes.
ENSTAR Alaska also has an APUC-approved gas purchase contract with the
Municipality of Anchorage, Chevron U.S.A., Inc. and ARCO Alaska, Inc. (the
"Beluga Contract") which provides for the delivery of up to approximately 220
Bcf of gas through the year 2009. The pricing mechanism in the
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<PAGE>
Beluga Contract is similar to that contained in the Marathon Contract. The 1997
price under the Beluga Contract, after application of contractual adjustments,
averaged $1.93 per Mcf, including reimbursements for severance taxes.
Based on gas purchases during the twelve months ended December 31, 1997,
which are not necessarily indicative of the volume of future purchases, gas
reserves committed to ENSTAR Alaska under the Marathon and Beluga Contracts are
sufficient to supply all of ENSTAR Alaska's expected gas supply requirements
through the year 2001. After that time supplies will still be available under
the Marathon and Beluga contracts in accordance with their terms, but at least a
portion of ENSTAR Alaska's requirements are expected to be satisfied outside the
terms of these contracts, as currently in effect.
Currently, ENSTAR Alaska's supply source, primarily through the Marathon
and Beluga Contracts, is confined to the Cook Inlet area with no direct access
to other natural gas pipelines. During 1997, two of the Cook Inlet area's major
suppliers filed for regulatory approval to export certain quantities of gas to
overseas LNG markets. ENSTAR Alaska has filed as an intervenor in these
proceedings and is actively working with regulatory authorities to insure that
the supply needs of its customers are met.
ENSTAR Alaska's average cost of gas sold in 1997, 1996 and 1995 was $1.89,
$1.59 and $1.75 per Mcf, respectively. ENSTAR Alaska's average gas sales price
in 1997, 1996 and 1995 was $3.65, $3.29 and $3.41 per Mcf, respectively.
As stated above, ENSTAR Alaska purchases all of its natural gas under
long-term contracts in which the price is indexed to changes in the price of
crude oil futures contracts. However, because ENSTAR Alaska's sales prices are
adjusted to include the projected cost of its natural gas, there has been and is
expected to be little or no impact on margins derived from ENSTAR Alaska's gas
sales as a result of fluctuations in oil prices due to worldwide political
events and changing market conditions.
Competition
ENSTAR Alaska competes primarily with municipal and cooperative electric
power distributors and with various suppliers of fuel oil and propane for the
available energy market. There are also extensive coal reserves proximate to
ENSTAR Alaska's operating area; however, such reserves are not presently being
produced.
During the last nine years, ENSTAR Alaska's natural gas volumes delivered
on a purchase/resale basis have declined. Beginning in 1989, several of its
major customers began purchasing gas directly from gas producers or gas
marketers. However, the APUC has approved tariffs allowing ENSTAR Alaska to
transport these volumes for a transportation fee that approximates the margin
that would have been earned had the customer remained a sales customer rather
than becoming a transportation customer. Consequently, ENSTAR Alaska anticipates
no adverse economic impact to result from these transportation arrangements.
If any other existing large customer of ENSTAR Alaska chooses to purchase
gas directly from producers, ENSTAR Alaska would expect to collect a fee for
transporting that gas equivalent to the margin earned on sales volumes for those
customers because the large distance of remaining user facilities from producing
fields would preclude the by-pass of ENSTAR Alaska's pipelines.
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<PAGE>
ENSTAR Alaska supplies natural gas to its customers at prices that at the
present time economically preclude substitution of alternative fuels. Since the
Beluga Contract and the Marathon Contract include prices that fluctuate based on
oil indices, a competitive margin favoring natural gas over oil-based energy
sources is expected to continue. However, there is no assurance that the
competitive advantage over other alternative fuels will not be reduced or
eliminated by the development of new energy technology, by changes in the price
of oil or refined products or by decreased gas supply if additional exports are
allowed out of the Cook Inlet area.
Regulation
The APUC has jurisdiction as to rates and charges for gas sales,
construction of new facilities, extensions and abandonments of service and
certain other matters. Rates are generally designed to permit the recovery of
the cost of providing service, including purchased gas costs, and a return on
investment in plant. Because ENSTAR Alaska's operations are wholly intrastate,
ENSTAR Alaska is not subject to or affected by Order 636 or any other economic
regulation by the FERC.
As a result of a proceeding filed in 1984, which was concluded in May 1986,
the APUC granted ENSTAR Alaska an aggregate rate increase of 20.27% and
authorized a regulatory rate of return on common equity of 15.65%. ENSTAR Alaska
has no significant regulatory issues pending before the APUC. Since its
inception in 1961, ENSTAR Alaska has participated in only three formal rate
proceedings.
CORPORATE
Regulation
The Company is a "public utility company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended (the "1935 Act"). Accordingly,
if any "company" (as defined for purposes of the 1935 Act and therefore
including so-called "organized groups") becomes the owner of 10% or more of the
Company's outstanding voting stock, that company would be required to register
as a "holding company" under the 1935 Act, in the absence of an exemption of the
type described below. Section 9(a)(2) also requires a person (including both
individuals and "companies") to obtain prior approval from the Securities and
Exchange Commission (the "SEC") in connection with the acquisition of 5% or more
of the outstanding voting stock of a public utility if that person is also the
owner of 5% or more of the outstanding voting stock of another public utility.
In March 1991, the Company filed an application in good faith with the SEC
pursuant to Section 2(a)(8) of the 1935 Act, seeking a determination that
Seagull was not subject to regulation as a "subsidiary company" of FMR Corp.
(the "FMR Application"), which was then the owner of 2,805,624 shares
(approximately 12.5% at such time) (shares adjusted for a 2-for-1 stock split of
all the issued shares of the Company's common stock (the "Common Stock"),
effected June 4, 1993) of the outstanding Common Stock. Under the 1935 Act, a
company is a "subsidiary company" of a "holding company" if the "holding
company" owns 10% or more of the total voting power of the "subsidiary company",
unless the SEC determines otherwise. Based upon the most recent information
furnished to the Company by FMR Corp., FMR Corp.'s beneficial shares owned have
fallen below 5% of the outstanding voting stock of the Company.
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<PAGE>
In December 1993, Seagull filed an additional application in good faith
with the SEC pursuant to Section 2(a)(8) of the 1935 Act, seeking a
determination that the Company was not subject to regulation as a "subsidiary
company" of AXA Assurances I. A. R. D. Mutuelle, AXA Assurances Vie Mutuelle,
Alpha Assurances I. A. R. D. Mutuelle, Alpha Assurances Vie Mutuelle, Uni Europe
Assurance Mutuelle and AXA (collectively, the "Mutuelles AXA") and The Equitable
Companies Incorporated ("Equitable") and their respective affiliates
(collectively, the "Equitable Entities"), (the "Equitable Application"). At such
time, the Equitable Entities beneficially owned 4,495,600 shares (approximately
12.5%) of Common Stock. Based upon the most recent information furnished to the
Company by the Equitable Entities, the Equitable Entities' beneficial shares
owned have fallen below 5% of the outstanding voting stock of the Company.
On October 3, 1996, the Company filed an application in good faith with the
SEC pursuant to Section 2(a)(8) of the 1935 Act, seeking a determination that
Seagull was not subject to regulation as a "subsidiary company" of The
Prudential Insurance Company of America ("Prudential"), (the "Prudential
Application"), which was then the owner of 5,573,061 shares (approximately 8.9%
at such time of the outstanding Common Stock). According to information provided
by Prudential, in its capacity as investment adviser, is beneficial owner of
5,883,861 shares (9.3%) of the Common Stock which are owned by numerous
investment counseling clients, none of which is known to have such interest with
respect to more than 5% of the class. Prudential has sole voting and dispositive
power as to 5,561,361 shares and shared voting and dispositive power as to
322,500 shares.
As a result of the Company's good faith filing of the Prudential
Application, the Company will not be subject to any obligation, duty or
liability imposed by the 1935 Act, unless and until the SEC enters an order
denying or otherwise adversely disposing of the Prudential Application. To date,
no such order has been issued. The Company believes that the Prudential
Application ultimately should be granted.
ENVIRONMENTAL MATTERS
Seagull's operations are subject to federal, state and local laws and
regulation governing the discharge of materials into the environment or
otherwise relating to environmental protection. Numerous governmental
departments issue rules and regulations to implement and enforce such laws which
are often difficult and costly to comply with and which carry substantial
penalties for failure to comply. These laws and regulations may require the
acquisition of a permit before drilling commences, restrict the types,
quantities and concentration of various substances that can be released into the
environment in connection with drilling and production activities, limit or
prohibit drilling activities on certain lands lying within wilderness, wetlands
and other protected areas, and impose substantial liabilities for pollution
resulting from the Company's operations. In addition, these laws, rules and
regulations may restrict the rate of oil and natural gas production below the
rate that would otherwise exist. State laws often require some form of remedial
action to prevent pollution from former operations, such as pit closure and
plugging abandoned wells.
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without regard
to fault or the legality of the original conduct, on certain classes of persons
who are considered to be responsible for the release of a "hazardous substance"
into the environment. These persons include the owner or operator of the
disposal site or sites where the release occurred and companies that disposed or
arranged for the disposal of the
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<PAGE>
hazardous substances. Under CERCLA, such persons may be subject to joint and
several liability for the costs of cleaning up the hazardous substances that
have been released into the environment, for damages to natural resources and
for the costs of certain health studies. It is not uncommon for neighboring
landowners and other third parties to file claims for personal injury and
property damage allegedly caused by hazardous substances or other pollutants
released into the environment.
Stricter standards in environmental legislation may be imposed on the oil
and gas industry in the future. For instance, legislation has been proposed in
Congress from time to time that would reclassify certain oil and natural gas
exploration and production wastes as "hazardous wastes" and make the
reclassified wastes subject to more stringent handling, disposal and clean-up
requirements. If such legislation were to be enacted, it could have a
significant impact on the operating costs of the Company, as well as the oil and
gas industry in general. Furthermore, although petroleum, including crude oil
and natural gas, is exempt from CERCLA, at least two courts have recently ruled
that certain wastes associated with the production of crude oil may be
classified as "hazardous substances" under CERCLA and thus such wastes may
become subject to liability and regulation under CERCLA, as described above.
State initiatives to further regulate the disposal of oil and natural gas wastes
are also pending in certain states, and these various initiatives could have a
similar impact on the Company. Compliance with environmental requirements
generally could have a material adverse effect upon the capital expenditures,
earnings or competitive position of the Company. Although the Company has not
experienced any material adverse effect from compliance with environmental
requirements, there is no assurance that this will continue in the future.
The Oil Pollution Act of 1990 ("OPA") and regulations promulgated pursuant
thereto impose a variety of requirements on "responsible Parties" related to the
prevention of oil spills and liability for damages resulting from such spills.
Few defenses exist to the liability imposed by the OPA and such liability could
be substantial. A failure to comply with ongoing requirements or inadequate
cooperation in a spill event could subject a responsible party to civil or
criminal enforcement action.
On October 19, 1996, legislative amendments to OPA were enacted. These
amendments reduced the requirement of obtaining a certificate of financial
responsibility to $35 million in the event of a spill, instead of the $150
million originally called for under OPA. In addition, the Texas Railroad
Commission proposed an amendment to its regulations in line with OPA. The
proposed amendment requires operators of hazardous liquid pipeline facilities
inland of the Gulf coast to prepare facility response plans within 60 days of
the effective date of the rule or simultaneously with the filing of the plan
with federal authorities.
In addition, the OCSLA authorizes regulations relating to safety and
environmental protection applicable to lessees and permittees operating in the
OCS. Specific design and operation standards may apply to OCS vessels, rigs,
platforms, vehicles and structures. Violations of lease conditions or
regulations issued pursuant to OCSLA can result in substantial civil and
criminal penalties, as well as potential court injunctions curtailing operations
and the cancellation of leases. Such enforcement liabilities can result from
either governmental or private prosecution.
The Federal Water Pollution Control Act ("FWPCA") imposes restrictions and
strict controls regarding the discharge of pollutants to state and federal
waters. The FWPCA provides for civil, criminal and administrative penalties for
any unauthorized discharges of oil and other hazardous substances in reportable
quantities and, along with the OPA, imposes substantial potential liability for
the costs of removal, remediation and damages. State laws for the control of
water pollution also provide varying
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<PAGE>
civil, criminal and administrative penalties and liabilities in the case of a
discharge of petroleum or its derivatives into state waters. Within the next few
years, both state water discharge regulations and the federal permits are
expected to prohibit the discharge of produced water and sand, and some other
substances related to the oil and gas industry, to coastal waters. Although the
costs to comply with zero discharge mandates under federal or state law may be
significant, the entire industry will experience similar costs and the Company
believes that these costs will not have a material adverse impact on the
Company's financial condition and operations. Some oil and gas exploration and
production facilities are required to obtain permits for their storm water
discharges. Costs may be associated with treatment of wastewater or developing
storm water pollution prevention plans. Further, the Coastal Zone Management Act
authorizes state implementation and development of programs of management
measures for non-point source pollution to restore and protect coastal waters.
Many states in which the Company operates have recently begun to regulate
naturally occurring radioactive materials ("NORM") and NORM wastes that are
generated in connection with oil and gas exploration and production activities.
NORM wastes typically consist of very low-level radioactive substances that
become concentrated in pipe scale and in production equipment. State regulations
may require the testing of pipes and production equipment for the presence of
NORM, the licensing of NORM-contaminated facilities and the careful handling and
disposal of NORM wastes. The Company believes that the growing regulation of
NORM will have a minimal effect on the Company's operations because the Company
generates only a very small quantity of NORM on an annual basis.
EMPLOYEES
As of March 1, 1998, the Company had 877 full time employees. In addition
to the services of its full time employees, the Company employs, as needed, the
services of consulting geologists, engineers, regulatory consultants, contract
pumpers and certain other temporary employees.
ENSTAR Alaska operates under collective bargaining agreements with separate
bargaining units for operating and clerical employees. These units represent
approximately 80% of ENSTAR Alaska's work force. Contracts have been negotiated
that set wages and work relationships for the two units. The operating
bargaining unit contract is effective from April 1, 1996 through April 1, 2000.
The clerical bargaining unit contract is effective from April 1, 1995 through
April 1, 2000. The Company is not a party to any other collective bargaining
agreements. The Company has never had a work stoppage.
The Company considers its relations with its employees to be satisfactory.
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<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, each of whom has been elected to
serve until his successor is elected and qualified, are as follows:
<TABLE>
<CAPTION>
Name Age Present Position and Prior Business Experience
<S> <C> <C>
Barry J. Galt.............. 64 Chairman of the Board and Chief Executive Officer since December 1983 and President
of the Company from April 1997; President of the Company from December 1983 to
October 1996.
John W. Elias.............. 57 Executive Vice President since April 1993; For the previous 30 years, he served in a
variety of positions for Amoco Production Company and its parent, Amoco Corporation.
Richard F. Barnes.......... 54 President of ENSTAR Alaska since September 1987.
Gerald R. Colley........... 47 Senior Vice President, International Exploration and Production since November 1996;
Senior Vice President - International Exploration of Global from December 1994 to
November 1996; Vice President - International Exploration of Global from July 1993 to
December 1994; Vice President - International Exploration of Global Natural Resources
Corporation of Nevada ("GNRC"), a wholly owned subsidiary of Global, since October
1992; Vice President and Exploration Director of Hadson Europe, Inc. from August 1986
to October 1992.
John N. Goodpasture........ 49 Senior Vice President, Pipelines and Marketing since May 1993; President of Seagull
Pipeline Company since March 1990.
William L. Transier........ 43 Senior Vice President and Chief Financial Officer since May 1996; For the previous 20
years, he held a variety of positions at KPMG Peat Marwick LLP and was promoted to
partner in July 1986.
Carl B. King............... 55 Senior Vice President and General Counsel since February 1998; Senior Vice President
and General Counsel of PanEnergy Corp from 1991 to February 1998; For the previous
16 years, he served in a variety of positions with Cooper Industries/Cameron Iron
Works.
Gordon L. McConnell........ 51 Vice President and Controller since November 1996; Vice President - Accounting of
Global from January 1996 to November 1996; Controller of Global from July 1993 to
January 1996; Controller of GNRC since October 1991; Assistant Controller of GNRC
from July 1991 to October 1991.
H. Alan Payne.............. 56 Vice President, Investor Relations since November 1996; Director, Investor Relations
from December 1984 to November 1996.
Jack M. Robertson.......... 54 Vice President, Human Resources since November 1996; Director, Human Resources from
November 1990 to November 1996.
Stephen A. Thorington...... 42 Vice President, Finance and Treasurer since May 1996; Managing Director of Chase
Securities Inc. from January 1992 to May 1996; Managing Director for The Chase
Manhattan Bank, N.A. from June 1991 through April 1994.
M. Lee Van Winkle.......... 45 Vice President, Corporate Planning since November 1996; Vice President - Corporate
Planning of Global from July 1993 to November 1996; Vice President - Corporate
Planning of GNRC since August 1992; Corporate Manager - Planning and Budget for Adobe
Resources Corporation for more than five years prior to August 1992.
Carl E. Volke.............. 54 Vice President, Administration since November 1996; Director, Administration from
November 1986 to November 1996.
</TABLE>
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<PAGE>
Item 2. Properties
Incorporated herein by reference to Item 1 of this Annual Report on Form
10-K.
Item 3. Legal Proceedings
Royalty Litigation -- Increasingly, royalty owners under oil and gas leases
are challenging valuation methodology and post-production deductions used by
producers. These cases have arisen because oil and gas producers such as Seagull
have begun to provide services that had previously been provided by the
interstate gas pipelines prior to the "unbundling" of gas services. For example,
in 1996, Seagull was sued in Anne K. Barnaby, et al. v. Seagull Mid-South Inc.
This case is pending in state court of Latimer County, Oklahoma. In this case,
the plaintiffs seek additional royalties based upon the alledged deduction by
Seagull of post-production costs, such as those related to gathering,
compression, dehydration and treating. In addition, the plaintiffs have
questioned the sales price used by Seagull as a basis for calculating royalties
to the extent that sales were made to Seagull's gas marketing subsidiary. While
Seagull intends to vigorously defend this case, the Company cannot predict the
outcome of these matters.
NorAm Litigation -- Seagull also was sued in NorAm Gas Transmission Co., et
al. v. Seagull Mid-South Inc. (the "NorAm Litigation"). The case relates to
Seagull's termination of a 1956 gas contract which provided for the sale of gas
by Seagull from certain wells in the Aetna Field in Arkansas for approximately
$0.16 per Mcf. NorAm Gas Transmission Co. ("NorAm") and Arkansas Western Gas
Company ("AWG") have sought a declaratory judgment that the gas contract remains
in effect with respect to these wells or, in the alternative, money damages.
Since the termination by Seagull of the gas contract, Seagull has been selling
the gas in question on the spot market. Seagull believes that it had reasonable
grounds for terminating the gas contract. NorAm and AWG have also sought a
declaratory judgment to the effect that certain additional wells in the Aetna
Field (including any new wells) would be subject to the $0.16 per Mcf price (the
"Additional Well Claim"). If NorAm and AWG were successful with the Additional
Well Claim, Seagull's operations in the Aetna Field would be materially affected
in an adverse manner. By mid-1997, the plaintiffs had alleged losses in these
matters of approximately $90 million plus attorney's fees.
In November 1997, the Company, NorAm and AWG signed a Settlement Proposal
that ultimately could lead to a final settlement and resolution of the NorAm
Litigation discussed above. The Settlement Proposal calls for Seagull to make a
cash payment and deliver gas under a five-year gas sales contract. As a result
of this Settlement Proposal, the Company recorded in the fourth quarter a
one-time pre-tax charge of approximately $4.5 million, included in general and
administrative expense.
Gulf Coast Vacuum Site -- In 1993, the Environmental Protection Agency
("EPA") notified the Company that a subsidiary was a potentially responsible
party ("PRP") at the Gulf Coast Vacuum Services Superfund Site (the "GCV Site")
in Vermilion Parish, Louisiana. Based upon the Company's investigation of this
claim, the Company believes that the basis for its alleged liability is a series
of transactions between the Company's subsidiary and the operator of the GCV
Site that occurred during 1979 and 1980. While the EPA's cleanup cost estimate
of the GCV Site is in the range of $17 million, the Company believes that its
liability is unlikely to be material to its financial condition, results of
operations or cash flows because of the large number of PRPs at the GCV Site and
the relative amount of contamination, if any, that may have been caused at the
GCV Site by the disposal of wastes by the Company during 1979 and 1980.
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<PAGE>
Comstock Mill Site -- On February 21, 1996, the United States Department of
Interior Bureau of Land Management ("BLM") sent a letter to Houston Oil &
Minerals Corporation ("HO&M"), a wholly owned subsidiary of Seagull, requesting
HO&M to prepare and submit a plan for sampling and analyzing groundwater at a
former mining operation located near Virginia City, Nevada (the "Comstock Mill
Site"). The basis for the BLM's request was the alleged operation of the
Comstock Mill Site by HO&M between 1978 and 1982. Pursuant to an indemnity
provision in the stock purchase agreement by which Seagull acquired HO&M in 1988
(the "HO&M Purchase Agreement"), Seagull tendered the BLM's letter to Tenneco
Inc. ("Tenneco") with a demand for indemnity and notified the BLM that Tenneco
would respond to the BLM letter on behalf of HO&M. The BLM has also indicated
that Tenneco and HO&M might be required to address cyanide contamination of
groundwater at the Comstock Mill Site by separate action of the Nevada Division
of Environmental Protection. Seagull believes that any liability associated with
the Comstock Mill Site is the responsibility of Tenneco or its successors in
liability pursuant to the HO&M Purchase Agreement.
Other -- The Company is a party to other ongoing litigation in the normal
course of business. Management regularly analyzes current information and, as
necessary, provides accruals for probable liabilities on the eventual
disposition of these matters. While the outcome of lawsuits or other proceedings
against the Company cannot be predicted with certainty, management believes that
the effect on its financial condition, results of operations and cash flows, if
any, will not be material.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters
A. The Company's Common Stock (the "Common Stock") is traded on the New
York Stock Exchange under the ticker symbol "SGO." The high and low sales prices
on the New York Stock Exchange Composite Tape for each quarterly period during
the last two fiscal years were as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------------------------- --------------------------------------
High Low High Low
----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
First Quarter 24 1/8 17 7/8 22 7/8 17 1/8
Second Quarter 19 1/4 16 1/2 25 1/2 21
Third Quarter 25 7/8 17 3/4 26 17 1/2
Fourth Quarter 27 5/8 19 1/16 24 3/8 20 5/8
</TABLE>
B. As of March 9, 1998, there were approximately 4,370 holders of record of
Common Stock.
C. Seagull has not declared any cash dividends on its Common Stock since it
became a public entity in 1981. The decision to pay Common Stock dividends in
the future will depend upon the Company's earnings and financial condition and
such other factors as the Company's Board of Directors deems relevant. The
Company's revolving credit agreement (the "Revolving Credit Facility") restricts
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<PAGE>
the Company's declaration or payment of dividends on and repurchases of Common
Stock unless each of the following tests have been met: (i) the Company's Total
Debt/Capitalization Ratio cannot be more than 60% and (ii) no Default or Event
of Default shall have occurred and be continuing. The capitalized terms used
herein to describe the restrictions contained in the Revolving Credit Facility
have the meanings assigned to them in the Revolving Credit Facility. Under the
most restrictive of these tests, as of December 31, 1997, approximately $344
million was available for payment of dividends or repurchase of Common Stock. In
addition, certain debt instruments of ENSTAR Alaska restrict the ability of
ENSTAR Alaska to transfer funds to the Company in the form of cash dividends,
loans or advances. For a description of such restrictions, reference is made to
Note 6 of the Consolidated Financial Statements included in the Company's 1997
Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Item 6. Selected Financial Data
Incorporated herein by reference to the Selected Financial Data included in
the Company's 1997 Annual Report to Shareholders and as part of Exhibit 13
attached hereto.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Incorporated herein by reference to Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's 1997
Annual Report to Shareholders and as part of Exhibit 13 attached hereto.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Based on the Company's market capitalization, the quantitative and
qualitative disclosures required by Rule 305 of the Securities and Exchange Act
of 1934 are required for Seagull's Form 10-K for the year ended December 31,
1998 and, if material, will be so included.
Item 8. Financial Statements and Supplementary Data
Incorporated herein by reference to the Consolidated Financial Statements
and Supplementary Data included in the Company's 1997 Annual Report to
Shareholders and as part of Exhibit 13 attached hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Incorporated herein by reference to "Election of Directors" included in the
Proxy Statement for the Company's Annual Meeting of Shareholders to be held on
May 13, 1998 (the "Proxy Statement"). See also "Executive Officers of the
Company" included in Part I of this Annual Report on Form 10-K, which is
incorporated by reference herein.
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<PAGE>
Item 11. Executive Compensation
Incorporated herein by reference to "Executive Compensation--Summary
Compensation Table," "--Compensation Arrangements," "--Option Exercises and
Fiscal Year-End Values," "--Option Grants," "--Executive Supplemental Retirement
Plan," "--ENSTAR Natural Gas Company Supplemental Executive Retirement Plan" and
"--ENSTAR Natural Gas Company Retirement Plan"; and "Election of
Directors--Compensation of Directors" included in the Proxy Statement.
Notwithstanding any provision in this Annual Report on Form 10-K to the
contrary, under no circumstances are the "Compensation Committee Report" or the
information under the heading "Shareholder Return Performance Presentation"
incorporated herein for any purpose.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated herein by reference to "Principal Shareholders" and "Election
of Directors--Security Ownership of Directors and Management" included in the
Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference to "Election of Directors--Certain
Transactions" included in the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements:
The Consolidated Financial Statements, Notes to Consolidated Financial
Statements and Independent Auditors' Report thereon are included in the
Company's 1997 Annual Report to Shareholders and as part of Exhibit 13 attached
hereto, and are incorporated herein by reference:
2. Schedules:
All schedules have been omitted because the required information is
insignificant or not applicable.
3. Exhibits:
3.1 Articles of Incorporation of the Company, as amended, including
Articles of Amendment filed May 12, 1988, May 21, 1991, and May 21,
1993 with the Secretary of State of the State of Texas, that certain
Statement of Relative Rights and Preferences related to the
designation and issuance of the Company's $2.25 Convertible
Exchangeable Preferred Stock, Series A, filed August 6, 1986 with the
Secretary of State of the State of Texas and that certain Statement of
Resolution Establishing Series of Shares of Series B Junior
Participating Preferred Stock of Seagull Energy Corporation filed
March 21, 1989 with the Secretary of State of the State of Texas
(incorporated by reference to Exhibit 3.1 to Quarterly Report on Form
10-Q for the quarter ended June 30, 1993).
3.2 Bylaws of the Company, as amended through March 7, 1997 (incorporated
by reference to Exhibit 4.9 to Form S-3 filed with the Securities and
Exchange Commission on September 18, 1997).
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<PAGE>
*4.1 $500,000,000 Revolving Credit and Competitive Bid Facility among
Seagull Energy Corporation, The Chase Manhattan Bank, Morgan Guaranty
Trust Company of New York, NationsBank of Texas, N.A., and The Other
Banks Signatory Thereto, dated December 27, 1997.
4.2 Senior Indenture dated as of July 15, 1993 by and between the Company
and The Bank of New York, as Trustee (incorporated by reference to
Exhibit 4.1 to Current Report on Form 8-K dated August 4, 1993;
Specimen of 7 7/8% Senior Note due 2003 and resolutions adopted by the
Chairman of the Board of Directors is incorporated by reference to
Exhibit 4.3 to Current Report on Form 8-K dated August 4, 1993).
4.3 Senior Subordinated Indenture dated as of July 15, 1993 by and between
the Company and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.2 to Current Report on Form 8-K dated August 4,
1993; Specimen of 8 5/8% Senior Subordinated Note due 2005 and
resolutions adopted by the Chairman of the Board of Directors is
incorporated by reference to Exhibit 4.4 to Current Report on Form 8-K
dated August 4, 1993).
*4.4 Senior Indenture among the Company and The Bank of New York, as
Trustee, and Specimen of 7 1/2% Senior Notes due September 15, 2027.
4.5 Terms Agreement and the resolutions of adoption by the Chairman of the
Board of Directors related to Exhibit 4.4 (incorporated by reference
to Exhibit 2.3 to Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 17, 1997).
*4.6 Note Agreement dated June 17, 1985 by and among Alaska Pipeline
Company and The Travelers Insurance Company, The Travelers Life
Insurance Company, and the Equitable Life Assurance Society of the
United States (collectively, the "Insurance Companies") (including
forms of notes and other exhibits thereto) and Inducement Agreement of
even date therewith by and among Seagull and the Insurance Companies
(the Note Agreement including exhibits thereto incorporated by
reference to Exhibit 4.1 to Annual Report on Form 10-K for the year
ended December 31, 1995; the Form of Consent and Agreement dated April
15, 1991 by and among Alaska Pipeline Company and the Insurance
Companies (including exhibits thereto) is filed herewith).
4.7 Note Agreement dated May 14, 1992 by and among Alaska Pipeline Company
and each of the purchasers thereto (including forms of notes and other
exhibits thereto) and Inducement Agreement of even date therewith by
and among Seagull and Aid Association for Lutherans, The Equitable
Life Assurance Society of the United States, Equitable Variable Life
Insurance Company, Provident Life & Accident Insurance Company and
Teachers Insurance & Annuity Association of America (including
exhibits thereto) (incorporated by reference to Exhibit 4.1 to
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997).
4.8 Trust Agreement dated as of September 1, 1995 for the Seagull Series
1995 Trust (the Trust Agreement is incorporated by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995; the Guaranty by Seagull Energy Corporation in
favor of the Seagull Series 1995 Trust is incorporated by reference to
Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995).
4.9 Amended and Restated Rights Agreement dated March 17, 1989, as amended
effective June 13, 1992, and amended and restated as of December 12,
1997, between the Company and BankBoston, N.A. (as successor to NCNB
Texas National Bank), including Form of Statement of Resolution
Establishing the Series B Junior Participating Preferred Stock, the
Form of Right Certificate and Form of Summary of Rights to Purchase
Preferred Shares (incorporated by reference to Exhibit 2 to Current
Report on Form 8-K dated December 15, 1997).
#10.1 Seagull Energy Corporation 1995 Executive Incentive Plan(incorporated
by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995).
#10.2 Seagull Energy Corporation 1996 Executive Incentive Plan(incorporated
by reference to Exhibit 10.3 to Annual Report on Form 10-K for the
year ended December 31, 1996).
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<PAGE>
#10.3 Seagull Energy Corporation 1997 Executive Incentive Plan
(incorporated by reference to Exhibit 10.1 to Quarterly Report on Form
10-Q for the quarter ended June 30, 1997).
#10.4 Seagull Energy Corporation 1981 Stock Option Plan (Restated),
including forms of agreements, as amended (the amended and restated
plan is incorporated by reference to Exhibit 10.6 to Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993; Form of Amendment to
Stock Option Agreement(s) for the Seagull Energy Corporation is
incorporated by reference to Exhibit 10.5 to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995; Form of Amendment to
Stock Option Agreement(s) is incorporated by reference to Exhibit 10.4
to Annual Report on Form 10-K for the year ended December 31, 1996).
#10.5 Seagull Energy Corporation 1983 Stock Option Plan (Restated),
including forms of agreements, as amended (the amended and restated
plan is incorporated by reference to Exhibit 10.7 to Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993; the amended form of
Nonstatutory Stock Option Agreement is incorporated by reference to
Exhibit 10.15 to Annual Report on Form 10-K for the year ended
December 31, 1993; Form of Amendment to Stock Option Agreement(s) for
the Seagull Energy Corporation is incorporated by reference to Exhibit
10.5 to the Quarterly Report on Form 10-Q for the quarter ended June
30, 1995; Form of Amendment to Stock Option Agreement(s) is
incorporated by reference to Exhibit 10.5 to Annual Report on Form
10-K for the year ended December 31, 1996).
#10.6 Seagull Energy Corporation 1986 Stock Option Plan (Restated),
including forms of agreements, as amended (the amended and restated
plan is incorporated by reference to Exhibit 10.8 to Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993; the amended form of
Nonstatutory Stock Option Agreement is incorporated by reference to
Exhibit 10.16 to Annual Report on Form 10-K for the year ended
December 31, 1993; Form of Amendment to Stock Option Agreement(s) for
the Seagull Energy Corporation is incorporated by reference to Exhibit
10.5 to the Quarterly Report on Form 10-Q for the quarter ended June
30, 1995; Form of Amendment to Stock Option Agreement(s) is
incorporated by reference to Exhibit 10.6 to Annual Report on Form
10-K for the year ended December 31, 1996).
#10.7 Seagull Energy Corporation 1990 Stock Option Plan, including forms of
agreements, as amended (incorporated by reference to Exhibit 10.22 to
Annual Report on Form 10-K for the year ended December 31, 1995; Form
of Amendment to Stock Option Agreement(s) is incorporated by reference
to Exhibit 10.7 to Annual Report on Form 10-K for the year ended
December 31, 1996).
#10.8 Global Natural Resources Inc. 1989 Key Employees Stock Option Plan
(the Plan is incorporated by reference to Exhibit 4.1 to Registration
Statement No. 33-31537 of Global Natural Resources Inc.; the Form of
Stock Option Agreement is incorporated by reference to Exhibit 4.2 to
Registration Statement No. 33-31537 of Global Natural Resources Inc.;
Form of Amendment to Stock Option Agreement(s) is incorporated by
reference to Exhibit 10.8 to Annual Report on Form 10-K for the year
ended December 31, 1996).
#10.9 Global Natural Resources Inc. 1992 Stock Option Plan (the Plan is
incorporated by reference to Exhibit 10.47 to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1992 of Global Natural
Resources Inc. (Registration No. 1-8674); the Form of Stock Option
Agreement is incorporated by reference to Exhibit 10.48 to the
Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 of
Global Natural Resources Inc. (Registration No. 1-8674); Form of
Amendment to Stock Option Agreement(s) is incorporated by reference to
Exhibit 10.9 to Annual Report on Form 10-K for the year ended December
31, 1996).
#10.10 Seagull Energy Corporation 1993 Nonemployee Directors' Stock Option
Plan, including forms of agreements, as amended (incorporated by
reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997).
#10.11 Seagull Energy Corporation 1993 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.3 to Quarterly Report on Form
10-Q for the quarter ended September 30, 1997).
#10.12 1995 Omnibus Stock Plan (the Plan is incorporated by reference to
Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995; Form of Amendment to Stock Option Agreement(s) is
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<PAGE>
incorporated by reference to Exhibit 10.12 to Annual Report on Form
10-K for the year ended December 31, 1996).
#10.13 Seagull Energy Corporation Management Stability Plan (the Plan is
incorporated by reference to Exhibit 10.35 to Annual Report on Form
10-K for the year ended December 31, 1994; the First Amendment is
incorporated by reference to Exhibit 10.13 to Annual Report on Form
10-K for the year ended December 31, 1996).
#10.14 Outside Directors Deferred Fee Plan of the Company, as amended and
restated (incorporated by reference to Exhibit 10.2 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996).
#10.15 Employment Agreement dated December 30, 1983 by and between the
Company and Barry J. Galt, Chairman of the Board, President and Chief
Executive Officer of the Company (the Agreement is incorporated by
reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993; Amendment to Employment Agreement is
incorporated by reference to Exhibit 10.15 to Annual Report on Form
10-K for the year ended December 31, 1996).
#10.16 Executive Supplemental Retirement Plan Membership Agreement between
the Company and Barry J. Galt dated as of February 3, 1986, as amended
(incorporated by reference to Exhibit 10.2 to Quarterly Report on Form
10-Q for the quarter ended September 31, 1996).
#10.17 Restricted Stock Agreement made and entered into as of March 17, 1995
between Seagull Energy Corporation and Barry J. Galt (incorporated by
reference to Exhibit 10.32 to Annual Report on Form
10-K for the year ended December 31, 1994).
#10.18 Severance Agreement between Seagull Energy Corporation and Barry J.
Galt (incorporated by reference to Exhibit 10.3 to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995).
#10.19 Seagull Energy Corporation Executive Supplemental Retirement Plan, as
amended (incorporated by reference to Exhibit 1.1 to Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996).
#10.20 Seagull Energy Corporation Supplemental Benefit Plan, as amended,
including the First Amendment thereto (incorporated by reference to
Exhibit 10.11 to Annual Report on Form 10-K for the year ended
December 31, 1995).
#10.21 Form of Restricted Stock Agreement made and entered into as of March
17, 1995 between Seagull Energy Corporation and, individually, Richard
F. Barnes (granted 2,000 shares of restricted Common Stock), John W.
Elias (granted 3,000 shares of restricted Common Stock) and William L.
Transier (granted 3,000 shares of restricted Common Stock)
(incorporated by reference to Exhibit 10.33 to Annual Report on Form
10-K for the year ended December 31, 1994).
#10.22 Form of Severance Agreement between Seagull Energy Corporation and
Richard F. Barnes, John W. Elias and William L. Transier (incorporated
by reference to Exhibit 10.34 to Annual Report on Form 10-K for the
year ended December 31, 1994).
#10.23 Consulting Agreement between Robert Vagt and Seagull Energy
Corporation (incorporated by reference to Exhibit 10.9 to Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997).
10.24 Royalty Incentive Plan, as amended (incorporated by reference to
Exhibit 1.4 to the Annual Report on Form 20-F for the year ended
December 31, 1981 of the U.K. Company).
10.25 Purchase and Sale Agreement by and among Seagull Energy Corporation,
Amoco Gas Company, Houston Pipe Line Company, Enron Gas Processing
Company and Mantaray Pipeline Company, as sellers and Seahawk
Gathering & Liquids Company as buyer and Tejas Power Corporation as
Guarantor dated July 28, 1995 (incorporated by reference to Exhibit
10.6 to Quarterly Report on Form 10-Q for the quarter ended June 30,
1995).
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<PAGE>
10.26 Stock Purchase Agreement Between Seagull Energy Corporation and Exxon
Corporation relating to all of the Outstanding Capital Stock of Esso
Suez Inc., as executed in Houston, Texas on July 22, 1996
(incorporated by reference to Exhibit 2.1 to the Current Report on
Form 8-K filed on August 28, 1996).
10.27 Purchase and Sale Agreement Between Esso Egypt Limited and Seagull
Energy Corporation dated July 22, 1996 (incorporated by reference to
Exhibit 2.2 to the Current Report on Form 8-K filed on August 28,
1996).
10.28 Agreement and Plan of Merger dated as of July 22, 1996 by and among
Seagull Energy Corporation, GNR Merger Corporation and Global Natural
Resources Inc. (incorporated by reference to Exhibit 2.1 to
Registration Statement No. 333-09845 on Form S-4 of Seagull Energy
Corporation).
10.29 Share Sale Agreement, dated as of September 11, 1997, by and between
Seagull Energy Canada Holding Company, Seagull Energy Corporation and
Rio Alto Exploration Ltd. (incorporated by reference to Exhibit 2.1 to
Current Report on Form 8-K dated September 11, 1997).
*13 Portions of the Seagull Energy Corporation and Subsidiaries Annual
Report to Shareholders for the year ended December 31, 1996 which are
incorporated by reference herein to this Annual Report on Form 10-K of
Seagull Energy Corporation and Subsidiaries for the year ended
December 31,1997.
*21 Subsidiaries of Seagull Energy Corporation.
*23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Ryder Scott Company, independent petroleum engineers.
*23.3 Consent of DeGolyer and MacNaughton, independent petroleum engineers.
*23.4 Consent of Netherland, Sewell and Associates, Inc., independent
petroleum engineers.
*27.1 Financial Data Schedule.
----------------------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K, dated December 15, 1997,
with respect to certain amendments to the Rights Agreement governing its
Preferred Share Purchase Rights.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
SEAGULL ENERGY CORPORATION
<S> <C> <C>
Date: March 17, 1998 By: /s/ Barry J. Galt
Barry J. Galt, Chairman of the Board and
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By: /s/ Barry J. Galt By: /s/ Peter J. Fluor
Barry J. Galt, Chairman of the Board, President Peter J. Fluor, Director
and Chief Executive Officer and Director Date March 17, 1998
(Principal Executive Officer) By: /s/ William R. Grant
Date: March 17, 1998 William R. Grant, Director
By: /s/ John W. Elias Date: March 17, 1998
John W. Elias, Executive Vice President By: /s/ Dean P. Guerin
and Director Dean P. Guerin, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ William L. Transier By: /s/ Richard M. Morrow
William L. Transier, Senior Vice President Richard M. Morrow, Director
and Chief Financial Officer Date: March 17, 1998
(Principal Financial Officer) By: /s/ Dee S. Osborne
Date: March 17, 1998 Date: Dee S. Osborne, Director
By: /s/ Gordon L. McConnell March 17, 1998
Gordon L. McConnell, Vice President and By: /s/ Sidney R. Petersen
Controller (Principal Accounting Officer) Sidney R. Petersen, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ J. Evans Attwell By: /s/ Sam F. Segnar
J. Evans Attwell, Director Sam F. Segnar, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ Richard J. Burgess By:
Richard J. Burgess, Director Robert F. Vagt, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ Milton Carroll By: /s/ R. A. Walker
Milton Carroll, Director R. A. Walker, Director
Date: March 17, 1998 Date: March 17, 1998
By: /s/ Thomas H. Cruikshank
Thomas H. Cruikshank, Director
Date: March 17, 1998
</TABLE>
-29-
<PAGE>
EXHIBIT INDEX
EXHIBITS:
3.1 Articles of Incorporation of the Company, as amended, including
Articles of Amendment filed May 12, 1988, May 21, 1991, and May
21, 1993 with the Secretary of State of the State of Texas, that
certain Statement of Relative Rights and Preferences related to
the designation and issuance of the Company's $2.25 Convertible
Exchangeable Preferred Stock, Series A, filed August 6, 1986 with
the Secretary of State of the State of Texas and that certain
Statement of Resolution Establishing Series of Shares of Series B
Junior Participating Preferred Stock of Seagull Energy
Corporation filed March 21, 1989 with the Secretary of State of
the State of Texas (incorporated by reference to Exhibi 3.1 to
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993).
3.2 Bylaws of the Company, as amended through March 7, 1997
(incorporated by reference to Exhibit 4.9 to Form S-3 filed with
the Securities and Exchange Commission on September 18, 1997).
*4.1 $500,000,000 Revolving Credit and Competitive Bid Facility among
Seagull Energy Corporation, The Chase Manhattan Bank, Morgan
Guaranty Trust Company of New York, NationsBank of Texas, N.A.,
and The Other Banks Signatory Thereto, dated December 27, 1997.
4.2 Senior Indenture dated as of July 15, 1993 by and between the
Company and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.1 to Current Report on Form 8-K dated
August 4, 1993; Specimen of 7 7/8% Senior Note due 2003 and
resolutions adopted by the Chairman of the Board of Directors is
incorporated by reference to Exhibit 4.3 to Current Report on
Form 8-K dated August 4, 1993).
4.3 Senior Subordinated Indenture dated as of July 15, 1993 by and
between the Company and The Bank of New York, as Trustee
(incorporated by reference to Exhibit 4.2 to Current Report on
Form 8-K dated August 4, 1993; Specimen of 8 5/8% Senior
Subordinated Note due 2005 and resolutions adopted by the
Chairman of the Board of Directors is incorporated by reference
to Exhibit 4.4 to Current Report on Form 8-K dated
August 4, 1993).
*4.4 Senior Indenture among the Company and The Bank of New York, as
Trustee, and Specimen of 7 1/2 Senior Notes due September 15,
2027.
4.5 Terms Agreement and the resolutions of adoption by the Chairman
of the Board of Directors related to Exhibit 4.4 (incorporated by
reference to Exhibit 2.3 to Current Report on Form 8-K filed with
the Securities and Exchange Commission on October 17, 1997).
*4.6 Note Agreement dated June 17, 1985 by and among Alaska Pipeline
Company and The Travelers Insurance Company, The Travelers Life
Insurance Company, and the Equitable Life Assurance Society of
the United States (collectively, the "Insurance Companies")
(including forms of notes and other exhibits thereto) and
Inducement Agreement of even date therewith by and among Seagull
and the Insurance Companies (the Note Agreement including
exhibits thereto incorporated by reference to Exhibit 4.1 to
Annual Report on Form 10-K for the year ended December 31, 1995;
the Form of Consent and Agreement dated April 15, 1991 by and
among Alaska Pipeline Company and the Insurance Companies
(including exhibits thereto) is filed herewith).
<PAGE>
4.7 Note Agreement dated May 14, 1992 by and among Alaska Pipeline
Company and each of the purchasers thereto (including forms of
notes and other exhibits thereto) and Inducement Agreement of
even date therewith by and among Seagull and Aid Association for
Lutherans, The Equitable Life Assurance Society of the United
States, Equitable Variable Life Insurance Company, Provident Life
& Accident Insurance Company and Teachers Insurance & Annuity
Association of America (including exhibits thereto) (incorporated
by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997).
4.8 Trust Agreement dated as of September 1, 1995 for the Seagull
Series 1995 Trust (the Trust Agreement is incorporated by
reference to Exhibit 10.1 to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995; the Guaranty by Seagull
Energy Corporation in favor of the Seagull Series 1995 Trust is
incorporated by reference to Exhibit 10.2 to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995).
4.9 Amended and Restated Rights Agreement dated March 17, 1989, as
amended effective June 13, 1992, and amended and restated as of
December 12, 1997, between the Company and BankBoston, N.A. (as
successor to NCNB Texas National Bank), including Form of
Statement of Resolution Establishing the Series B Junior
Participating Preferred Stock, the Form of Right Certificate and
Form of Summary of Rights to Purchase Preferred Shares
(incorporated by reference to Exhibit 2 to Current Report on Form
8-K dated December 15, 1997).
#10.1 Seagull Energy Corporation 1995 Executive Incentive Plan
(incorporated by reference to Exhibit 10.2 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995).
#10.2 Seagull Energy Corporation 1996 Executive Incentive Plan
(incorporated by reference to Exhibit 10.3 to Annual Report on
Form 10-K for the year ended December 31, 1996).
#10.3 Seagull Energy Corporation 1997 Executive Incentive Plan
(incorporated by reference to Exhibit 10.1 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997).
#10.4 Seagull Energy Corporation 1981 Stock Option Plan (Restated),
including forms of agreements, as amended (the amended and
restated plan is incorporated by reference to Exhibit 10.6 to
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993; Form of Amendment to Stock Option Agreement(s) for the
Seagull Energy Corporation is incorporated by reference to
Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995; Form of Amendment to Stock Option
Agreement(s) is incorporated by reference to Exhibit 10.4 to
Annual Report on Form 10-K for the year ended December 31, 1996).
#10.5 Seagull Energy Corporation 1983 Stock Option Plan (Restated),
including forms of agreements, as amended (the amended and
restated plan is incorporated by reference to Exhibit 10.7 to
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993; the amended form of Nonstatutory Stock Option Agreement is
incorporated by reference to Exhibit 10.15 to Annual Report on
Form 10-K for the year ended December 31, 1993; Form of Amendment
to Stock Option Agreement(s) for the Seagull Energy Corporation
is incorporated by reference to Exhibit 10.5 to the Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995; Form of
Amendment to Stock Option Agreement(s) is incorporated by
reference to Exhibit 10.5 to Annual Report on Form 10-K for the
year ended December 31, 1996).
#10.6 Seagull Energy Corporation 1986 Stock Option Plan (Restated),
including forms of agreements, as amended (the amended and
restated plan is incorporated by reference to Exhibit 10.8 to
<PAGE>
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993; the amended form of Nonstatutory Stock Option Agreement is
incorporated by reference to Exhibit 10.16 to Annual Report on
Form 10-K for the year ended December 31, 1993; Form of Amendment
to Stock Option Agreement(s) for the Seagull Energy Corporation
is incorporated by reference to Exhibit 10.5 to the Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995; Form of
Amendment to Stock Option Agreement(s) is incorporated by
reference to Exhibit 10.6 to Annual Report on Form 10-K for the
year ended December 31, 1996).
#10.7 Seagull Energy Corporation 1990 Stock Option Plan, including
forms of agreements, as amended (incorporated by reference to
Exhibit 10.22 to Annual Report on Form 10-K for the year ended
December 31, 1995; Form of Amendment to Stock Option Agreement(s)
is incorporated by reference to Exhibit 10.7 to Annual Report on
Form 10-K for the year ended December 31, 1996).
#10.8 Global Natural Resources Inc. 1989 Key Employees Stock Option
Plan (the Plan is incorporated by reference to Exhibit 4.1 to
Registration Statement No. 33-31537 of Global Natural Resources
Inc.; the Form of Stock Option Agreement is incorporated by
reference to Exhibit 4.2 to Registration Statement No. 33-31537
of Global Natural Resources Inc.; Form of Amendment to Stock
Option Agreement(s) is incorporated by reference to Exhibit 10.8
to Annual Report on Form 10-K for the year ended December 31,
1996).
#10.9 Global Natural Resources Inc. 1992 Stock Option Plan (the Plan
is incorporated by reference to Exhibit 10.47 to the Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992 of Global
Natural Resources Inc. (Registration No. 1-8674); the Form of
Stock Option Agreement is incorporated by reference to Exhibit
10.48 to the Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992 of Global Natural Resources Inc. (Registration No.
1-8674); Form of Amendment to Stock Option Agreement(s) is
incorporated by reference to Exhibit 10.9 to Annual Report on
Form 10-K for the year ended December 31, 1996).
#10.10 Seagull Energy Corporation 1993 Nonemployee Directors' Stock
Option Plan, including forms of agreements, as amended
(incorporated by reference to Exhibit 10.1 to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997).
#10.11 Seagull Energy Corporation 1993 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.3 to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997).
#10.12 1995 Omnibus Stock Plan (the Plan is incorporated by reference to
Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995; Form of Amendment to Stock Option
Agreement(s) is incorporated by reference to Exhibit 10.12 to
Annual Report on Form 10-K for the year ended December 31, 1996).
#10.13 Seagull Energy Corporation Management Stability Plan (the Plan is
incorporated by reference to Exhibit 10.35 to Annual Report on
Form 10-K for the year ended December 31, 1994; the First
Amendment is incorporated by reference to Exhibit 10.13 to Annual
Report on Form 10-K for the year ended December 31, 1996).
#10.14 Outside Directors Deferred Fee Plan of the Company, as amended
and restated (incorporated by reference to Exhibit 10.2 to
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996).
#10.15 Employment Agreement dated December 30, 1983 by and between the
Company and Barry J. Galt, Chairman of the Board, President and
Chief Executive Officer of the Company (the Agreement is
incorporated by reference to Exhibit 10.1 to Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993; Amendment to
Employment Agreement is incorporated by reference to Exhibit
10.15 to Annual Report on Form 10-K for the year ended December
31, 1996).
<PAGE>
#10.16 Executive Supplemental Retirement Plan Membership Agreement
between the Company and Barry J. Galt dated as of February 3,
1986, as amended (incorporated by reference to Exhibit 10.2 to
Quarterly Report on Form 10-Q for the quarter ended September 31,
1996).
#10.17 Restricted Stock Agreement made and entered into as of March 17,
1995 between Seagull Energy Corporation and Barry J. Galt
(incorporated by reference to Exhibit 10.32 to Annual Report on
Form 10-K for the year ended December 31, 1994).
#10.18 Severance Agreement between Seagull Energy Corporation and Barry
J. Galt (incorporated by reference to Exhibit 10.3 to Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995).
#10.19 Seagull Energy Corporation Executive Supplemental Retirement
Plan, as amended (incorporated by reference to Exhibit 1.1 to
Quarterly Report on Form 10-Q for the quarter ended September 30,
1996).
#10.20 Seagull Energy Corporation Supplemental Benefit Plan, as amended,
including the First Amendment thereto (incorporated by reference
to Exhibit 10.11 to Annual Report on Form 10-K for the year ended
December 31, 1995).
#10.21 Form of Restricted Stock Agreement made and entered into as of
March 17, 1995 between Seagull Energy Corporation and,
individually, Richard F. Barnes (granted 2,000 shares of
restricted Common Stock), John W. Elias (granted 3,000 shares of
restricted Common Stock) and William L. Transier (granted 3,000
shares of restricted Common Stock) (incorporated by reference to
Exhibit 10.33 to Annual Report on Form 10-K for the year ended
December 31, 1994).
#10.22 Form of Severance Agreement between Seagull Energy Corporation
and Richard F. Barnes, John W. Elias and William L. Transier
(incorporated by reference to Exhibit 10.34 to Annual Report on
Form 10-K for the year ended December 31, 1994).
#10.23 Consulting Agreement between Robert Vagt and Seagull Energy
Corporation (incorporated by reference to Exhibit 10.9 to
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997).
10.24 Royalty Incentive Plan, as amended (incorporated by reference to
Exhibit 1.4 to the Annual Report on Form 20-F for the year ended
December 31, 1981 of the U.K. Company).
10.25 Purchase and Sale Agreement by and among Seagull Energy
Corporation, Amoco Gas Company, Houston Pipe Line Company, Enron
Gas Processing Company and Mantaray Pipeline Company, as sellers
and Seahawk Gathering & Liquids Company as buyer and Tejas Power
Corporation as Guarantor dated July 28, 1995 (incorporated by
reference to Exhibit 10.6 to Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995).
10.26 Stock Purchase Agreement Between Seagull Energy Corporation and
Exxon Corporation relating to all of the Outstanding Capital
Stock of Esso Suez Inc., as executed in Houston, Texas on July
22, 1996 (incorporated by reference to Exhibit 2.1 to the Current
Report on Form 8-K filed on August 28, 1996).
10.27 Purchase and Sale Agreement Between Esso Egypt Limited and
Seagull Energy Corporation dated July 22, 1996 (incorporated by
reference to Exhibit 2.2 to the Current Report on Form 8-K filed
on August 28, 1996).
<PAGE>
10.28 Agreement and Plan of Merger dated as of July 22, 1996 by and
among Seagull Energy Corporation, GNR Merger Corporation and
Global Natural Resources Inc. (incorporated by reference to
Exhibit 2.1 to Registration Statement No. 333-09845 on Form S-4
of Seagull Energy Corporation).
10.29 Share Sale Agreement, dated as of September 11, 1997, by and
between Seagull Energy Canada Holding Company, Seagull Energy
Corporation and Rio Alto Exploration Ltd. (incorporated by
reference to Exhibit 2.1 to Current Report on Form 8-K dated
September 11, 1997).
*13 Portions of the Seagull Energy Corporation and Subsidiaries
Annual Report to Shareholders for the year ended December 31,
1996 which are incorporated by reference herein to this Annual
Report on Form 10-K of Seagull Energy Corporation and
Subsidiaries for the year ended December 31, 1997.
*21 Subsidiaries of Seagull Energy Corporation.
*23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Ryder Scott Company, independent petroleum engineers.
*23.3 Consent of DeGolyer and MacNaughton, independent petroleum
engineers.
*23.4 Consent of Netherland, Sewell and Associates, Inc., independent
petroleum engineers.
*27.1 Financial Data Schedule.
- --------------------
* Filed herewith.
# Identifies management contracts and compensatory plans or arrangements.
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
PAGE
Selected Financial Data................................................. 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 24
Selected Quarterly Financial Data....................................... 35
Report of Management to Shareholders.................................... 36
Independent Auditors' Report............................................ 37
Consolidated Statements of Operations................................... 38
Consolidated Balance Sheets............................................. 39
Consolidated Statements of Cash Flows................................... 40
Consolidated Statements of Shareholders' Equity......................... 41
Notes to Consolidated Financial Statements.............................. 42
</TABLE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA (1)
(Amounts in Thousands Except Per Share Data)
Year Ended December 31,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues............................... $ 549,367 $ 517,211 $ 406,280 $ 467,579 $ 452,232
Net income (loss) (2).................. 49,130 28,961 (1,738) (4,405) 34,095
Earnings (loss) per share:
Basic............................... 0.78 0.46 (0.03) (0.07) 0.56
Diluted............................. 0.77 0.46 (0.03) (0.07) 0.56
Net cash provided by operating
activities before changes in
operating assets and liabilities.... 249,587 220,543 124,822 182,413 174,697
Net cash provided by
operating activities................ 262,749 258,439 117,727 207,339 139,292
Total assets........................... 1,411,066 1,515,063 1,359,125 1,454,050 1,286,391
Long-term debt......................... 469,017 573,455 557,107 622,080 459,787
Shareholders' equity................... 647,204 597,730 562,621 557,646 567,943
Capital expenditures................... 275,608 213,462 144,101 202,553 137,894
Acquisitions, net of cash acquired..... 17,665 104,420 - 193,859 29,470
Standardized measure of discounted
future net cash flows before taxes.. 1,219,363 2,137,870 1,103,962 865,047 1,022,140
</TABLE>
(1) Includes Seagull Energy Canada Ltd. from January 4, 1994 through October 6,
1997.
(2) 1995 includes a non-cash pre-tax charge for the impairment of long-lived
assets of $49 million.
23 Seagull Energy Corporation
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
CONSOLIDATED HIGHLIGHTS
(Amounts in Thousands)
Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Oil and gas operations................................................ $ 453,648 $ 419,595 $ 308,510
Alaska transmission and distribution.................................. 95,719 97,616 97,770
--------------- --------------- ---------------
$ 549,367 $ 517,211 $ 406,280
=============== =============== ===============
Operating profit (loss):
Oil and gas operations................................................ $ 106,983 $ 97,192 $ (35,867)
Alaska transmission and distribution.................................. 22,588 25,781 22,896
Corporate............................................................. (19,095) (19,530) (23,798)
--------------- --------------- ---------------
$ 110,476 $ 103,443 $ (36,769)
=============== =============== ===============
Net income (loss).......................................................... $ 49,130 $ 28,961 $ (1,738)
Net cash provided by operating activities before changes in operating
assets and liabilities.................................................. $ 249,587 $ 220,543 $ 124,822
Net cash provided by operating activities.................................. $ 262,749 $ 258,439 $ 117,727
</TABLE>
In the last three years, Seagull Energy Corporation ("Seagull" or the
"Company") has made substantial changes in its operational focus. These changes
have resulted in more international operations, a greater component of oil in
Seagull's reserve base, a renewed emphasis on its exploration and production
activities and a strengthening of its balance sheet. These changes were
accomplished through various transactions throughout the three-year period ended
December 31, 1997 - including the sale of its Canadian oil and gas operations,
the merger with Global Natural Resources Inc. ("Global"), the purchase of
additional Egyptian concessions and the sale of substantially all of the
Company's pipeline and gas processing assets.
With these changes and an increase in domestic gas prices, Seagull's net
income improved by $20 million to $49 million in 1997 versus 1996 and cash flow
provided by operating activities before changes in operating assets and
liabilities improved $29 million to $250 million for 1997. The same factors
helped create a $31 million increase in net income (loss) from $(2) million in
1995 to $29 million in 1996 and a $96 million increase in cash flow provided by
operating activities before changes in operating assets and liabilities to $221
million for 1996 over $125 million for 1995. The increase in net income and cash
flow is concentrated in the Oil and Gas Operations ("O&G") segment.
24 Seagull Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
OIL AND GAS OPERATIONS
(Amounts in Thousands)
Year Ended December 31,
-----------------------------------------------------------
1997 1996 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues:
Natural gas................................................... $ 298,223 $ 298,235 $ 219,111
Oil and NGL................................................... 131,096 90,779 48,725
Pipeline and marketing........................................ 24,329 30,581 40,674
----------------- ----------------- -----------------
453,648 419,595 308,510
----------------- ----------------- -----------------
Production operating expenses...................................... 115,713 102,158 85,025
Pipeline and marketing expenses.................................... 28,670 24,091 30,674
Exploration charges................................................ 42,085 50,772 40,223
Depreciation, depletion and amortization........................... 160,197 145,382 139,613
Impairment of long-lived assets.................................... - - 48,842
----------------- ----------------- -----------------
Operating profit (loss)............................................ $ 106,983 $ 97,192 $ (35,867)
================= ================= =================
</TABLE>
As discussed previously, the O&G segment's results reflect some significant
changes in the focus of the Company's operations. Revenues from oil production
are now a more significant part of the Company's activities as reflected by
Seagull's expanding operations in Egypt. This growing presence in Egypt and
increases in domestic gas prices over the last three years have helped the O&G
segment's operating profit to grow from $13 million (excluding impairment of $49
million) in 1995 to $107 million in 1997.
The O&G segment showed a $34 million increase in revenues to $454 million
and a $10 million increase in operating profit to $107 million for 1997. This 8%
increase in O&G revenues was principally due to stronger natural gas prices in
nearly all areas of the Company's production operations and increases in
international oil and gas production, excluding Canada which was sold in October
1997.
The effect of stronger gas prices and international liquids production was
partially offset by a decline in oil prices in all areas other than Tatarstan,
particularly Egypt where the price decreased 15% from 1996 to 1997, and a
decrease in pipeline and marketing revenues. The 10% increase in the operating
profit of the O&G segment was primarily a result of the 160% increase in oil
production in Egypt. Increases in Egyptian oil production accounted for over
three quarters of the Company's overall increase in oil production, as Seagull
realized additional contributions from (i) the East Zeit and South Hurghada
concessions, the two concessions purchased in late 1996; (ii) the Qarun
concession, as additional production facilities became operational; and (iii)
the West Abu Gharadig concession, purchased in October 1997. Oil prices in Egypt
declined $3.30 per Bbl to $18.26 per Bbl in 1997 versus $21.56 per Bbl in 1996.
25 Seagull Energy Corporation
<PAGE>
In October 1997, the Company sold its Canadian oil and gas operations,
which had revenues of approximately $26 million, $34 million and $29 million and
income (loss) before income taxes of approximately $6 million, $(5) million and
$(11) million for the years ended December 31, 1997, 1996 and 1995,
respectively.
The $111 million increase in revenues for 1996 as compared to 1995 was
primarily the result of increases in domestic natural gas prices, increases in
international oil production and increases in international oil and gas prices.
The increase in domestic natural gas prices from $1.62 per Mcf for 1995 to $2.17
per Mcf for 1996 accounted for approximately $63 million of the overall increase
in revenues. International oil production increased over 1995 as production from
the Qarun concession in Egypt began in November 1995 and the Company purchased
interests in two additional Egyptian concessions in September 1996. Also,
production increased steadily during 1996 from Cote d'Ivoire, where production
began in April 1995. The increases in production in Cote d'Ivoire and Egypt
contributed approximately $35 million of the overall increase in revenues.
Domestic production also increased slightly, providing approximately $6 million
of the overall increase in revenues.
Pipeline and marketing revenues declined to $24 million in 1997 with the
absence of the higher margins created from the high volatility in the natural
gas markets during early 1996, partially offset by an increase in revenues
related to the Company's gas gathering and processing facilities. This increase
in gas gathering and processing revenues was substantially offset by an increase
in the related cost of gas. Pipeline and marketing revenues decreased from $41
million in 1995 to $31 million in 1996, primarily due to the sale of
substantially all of the Company's gas gathering and processing facilities (the
"Pipeline Assets") in September 1995, partially offset by the contribution of
the higher margins realized in 1996. The Pipeline Assets contributed
approximately $18 million in revenues and $6 million in operating profit for
1995.
In late 1995, Seagull initiated a risk management program for a portion of
its equity production and certain third-party marketing activities, utilizing
such derivative financial instruments as futures contracts, options and swaps.
In early 1997, the Company closed substantially all of its derivative financial
instruments related to equity production and focused its risk management efforts
on reducing price and basis risk for its third-party marketing activities.
Seagull accounts for its commodity derivative contracts as hedging activities
and, accordingly, the effect is included in revenues when the commodities are
sold.
The Company recorded $10 million, $9 million and $0.5 million for 1997,
1996 and 1995, respectively, in costs related to equity hedging activities and
$3 million in costs and $0.5 million in income for 1997 and 1996, respectively,
related to third-party marketing activities. By the end of the first quarter of
1997, the Company's equity hedging activities had been substantially reduced,
leaving primarily the commodity hedges in place as required by the monetary
production payment (related to the 1995 sale of the Company's Section 29 tax
credit-bearing properties) for approximately 11 MMcf per day through December
1998. The equity hedging costs discussed above include costs related to the
monetary production payment hedges of approximately $3 million and $4 million in
1997 and 1996, respectively. Total equity hedging costs had the effect of
reducing average gas prices by $0.06 per Mcfe
26 Seagull Energy Corporation
<PAGE>
for both 1997 and 1996 and $0.004 per Mcfe for 1995. At December 31, 1997, the
Company had open natural gas futures, swaps and option contracts related to its
third-party marketing efforts totaling 6 Bcf and 14 Bcf related to purchases and
sales, respectively, for the period from January through December 1998. At
December 31, 1997, the fair value related to the Company's commodity hedging
activities was $1 million of unrealized costs related to open contracts.
<TABLE>
<CAPTION>
OIL AND GAS REVENUES BY AREA
(Amounts in Thousands)
Year Ended December 31,
-----------------------------------------------------------------
1997 1996 1995
------------------ ------------------ -------------------
<S> <C> <C> <C>
Domestic..................................................... $ 290,337 $ 282,508 $ 205,706
Canada (*)................................................... 25,956 34,006 28,849
Egypt........................................................ 61,772 28,126 442
Cote d'Ivoire................................................ 15,995 12,798 4,377
Tatarstan.................................................... 21,558 15,626 16,037
Indonesia and other.......................................... 13,701 15,950 12,425
------------------ ------------------ -------------------
$ 429,319 $ 389,014 $ 267,836
================== ================== ===================
</TABLE>
(*) All of the Company's Canadian oil and gas operations were sold in
October 1997.
<TABLE>
<CAPTION>
PRODUCTION AND UNIT PRICE BY AREA
Net Daily Production Unit Price
----------------------------------------------- --------------------------------------------
Year Ended December 31, Year Ended December 31,
----------------------------------------------- --------------------------------------------
1997 1996 1995 1997 1996 1995
------------ ------------- ------------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gas Sales(1):
Domestic.................. 303 318 311 $ 2.34 $ 2.17 $ 1.62
Canada (2)................ 37 58 60 1.63 1.32 1.07
Cote d'Ivoire............. 6 4 1 1.93 1.77 1.61
Indonesia and other....... 11 12 11 3.18 3.36 2.96
------------ ------------- ------------- ----------- -------------- -----------
357 392 383 $ 2.29 $ 2.08 $ 1.57
============ ============= ============= =========== ============= ===========
Oil and NGL Sales(1):
Domestic................. 4,830 4,264 3,845 $17.60 $19.03 $15.84
Canada (2)............... 665 985 1,092 16.46 16.77 13.01
Egypt 9,268 3,565 67 18.26 21.56 17.97
Cote d'Ivoire............ 1,653 1,395 715 19.34 20.04 15.51
Tatarstan................ 4,143 3,053 2,909 14.26 13.98 15.11
Indonesia and other...... 152 147 125 19.31 19.58 17.38
------------ ------------- ------------- ----------- -------------- -----------
20,711 13,409 8,753 $17.34 $18.50 $15.53
============ ============= ============= =========== ============== ===========
</TABLE>
(1) Natural gas is stated in MMcf and $ per Mcf. Oil and NGLs are stated in Bbl
and $ per Bbl.
(2) All of the Company's Canadian oil and gas operations were sold in October
1997.
27 Seagull Energy Corporation
<PAGE>
Production operating expenses for 1997 increased approximately $14 million,
primarily due to the increased production associated with the Company's Egyptian
operations and increased domestic operating expenses. This increase in operating
expenses associated with the Company's domestic operations was the primary
reason for the $0.40 per BOE increase in production operating expense per
equivalent unit of production to $3.95 per BOE for 1997. Increased production
taxes as natural gas prices increased, a change in the mix of producing
properties and an increase in transportation expenses were the major
contributing factors to the increase in domestic operating expenses during 1997.
Production operating expenses increased $17 million from 1995 to 1996
principally as a result of the increased production in the United States and
Egypt. However, operating expense per equivalent unit of production for the
Company's E&P activities increased from $3.21 per BOE in 1995 to $3.55 per BOE
in 1996, primarily due to increased domestic transportation expense.
Depreciation, depletion and amortization ("DD&A") expense per equivalent
unit of production increased to $5.42 per BOE in 1997 from $4.98 per BOE in 1996
and combined with the increase in Egyptian production to produce a 10% increase
in DD&A expense for the O&G segment. A change in the mix of the properties being
produced internationally was the primary factor for the increase, partially
offset by a decrease in DD&A expense related to Canadian oil and gas properties.
DD&A expense increased from $140 million in 1995 to $145 million in 1996,
primarily due to increased production discussed above, partially offset by a
decrease in the average DD&A rate per equivalent unit of production from $5.16
per BOE in 1995 to $4.98 per BOE in 1996.
During 1995, the Company recognized a pre-tax, non-cash charge against
earnings of $49 million related to impairment of long-lived assets.
Capital Spending and Oil and Gas Reserves
Exploration and production capital expenditures in 1997 totaled $257
million, up substantially from $200 million in 1996 and $134 million in 1995.
Spending outside North America in 1997 totaled $102 million, of which $42
million was for exploration and $60 million for exploitation. Seagull
participated in the drilling of 54 exploratory wells during 1997, of which 27
were successful. Another 14 wells were in progress at year-end. Of the
successes, 18 were in the U.S., 4 in Egypt, 1 in Cote d'Ivoire, 1 in Tatarstan
and 3 in Canada. In addition, domestic exploitation expenditures picked up
considerably in 1997 and 1996 after being severely curtailed in 1995 due to
depressed U.S. gas prices.
Seagull's program of relatively small domestic producing property
acquisitions initiated in 1996 resulted in the addition of 1.2 MMBOE at a cost
of $7 million in 1997 and 6.2 MMBOE at a cost of $29 million in 1996.
Through drilling and proved property acquisitions, the Company replaced
168% of its production during 1997 at a cost of $5.58 per BOE and 144% of its
production over the three-year period 1995 through 1997 at a cost of $5.73 per
BOE. However, Seagull's proved oil and gas reserves decreased from 258 MMBOE at
year-end 1996 to 217 MMBOE at December 31, 1997, as the sale of the Company's
Canadian properties offset reserve additions realized elsewhere.
The standardized measure of discounted future net cash flows before taxes
for Seagull's
28 Seagull Energy Corporation
<PAGE>
proved oil and gas reserves, calculated based on Securities and Exchange
Commission criteria, decreased to $1.2 billion at December 31, 1997 compared
with $2.1 billion at the end of 1996. This decrease was primarily the result of
the Canadian sale and lower year-end commodity prices at December 31, 1997
compared to December 31, 1996. Year-end calculations were made using an average
price of $15.41 and $20.99 per Bbl for oil, condensate and NGL and $2.42 and
$3.27 per Mcf for gas for 1997 and 1996, respectively. The Company's average
realized prices for the year ended December 31, 1997 were $17.34 per Bbl for
oil, condensate and NGL and $2.29 per Mcf for gas. The Company's average
realized prices for the month ended January 31, 1998 were $14.47 per Bbl for
oil, condensate and NGL and $2.21 per Mcf for gas. Because the disclosure
requirements for discounted future net cash flows are standardized, significant
changes can occur in these estimates based upon oil and gas prices in effect at
year-end. The above estimates should not be viewed as an estimate of fair market
value. See Note 15 of Notes to Consolidated Financial Statements.
Outlook
At year-end 1997, the Company was producing about 320 MMcf per day of
natural gas and 20,900 Bbl per day of crude oil, condensate and NGL worldwide.
In the United States, Seagull expects to maintain its level of domestic gas
production of about 300 MMcf per day. Internationally, liquids production
increases are anticipated in Egypt, as the first production from the East Beni
Suef concession begins.
The future results of the O&G segment will be affected by the market prices
of oil and natural gas and the Company's degree of exploration success. The
availability of a ready market for oil, natural gas and liquid products in the
future will depend on numerous factors beyond the control of the Company,
including weather, the Company's ability to hire and return skilled personnel,
production of other crude oil, natural gas and liquid products, imports,
marketing of competitive fuels, proximity and capacity of oil and gas pipelines
and other transportation facilities, any oversupply or undersupply of oil, gas
and liquid products, operating hazards attendant to the oil and gas business,
the availability and cost of material and equipment, the regulatory environment
in the domestic and foreign jurisdictions where the Company does business and
other international, regional and political events, none of which can be
predicted with certainty.
29 Seagull Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
ALASKA TRANSMISSION AND DISTRIBUTION
(Amounts in Thousands Except Degree Days)
Year Ended December 31,
--------------------------------------------------------
1997 1996 1995
---------------- --------------- ---------------
<S> <C> <C> <C>
Revenues................................................................ $ 95,719 $ 97,616 $ 97,770
Cost of gas sold........................................................ 43,684 42,600 46,328
---------------- --------------- ---------------
Gross margin............................................................ 52,035 55,016 51,442
Operations and maintenance expense...................................... 21,079 21,045 20,504
Depreciation, depletion and amortization................................ 8,368 8,190 8,042
---------------- --------------- ---------------
Operating profit........................................................ $ 22,588 $ 25,781 $ 22,896
================ =============== ===============
OPERATING DATA:
Degree days (*)...................................................... 9,727 10,975 9,997
</TABLE>
(*) A measure of weather severity calculated by subtracting the mean
temperature for each day from 65 degrees Fahrenheit. More degree days
equate to colder weather.
Operating profit of the Alaska transmission and distribution segment of the
Company ("ENSTAR Alaska") is primarily a function of the weather in the
Anchorage, Alaska area during the winter heating season. Cold weather equates to
higher gas volumes delivered, resulting in increased profits. This relationship
between operating profit and degree days held true in 1997 and 1996 as the
percentage change in operating profit (12% decrease in 1997 versus 1996 and 13%
increase in 1996 versus 1995) was approximately equal to the percentage change
in degree days (11% decrease in 1997 and 10% increase in 1996).
Outlook
ENSTAR Alaska will continue to play a significant role in Seagull's future.
Even though its activities may be somewhat different from the Company's other
O&G-oriented activities, management expects ENSTAR Alaska's stable cash flows
and activities to continue to contribute to Seagull's goals and financial
stability.
Future operating profit for this segment will be affected by weather,
regulatory action and customer growth in ENSTAR Alaska's service area. The 1997
degree days were 6% under the previous 30-year average degree days. The Company
expects customer growth to continue at a modest 2% to 3% rate. During the 1997
summer construction season, approximately 63 miles of new distribution pipelines
were installed to connect some 2,700 new customers (a 3% increase in customers
over 1996).
ENSTAR Alaska purchases all of its natural gas under long-term contracts in
which the price is indexed to changes in the price of crude oil futures
contracts. However, because ENSTAR Alaska's sales prices are adjusted to include
the projected cost of its natural gas, there has been and is expected to be
little or no impact on margins derived from ENSTAR Alaska's gas sales as a
result of fluctuations in commodity prices due to worldwide political events and
changing market conditions.
Currently, ENSTAR Alaska's supply source is confined to the Cook Inlet
area. During 1997, two of the Cook Inlet area's major suppliers filed for
regulatory approval to export certain quantities of gas to overseas LNG markets.
ENSTAR Alaska has filed as an intervenor in these proceedings and is actively
working with regulatory authorities to ensure that the future gas supply needs
of its customers are met.
30 Seagull Energy Corporation
<PAGE>
OTHER
After excluding the effects of provisions for litigation ($4.5 million in
1997 for a proposed settlement and $3 million in 1996 covering several minor
settlements), general and administrative expenses decreased from $14.4 million
in 1996 to $11.6 million in 1997. This decrease in general and administrative
expenses from 1996 to 1997 was primarily due to a decrease in certain expenses
due to efficiencies realized as a result of the Global merger and a decline in
expenses associated with compensation plans that are tied directly to the market
price of Seagull's common stock. In November 1997, the Company, NorAm Gas
Transmission Company and Arkansas Western Gas Company signed a settlement
proposal regarding the litigation discussed in Note 14 of Notes to the
Consolidated Financial Statements. As a result of the settlement proposal, the
Company recorded a pre-tax charge of approximately $4.5 million.
In the second quarter of 1995, the Company initiated a workforce reduction
and consolidation with the savings reflected in lower operating expenses. As
part of this action, Seagull recorded one-time pre-tax charges of $8 million in
general and administrative expenses. General and administrative expenses
increased approximately $4 million to $17 million in 1996 as compared to 1995,
excluding the $8 million charge for workforce reduction and consolidation, as a
result of an increase in incentive compensation expenses and the Company's
expanding international operations.
Interest expense declined from $53 million in 1995 and $45 million in 1996
to $39 million for 1997 through utilization of the proceeds from the sale of the
Company's Canadian operations in late 1997 and Pipeline Assets in late 1995 to
repay amounts outstanding under the Company's existing credit facilities.
Interest cost capitalized as property, plant and equipment amounted to
approximately $7 million, $3 million and $1 million in 1997, 1996 and 1995,
respectively.
As discussed earlier, the Company and Global completed a merger in October
1996, which was accounted for as a pooling-of-interests. As a result of the
merger, expenses of $10 million ($9 million after taxes) representing investment
banking fees, legal, accounting and other expenses were recorded.
Gain on sales of assets is primarily comprised of pre-tax gains of
approximately $12 million related to the 1997 sale of the Company's Canadian oil
and gas operations and $82 million related to the 1995 sale of the Pipeline
Assets.
Seagull's effective tax rate for 1997 of 43% decreased from the effective
tax rate of 47% for 1996 primarily due to an income tax benefit associated with
the gain on the sale of the Company's Canadian operations. With the increase in
the Company's international activities with their associated higher effective
tax rates, Seagull's 1997 effective tax rate had been expected to increase.
However substantial increases in domestic O&G income before taxes kept the
domestic to international proportion of income before taxes (and therefore the
effective tax rate before the sale of the Company's Canadian operations)
unchanged. In 1996, the increasing proportion of international operations, and
an increase in income before taxes, did lead to an increase in income tax
expense from $3 million in 1995 to $26 million in 1996.
31 Seagull Energy Corporation
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES AND ACQUISITIONS
(Amounts in Thousands)
Year Ended December 31,
---------------------------------------------------------
1997 1996 1995
------------------ ----------------- -----------------
<S> <C> <C> <C>
Capital Expenditures:
Exploration and production:
Lease acquisitions................................................ $ 23,141 $ 12,986 $ 18,000
Exploration....................................................... 95,681 77,774 46,575
Development....................................................... 137,806 108,763 69,260
------------------ ----------------- -----------------
256,628 199,523 133,835
Other oil and gas operations......................................... 885 228 441
------------------- ----------------- -----------------
Total oil and gas operations...................................... 257,513 199,751 134,276
Alaska transmission and distribution................................. 9,607 9,287 7,611
Corporate............................................................ 8,488 4,424 2,214
------------------- ----------------- -----------------
$ 275,608 $ 213,462 $ 144,101
=================== ================= ================
Acquisitions........................................................... $ 17,665 $ 104,420 $ -
=================== ================= ================
</TABLE>
Seagull's long-term goal is to grow its reserve base and its crude oil and
natural gas production capacity while maintaining a strong balance sheet. The
Company seeks a balanced approach of growing through its drilling efforts
complemented by strategic acquisitions of additional oil and gas assets in its
core operating areas. This desire to grow more through drilling has led the
Company in the last few years to broaden its exploration focus beyond the Gulf
Coast offshore area where Seagull originally concentrated its exploration
efforts. Seagull also has endeavored to bring more balance to its mix of crude
oil and natural gas assets, thereby lessening its dependence upon natural gas
and increasing (i) the percentage of crude oil represented in the Company's
total portfolio of proved reserves, (ii) its capacity to produce those reserves,
and (iii) the international orientation of its reserve base. To these ends, the
Company completed two business combinations in 1996 that reflect this shift in
strategy - the purchase of two Egyptian concessions from Exxon Corporation and
the stock-for-stock Global merger. These combinations brought a substantial
number of exploratory prospects to the Company, complementing its large
portfolio of long-lived domestic natural gas producing properties and a large,
stable cash flow base generated from oil and gas sales and its non-exploration
and production activities. These combinations also increased the Company's
ability to generate
32 Seagull Energy Corporation
<PAGE>
growth through its drilling efforts over the next several years in both its
proved reserves and its crude oil and natural gas production capacity.
Seagull's capital expenditures increased by $62 million to $276 million for
1997 versus almost $214 million in 1996. Of this amount, exploration and
production capital expenditures in 1997 totaled $257 million, up substantially
from $200 million in 1996 and $134 million in 1995. Spending outside North
America totaled $103 million, of which $43 million was for exploration and $60
million for exploitation.
DATA FROM GRAPHICS
<TABLE>
<CAPTION>
<S> <C>
(In Millions)
1998 Plan for E&P Expenditures of $257 Million
Domestic........................................................................$151
Egypt.............................................................................94
Other.............................................................................12
1997 Actual E&P Expenditures of $257 Million
Domestic........................................................................$141
Egypt.............................................................................83
Canada............................................................................13
Other.............................................................................20
1996 Actual E&P Expenditures of $200 Million
Domestic........................................................................$140
Egypt.............................................................................33
Canada............................................................................15
Other.............................................................................12
</TABLE>
Plans for 1998 call for capital expenditures of approximately $274 million,
including about $257 million in E&P. Seagull anticipates spending approximately
$154 million for development, $22 million for lease acquisitions and $81 million
will be devoted to exploration. Of this total, about $106 million is expected to
<PAGE>
be spent outside the U.S. The 1998 capital program anticipates about 60
exploratory wells, of which approximately half would be drilled in the U.S.
LIQUIDITY
Combined with the Company's long-term goal to grow its reserve base through
its drilling efforts and complementary strategic acquisitions, a strong balance
sheet is also a specific objective of management. To that end, Seagull reduced
its borrowings under existing bank facilities in 1997 by $133 million with a
portion of the proceeds from the sale of the Company's Canadian operations and
in 1995 by $143 million with the proceeds from the sale of the Pipeline Assets
and the Section 29 Properties. At December 31, 1997, there were no balances
outstanding under the Company's $500 million credit facility and the Company's
debt to capitalization ratio was 42%, compared with 49% at December 31, 1996.
With this stronger balance sheet in place, management believes that the Company
is well positioned to achieve its reserve growth and production capacity
objectives even in times when declining commodity prices result in lower cash
flows from operations.
On September 30, 1997, Seagull issued $150 million of senior notes (the
"1997 Senior Notes") at a public offering price of 99.544% of face value. The
1997 Senior Notes have a coupon of 7.5% and mature September 15, 2027. The 1997
Senior Notes are not redeemable prior to maturity and are not subject to any
sinking fund. The net proceeds of approximately $146 million were used to repay
existing debt and for general corporate purposes. The 1997 Senior Notes
represent unsecured obligations of the Company and rank pari passu with all
other unsecured, unsubordinated obligations of the Company.
The Company also has a $500 million revolving credit facility ("Revolving
Credit Facility"). During 1997, the Company amended and restated the Revolving
Credit Facility to, among other things, change the maturity date to December 31,
2002, reduce stated interest rate margins and remove, or modify, various
financial covenants. At December 31, 1997, there were no amounts borrowed under
the Revolving Credit Facility, however standby letters of credit totaling
approximately $19 million were outstanding. See Notes 4 and 6 of Notes to
Consolidated Financial Statements for additional information relating to
acquisitions and debt.
The Company has money market facilities with two U.S. banks with a combined
maximum commitment of $100 million. These lines of cred-
33 Seagull Energy Corporation
<PAGE>
it bear interest at rates made available by the banks at their option and may be
canceled at either Seagull's or the banks' option. There were no amounts
outstanding under these money market facilities at December 31, 1997.
ENVIRONMENTAL
To date, compliance with applicable environmental and safety regulations by
the Company has not required any significant capital expenditures or materially
affected its business or earnings. The Company believes it is in substantial
compliance with environmental and safety regulations and foresees no material
expenditures in the future; however, the Company is unable to predict the impact
that compliance with future regulations may have on capital expenditures,
earnings and competitive position.
YEAR 2000
Historically, most computer systems (including microprocessors embedded
into field equipment and other machinery) utilized software that processed
transactions using two digits to represent the year of the transaction (i.e., 97
represents the year 1997). This software (including software built into embedded
microprocessors) requires modification to properly process dates beyond December
31, 1999 (the "Year 2000 Issue"). In the first quarter of 1997, the Company
completed its assessment of the Year 2000 Issue and determined that
modifications or replacements of a portion of its software were required. The
Company's Year 2000 remediation was substantially complete at December 31, 1997.
The Company utilized both internal and external resources to reprogram, or
replace, and test the software for Year 2000 Issue modifications. To date, the
Company has incurred and expensed approximately $300,000 related to the
assessment and remediation of the Year 2000 Issue. The Company presently
believes that, as a result of these modifications to existing software and
conversions to new software, the Year 2000 Issue will not have a material
adverse effect attributable to the Company's systems.
The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company is
vulnerable to those third parties' potential failure to remediate their own Year
2000 Issue. However, there can be no guarantee that the systems of other
companies, on which the Company's systems rely, will be timely converted, or
that a failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have a material adverse
effect on the Company.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." This statement establishes standards
for reporting and display of comprehensive income and its components in the
Company's financial statements. Comprehensive income includes all changes in the
Company's equity except investments by and distributions to owners and includes,
among other things, foreign currency translation adjustments. In June 1997, the
FASB also issued SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." This statement establishes standards for reporting
information about operating segments in annual financial statements and requires
selected infor-
34 Seagull Energy Corporation
<PAGE>
mation about operating segments to be included in interim reports issued to
shareholders. Both of these statements are effective for financial statements
for periods beginning after December 15, 1997. As both SFAS No's. 130 and 131
establish standards for reporting and display, the Company does not expect the
adoption of these statements to have a material impact on its financial
condition or results of operations.
DEFINED TERMS
Natural gas is stated herein in billion cubic feet ("Bcf"), million cubic
feet ("MMcf") or thousand cubic feet ("Mcf"). Oil, condensate and natural gas
liquids ("NGL") are stated in barrels ("Bbl") or thousands of barrels ("Mbbl").
MMcfe and Mcfe represent the equivalent of one million and one thousand cubic
feet of natural gas, respectively. Oil, condensate and NGL are converted to gas
at a ratio of one barrel of liquids per six Mcf of gas, based on relative energy
content. MMBOE, MBOE and BOE represent one million, one thousand and one barrel
of oil equivalent, respectively, with six Mcf of gas converted to one barrel of
liquid.
SELECTED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data is as follows (amounts in thousands
except per share data):
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------------------- ------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
1997:
Revenues....................... $ 159,573 $ 122,180 $ 120,655 $ 146,959
Operating Profit............... $ 46,606 $ 17,811 $ 13,456 $ 32,603
Net Income..................... $ 17,254 $ 2,621 $ 3,202 $ 26,053 (2)
Earnings per Share:
Basic........................ $ 0.27 $ 0.04 $ 0.05 $ 0.41
Diluted(1)................... $ 0.27 $ 0.04 $ 0.05 $ 0.41
1996:
Revenues....................... $ 136,575 $ 112,289 $ 109,931 $ 158,416
Operating Profit............... $ 37,375 $ 13,616 $ 19,200 $ 33,252
Net Income (Loss).............. $ 18,312 $ (2,934) $ 7,458 $ 6,125 (3)
Earnings (Loss) per Share:
Basic........................ $ 0.29 $ (0.05) $ 0.12 $ 0.10
Diluted(1)................... $ 0.29 $ (0.05) $ 0.12 $ 0.10
</TABLE>
(1) Quarterly earnings (loss) per common share may not total to the full year
per share amount, as the weighted average number of shares outstanding for each
quarter fluctuated as a result of the assumed exercise of stock options.
(2) Includes $12 million pre-tax gain on sale of Canadian oil and gas
operations.
(3) Includes $10 million pre-tax merger expenses relating to the Global merger.
35 Seagull Energy Corporation
<PAGE>
REPORT OF MANAGEMENT TO SHAREHOLDERS
The management of Seagull Energy Corporation is responsible for the
preparation and integrity of financial statements and related data in this
Annual Report, whether audited or unaudited. The financial statements were
prepared in conformity with generally accepted accounting principles and include
certain estimates and judgments which management believes are reasonable under
the circumstances.
Management is responsible for and maintains a system of internal accounting
controls that is sufficient to provide reasonable assurance that assets are
safeguarded against loss or unauthorized use and that financial records are
reliable for preparing financial statements, as well as to prevent and detect
fraudulent financial reporting. The internal control system is supported by
written policies and procedures and the employment of trained, qualified
personnel. The Company has an internal auditing staff which reviews the adequacy
of the internal accounting controls and compliance with them. Management has
considered the recommendations of the internal auditing staff and KPMG Peat
Marwick LLP concerning the Company's system of internal controls and has
responded appropriately to those recommendations.
The accompanying consolidated financial statements of Seagull Energy
Corporation and Subsidiaries as of December 31, 1997 have been audited by KPMG
Peat Marwick LLP, independent certified public accountants, and their report is
included herein. Their audits were made in accordance with generally accepted
auditing standards and included a review of the system of internal controls to
the extent considered necessary to determine the audit procedures required to
support their opinion on the consolidated financial statements.
The Board of Directors, through its Audit Committee composed exclusively of
outside directors, meets periodically with representatives of management, the
internal auditing staff and the independent auditors to ensure the existence of
effective internal accounting controls and to ensure that financial information
is reported accurately and timely with all appropriate disclosures included. The
independent auditors and the internal auditing staff have full and free access
to, and meet with, the Audit Committee, with and without management present.
/s/ Barry J. Galt
Barry J. Galt
Chairman and
Chief Executive Officer
/s/ William L. Transier
William L. Transier
Senior Vice President and
Chief Financial Officer
/s/ Gordon L. McConnell
Gordon L. McConnell
Vice President and Controller
January 28, 1998
36 Seagull Energy Corporation
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Seagull Energy Corporation:
We have audited the accompanying consolidated balance sheets of Seagull
Energy Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Seagull
Energy Corporation and Subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Houston, Texas
January 28, 1998
37 Seagull Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share Amounts)
Year Ended December 31,
---------------------------------------------------
1997 1996 1995
-------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Oil and gas operations............................ $ 453,648 $ 419,595 $ 308,510
Alaska transmission and distribution.............. 95,719 97,616 97,770
-------------- --------------- ---------------
549,367 517,211 406,280
-------------- --------------- ---------------
Costs of Operations:
Operations and maintenance........................ 165,462 147,294 136,203
Alaska transmission and distribution cost of gas
sold............................................ 43,684 42,600 46,328
Exploration charges............................... 42,085 50,772 40,223
Depreciation, depletion and amortization.......... 171,516 155,669 149,685
Impairment of long-lived assets................... - - 48,842
General and administrative........................ 16,144 17,433 21,768
-------------- --------------- ---------------
438,891 413,768 443,049
-------------- --------------- ---------------
Operating Profit (Loss)............................... 110,476 103,443 (36,769)
Other (Income) Expense:
Interest expense.................................. 38,533 44,842 52,978
Merger expenses................................... - 9,982 -
Gain on sales of assets, net...................... (11,311) (1,088) (83,388)
Interest income and other......................... (2,946) (5,149) (7,403)
-------------- --------------- ---------------
24,276 48,587 (37,813)
-------------- --------------- ---------------
Income Before Income Taxes............................ 86,200 54,856 1,044
Income Tax Expense.................................... 37,070 25,895 2,782
-------------- --------------- ---------------
Net Income (Loss)..................................... $ 49,130 $ 28,961 $ (1,738)
============== =============== ===============
Earnings (Loss) Per Share:
Basic............................................. $ 0.78 $ 0.46 $ (0.03)
============== =============== ===============
Diluted........................................... $ 0.77 $ 0.46 $ (0.03)
============== =============== ===============
Weighted Average Number of Common
Shares Outstanding:
Basic.......................................... 63,022 62,584 62,107
============== =============== ===============
Diluted........................................ 63,791 63,552 62,107
============== =============== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
38 Seagull Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except Share and Per Share Data)
December 31,
------------------------------------
1997 1996
--------------- ----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................... $ 45,654 $ 15,284
Accounts receivable, net.......................................... 147,442 193,659
Inventories....................................................... 13,635 12,285
Prepaid expenses and other........................................ 16,240 6,389
--------------- ----------------
Total Current Assets........................................... 222,971 227,617
Property, Plant and Equipment:
Oil and gas properties (successful efforts method)................ 1,742,725 1,750,784
Utility plant..................................................... 246,670 238,091
Other............................................................. 64,288 60,481
--------------- ----------------
2,053,683 2,049,356
Accumulated Depreciation, Depletion and Amortization.................. 908,849 804,715
--------------- ----------------
1,144,834 1,244,641
Other Assets.......................................................... 43,261 42,805
--------------- ----------------
Total Assets.......................................................... $ 1,411,066 $ 1,515,063
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts and note payable......................................... $ 159,138 $ 166,775
Accrued expenses.................................................. 47,625 57,368
Current maturities of long-term debt.............................. 7,097 7,227
--------------- ----------------
Total Current Liabilities...................................... 213,860 231,370
Long-Term Debt........................................................ 469,017 573,455
Other Noncurrent Liabilities.......................................... 51,168 65,428
Deferred Income Taxes................................................. 14,126 31,021
Redeemable Bearer Shares.............................................. 15,691 16,059
Commitments and Contingencies......................................... - -
Shareholders' Equity:
Common Stock, $.10 par value; authorized 100,000,000
shares; issued 63,877,442 in 1997 and 63,073,287 in 1996....... 6,388 6,307
Additional paid-in capital........................................ 493,829 483,118
Retained earnings................................................. 164,935 115,805
Foreign currency translation adjustment........................... - 51
Less: note receivable from employee stock
ownership plan................................................. (2,990) (4,284)
Less: treasury stock, at cost; 861,314 shares in 1997
and 361,314 shares in 1996..................................... (14,958) (3,267)
--------------- ----------------
Total Shareholders' Equity............................................ 647,204 597,730
--------------- ----------------
Total Liabilities and Shareholders' Equity............................ $ 1,411,066 $ 1,515,063
=============== ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
39 Seagull Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Year Ended December 31,
----------------------------------------------
1997 1996 1995
-------------- ------------- --------------
<S> <C> <C> <C>
Operating Activities:
Net income (loss)............................................................... $ 49,130 $ 28,961 $ (1,738)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation, depletion and amortization..................................... 171,516 155,669 149,685
Impairment of long-lived assets.............................................. - - 48,842
Amortization of deferred financing costs..................................... 2,037 2,969 3,429
Deferred income taxes........................................................ 9,418 8,701 (16,292)
Dry hole expense............................................................. 20,062 23,671 22,153
Gains on sale of assets, net................................................. (11,311) (1,088) (83,388)
Other........................................................................ 8,735 1,660 2,131
-------------- ------------- --------------
249,587 220,543 124,822
Changes in operating assets and liabilities, net of acquisitions:
Decrease in short-term liquid investments.................................. - 5,014 28,538
Decrease (increase) in accounts receivable................................. 39,211 (53,531) (21,721)
Decrease (increase) in inventories, prepaid expenses and other............. (10,797) 9,731 1,793
Increase (decrease) in accounts payable.................................... 9,779 53,281 (15,551)
Increase (decrease) in accrued expenses and other.......................... (25,031) 23,401 (154)
-------------- ------------- --------------
Net Cash Provided By Operating Activities..................................... 262,749 258,439 117,727
Investing Activities:
Capital expenditures............................................................ (275,608) (213,462) (144,101)
Acquisitions of oil and gas properties.......................................... (17,665) (90,867) -
Acquisitions of other assets and liabilities, net of cash acquired.............. - (13,553) -
Proceeds from sale of assets, net............................................... 186,494 10,557 107,960
-------------- ------------- --------------
Net Cash Used In Investing Activities......................................... (106,779) (307,325) (36,141)
Financing Activities:
Proceeds from debt.............................................................. 821,097 407,738 668,815
Principal payments on debt...................................................... (938,554) (368,754) (737,473)
Proceeds from sales of common stock............................................. 7,422 4,401 2,241
Purchase of treasury stock...................................................... (11,691) - -
Other.......................................................................... (3,846) (1,051) (3,957)
-------------- ------------- --------------
Net Cash Provided By (Used In) Financing Activities........................... (125,572) 42,334 (70,374)
Effect of exchange rate changes on cash............................................ (28) 359 (48)
-------------- ------------- --------------
Increase (Decrease) In Cash and Cash Equivalents................................ 30,370 (6,193) 11,164
Cash and Cash Equivalents at Beginning of Year..................................... 15,284 21,477 10,313
-------------- ------------- --------------
Cash and Cash Equivalents at End of Year........................................... $ 45,654 $ 15,284 $ 21,477
============== ============= ==============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
40 Seagull Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in Thousands)
Foreign Note
Additional Currency Receivable
Common Paid-in Retained Translation From Treasury
Stock Capital Earnings Adjustment ESOP Stock Total
---------- ------------- ------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1995............... $ 6,577 $ 493,578 $ 88,582 $ (2,684) $(5,502) $ (22,902) $ 557,649
Net loss for the period.... - - (1,738) - - - (1,738)
Exercise of employee
stock options........... 21 2,220 - - - - 2,241
Foreign currency
translation adjustment.. - - - 3,073 - - 3,073
Repayment of ESOP note..... - - - - 580 - 580
Other...................... - 579 - - - 237 816
---------- ------------- ------------- ------------ ----------- ------------- -------------
December 31, 1995............. 6,598 496,377 86,844 389 (4,922) (22,665) 562,621
Net income for the period.. - - 28,961 - - - 28,961
Retirement of treasury
stock pursuant to the
Global Merger........... (335) (19,021) - - - 19,356 -
Exercise of employee
stock options........... 44 4,357 - - - - 4,401
Foreign currency
translation adjustment.. - - - (338) - - (338)
Repayment of ESOP note .... - - - - 638 - 638
Other...................... - 1,405 - - - 42 1,447
---------- ------------- ------------- ------------ ----------- ------------- -------------
December 31, 1996............. 6,307 483,118 115,805 51 (4,284) (3,267) 597,730
Net income for the period.. - - 49,130 - - - 49,130
Purchase of treasury stock. - - - - - (11,691) (11,691)
Exercise of employee
stock options........... 81 7,341 - - - - 7,422
Foreign currency
translation adjustment.. - - - (51) - - (51)
Repayment of ESOP note .... - - - - 1,294 - 1,294
Other...................... - 3,370 - - - 3,370
---------- ------------- ------------- ------------ ----------- ------------- -------------
December 31, 1997............. $ 6,388 $ 493,829 $ 164,935 $ - $(2,990) $ (14,958) $ 647,204
========== ============= ============= ============ =========== ============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
41 Seagull Energy Corporation
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Seagull Energy Corporation (the "Company" or "Seagull") is an international
oil and gas company engaged in exploration and development activities in the
United States, Egypt, Cote d'Ivoire, Indonesia and the Russian Republic of
Tatarstan. It also transports, distributes and markets natural gas, liquids
products and petrochemicals.
Merger with Global Natural Resources Inc. -- On October 3, 1996, the
shareholders of Seagull and Global Natural Resources Inc. ("Global") approved a
merger of a wholly owned subsidiary of Seagull into Global (the "Global
Merger"), with each share of Global common stock converted into 0.88 shares of
Seagull common stock. The Global Merger was accounted for as a pooling of
interests.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General -- The accompanying consolidated financial statements of Seagull
have been prepared according to generally accepted accounting principles and
pursuant to the rules and regulations of the Securities and Exchange Commission.
These accounting principles require the use of estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates. Certain
reclassifications have been made in the 1996 and 1995 financial statements to
conform to the presentation used in 1997.
Consolidation -- The accompanying consolidated financial statements include
the accounts of Seagull Energy Corporation and its majority-owned entities. All
significant intercompany transactions have been eliminated.
Regulation -- The Company operates in Alaska through a division of the
Company and a wholly owned subsidiary (collectively referred to herein as
"ENSTAR Alaska"). ENSTAR Alaska is subject to regulation by the Alaska Public
Utilities Commission ("APUC"), which has jurisdiction over, among other things,
rates, accounting procedures and standards of service.
Cash Equivalents -- The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
Inventories -- Materials and supplies are valued at the lower of average
cost or market value (net realizable value).
Oil And Gas Properties -- The Company uses the successful efforts method of
accounting for its oil and gas operations whereby acquisition costs and
exploratory drilling costs related to properties with proved reserves and all
development costs including development dry holes are capitalized. Under this
method, all costs to acquire mineral interest in oil and gas properties, to
acquire production sharing contracts with foreign governments, to drill and
equip exploratory wells which find proved reserves and to drill and equip
development wells are capitalized. Exploratory charges, including
42 Seagull Energy Corporation
<PAGE>
exploratory dry holes, geological and geophysical costs, delay rentals and
technical support, are expensed as incurred. Other internal costs related to oil
and gas activities are generally expensed as operations and maintenance expense
or exploration charges. Unproved leaseholds with significant acquisition costs
are assessed periodically, on a property-by-property basis, and a loss is
recognized to the extent, if any, that the cost of the property has been
impaired. Unproved leaseholds whose acquisition costs are not individually
significant are aggregated, and the portion of such costs estimated to
ultimately prove nonproductive, based on experience, are amortized over an
average holding period. As unproved leaseholds are determined to be productive,
the related costs are transferred to proved leaseholds. Capitalized costs are
depleted using the unit-of-production method based upon estimates of proved oil
and gas reserves on a depletable unit basis. Estimated costs (net of salvage
value) of dismantling and abandoning oil and gas production facilities are
computed by the Company's engineers and included when calculating depreciation
and depletion using the unit-of-production method. The total estimated future
dismantlement and abandonment cost being amortized as of December 31, 1997 was
approximately $26 million.
The Company performs a review for impairment of proved oil and gas
properties on a depletable unit basis when circumstances suggest there is a need
for such a review. For each depletable unit determined to be impaired, an
impairment loss equal to the difference between the carrying value and the fair
value of the depletable unit will be recognized. Fair value, on a depletable
unit basis, is estimated to be the present value of expected future cash flows
computed by applying estimated future oil and gas prices, as determined by
management, to estimated future production of oil and gas reserves over the
economic lives of the reserves. As a result of the impairment review, the
Company recognized a non-cash pre-tax charge against income in 1995 of $46
million related to oil and gas properties. No impairment charges were recorded
during 1996 and 1997.
Interest cost capitalized as property, plant and equipment amounted to
approximately $7 million, $3 million and $1 million in 1997, 1996 and 1995,
respectively.
Other Property, Plant And Equipment -- Depreciation of the utility plant,
gas gathering pipeline facility, gas processing plant and other property is
computed principally using the straight-line method over their estimated useful
lives, which vary from 3 to 33 years.
Utility plant facilities are subject to APUC regulation. When utility
facilities are disposed of or otherwise retired, the original cost of the
facilities, plus cost of retirement, less salvage value, is charged to
accumulated depreciation.
The Company groups and evaluates other property, plant and equipment for
impairment based on the ability to identify separate cash flows generated
therefrom. As a result of the impairment review, the Company recognized a
pre-tax non-cash charge against income in 1995 of $3 million for impairment of
other property, plant and equipment. No impairment charges were recorded during
1996 and 1997.
Maintenance, repairs and renewals are charged to operations and maintenance
expense except that renewals which extend the life of the property are
capitalized.
Environmental Liabilities -- Environmental expenditures that relate to
current or future revenues are expensed or capitalized as appropriate.
Expenditures that relate to an existing
43 Seagull Energy Corporation
<PAGE>
condition caused by past operations, and do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or clean-ups are probable, and the costs can be reasonably
estimated. Generally, the timing of these accruals coincides with the Company's
commitment to a formal plan of action.
Treasury Stock -- The Company follows the average cost method of accounting
for treasury stock transactions.
Revenue Recognition -- The Company records oil and natural gas revenue
following the entitlement method of accounting for production, in which any
excess amount received above the Company's share is treated as a liability. If
less than the Company's entitlement is received, the underproduction is recorded
as an asset.
ENSTAR Alaska's operating revenues are based on rates authorized by the
APUC which are applied to customers' consumption of natural gas. ENSTAR Alaska
records unbilled revenue, including amounts to be billed under a purchased gas
adjustment clause, at the end of each accounting period.
Derivative Financial Instruments -- The Company enters into a variety of
commodity derivative financial instruments (futures contracts, price swaps and
options) only for non-trading purposes as a hedging strategy to manage commodity
prices associated with oil and gas sales and to reduce the impact of price
fluctuations. To qualify as hedges, these instruments must highly correlate to
anticipated future production such that the Company's exposure to the effects of
price changes is reduced. The Company uses the hedge or deferral method of
accounting for these instruments and, as a result, gains and losses on commodity
derivative financial instruments are generally offset by similar changes in the
realized prices of the commodities. Income and costs related to these hedging
activities are recognized in oil and gas revenues when the commodities are
produced. Income and costs on commodity derivative financial instruments that
are closed before the hedged production occurs are also deferred until the
production month originally hedged. In the event of a loss of correlation
between changes in oil and gas reference prices under a commodity derivative
financial instrument and actual oil and gas prices, income or costs are
recognized currently to the extent the financial instrument has not offset
changes in actual oil and gas prices. Any realized income and costs that are
deferred at the balance sheet date and any margin accounts for futures contracts
are included as net current assets. While commodity derivative financial
instruments are intended to reduce the Company's exposure to declines in the
market price of oil and natural gas, the commodity derivative financial
instruments may also limit the Company's gain from increases in those market
prices.
The Company recorded $10 million, $9 million and $0.5 million for 1997,
1996 and 1995, respectively, in costs related to equity hedging activities and
$3 million in costs and $0.5 million in income for 1997 and 1996, respectively,
related to third-party marketing activities. By the end of the first quarter of
1997, the Company's equity hedging activities had been substantially reduced,
leaving primarily the commodity hedges in place as required by the monetary
production payment (related to the 1995 sale of the Company's Section 29 tax
credit-bearing properties) for approximately 11 MMcf per day through December
1998. The equity hedging costs discussed above include costs related to the
monetary production payment hedges of
44 Seagull Energy Corporation
<PAGE>
approximately $3 million and $4 million in 1997 and 1996, respectively. Total
equity hedging costs had the effect of reducing average gas prices by $0.06 per
Mcfe for both 1997 and 1996 and $0.004 per Mcfe for 1995. At December 31, 1997,
the Company had open natural gas futures, swaps and option contracts related to
its third-party marketing efforts totaling 6 Bcf and 14 Bcf related to purchases
and sales, respectively, for the period from January through December 1998. At
December 31, 1997, the fair value related to the Company's commodity hedging
activities was $1 million of unrealized costs related to open contracts.
From time to time, the Company has entered into various financial
instruments, such as interest rate swaps and interest rate lock agreements, to
manage the impact of changes in interest rates. To qualify as a hedge, these
instruments must highly correlate to anticipated future changes in interest
rates such that the Company's exposure to the effects of interest rate changes
is reduced. The Company uses the hedge or deferral method of accounting for
these instruments and, as a result, gains and losses on these financial
instruments are generally offset by similar changes in the realized interest
rate. The differential interest to be paid or received is accrued as interest
rates change and is recognized over the life of the agreements as a component of
interest expense. Currently, Seagull has no open interest rate swap or interest
rate lock agreements. The Company recorded no costs related to interest rate
hedging activities during 1997 and $1.7 million and $0.6 million for 1996 and
1995, respectively.
Income Taxes -- The Company uses the liability method of accounting for
income taxes under which deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized as part of the
provision for income taxes in the period that includes the enactment date.
Foreign Currency Translation -- The functional currency for the Company's
Canadian operations was the applicable local currency. Translation from Canadian
dollars to U. S. dollars was performed for balance sheet accounts using exchange
rates in effect at the balance sheet date and for revenue and expense accounts
using primarily a weighted average exchange rate during the period. Adjustments
resulting from such translation were included as a separate component of
shareholders' equity. Deferred income taxes were not provided on translation
adjustments because any unremitted income from Seagull's foreign operations was
considered to be permanently invested. The Company's Canadian operations were
sold in October 1997 (see Note 4).
The U.S. dollar is the functional currency for all other foreign
operations, as predominantly all transactions in those operations are
denominated in U.S. dollars.
Stock-Based Compensation -- The Company accounts for stock-based
compensation under the intrinsic value method. Under this method, the Company
records no compensation expense for stock options granted when the exercise
price of options granted is equal to the fair market value of Seagull's common
stock on the day of grant.
45 Seagull Energy Corporation
<PAGE>
Earnings Per Share -- Effective December 31, 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." This statement establishes standards for computing and presenting
earnings per share and requires, among other things, dual presentation of basic
and diluted earnings per share on the face of the statement of operations. In
accordance with SFAS No. 128, earnings per share and weighted average shares
outstanding have been restated to conform to this statement for all periods
presented.
The following table provides a reconciliation between basic and diluted
earnings (loss) per share (stated in thousands except per share data):
<TABLE>
<CAPTION>
Weighted Average
Common Shares Per-Share
Net Income (Loss) Outstanding Amount
-------------------- --------------------- ----------------
<S> <C> <C> <C>
Year Ended December 31, 1997:
Basic earnings per share ........................... $ 49,130 63,022 $ 0.78
Effect of dilutive stock options.................... - 769
-------------------- ---------------------
Diluted earnings per share ......................... $ 49,130 63,791 $ 0.77
==================== =====================
Year Ended December 31, 1996:
Basic earnings per share ........................... $ 28,961 62,584 $ 0.46
Effect of dilutive stock options.................... - 968
-------------------- ---------------------
Diluted earnings per share ......................... $ 28,961 63,552 $ 0.46
==================== =====================
Year Ended December 31, 1995:
Basic loss per share ............................... $ (1,738) 62,107 $(0.03)
Effect of dilutive stock options.................... - -
-------------------- ---------------------
Diluted loss per share ............................. $ (1,738) 62,107 $(0.03)
==================== =====================
</TABLE>
Options to purchase 1,610,100 and 1,685,500 shares of common stock at
$21.13 to $26.38 per share were outstanding during 1997 and 1996, respectively,
but were not included in the computation of diluted earnings per share because
the options' exercise prices were greater than the average market price of the
common shares. These options, which expire at various dates from 2003 to 2007,
remained outstanding at the end of 1997 and 1996. At December 31, 1995, options
to purchase 4,501,920 shares of common stock were outstanding but not included
in the computation of diluted loss per share because the effect of the assumed
exercise of these stock options as of the beginning of the year would have an
antidilutive effect on the computation of diluted loss per share. These options
had exercise prices ranging from $5.89 to $26.38 and expire at various dates
through 2005.
Concentrations Of Market Risk -- The future results of the oil and gas
operations segment will be affected by the market prices of oil and natural gas.
The availability of a ready market for natural gas, oil and liquid products in
the future will depend on numerous factors beyond the control of the Company,
including weather, production of other natural gas, crude oil and liquid
products, imports, marketing of competitive fuels, proximity and capacity of oil
and gas pipelines and other transportation facilities, any oversupply or
undersupply of gas, oil and liquid products, the regulatory environment and
other
46 Seagull Energy Corporation
<PAGE>
regional and political events, none of which can be predicted with certainty.
The Company operates in various phases of the oil and natural gas industry
with sales to resellers such as pipeline companies and local distribution
companies as well as to end-users such as commercial businesses, industrial
concerns and residential consumers. The Company's receivables include amounts
due from purchasers of oil and gas production and amounts due from joint venture
partners for their respective portions of operating expense and exploration and
development costs. The Company believes that no single customer or joint venture
partner exposes the Company to significant credit risk. While certain of these
customers and joint venture partners are affected by periodic downturns in the
economy in general or in their specific segment of the natural gas or oil
industry, the Company believes that its level of credit-related losses due to
such economic fluctuations has been and will continue to be immaterial to the
Company's results of operations in the long term. Trade receivables are
generally not collateralized; however, the Company analyzes customers' and joint
venture partners historical credit positions prior to extending credit. The
Company had one customer, the Egyptian national oil company ("EGPC") with 11%,
who accounted for more than 10% of total revenues during 1997.
The Company has a significant portion of its operations in various
geographic areas of the world. The Company's activities in these areas are
subject to the usual risks associated with international operations, including
political and economic uncertainties, risks of cancellation or unilateral
modification of agreements, operating restrictions, currency repatriation
restrictions, expropriation, export restrictions, the imposition of new taxes
and the increase of existing taxes, inflation, foreign exchange fluctuations and
other risks arising out of international government sovereignty over areas in
which the operations are conducted. The Company has endeavored to protect itself
against political and commercial risks inherent in these operations. There is no
certainty that the steps taken by the Company will provide adequate protection.
Concentrations Of Credit Risk -- Derivative financial instruments that
hedge the price of oil and natural gas and interest rates are generally executed
with major financial or commodities trading institutions which expose the
Company to acceptable levels of market and credit risks and may at times be
concentrated with certain counterparties or groups of counterparties. Although
notional amounts are used to express the volume of these contracts, the amounts
potentially subject to credit risk, in the event of non-performance by the
counterparties, are substantially smaller. The credit worthiness of
counterparties is subject to continuing review and full performance is
anticipated.
Accounting Pronouncements -- In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting and display of comprehensive
income and its components in the Company's financial statements. Comprehensive
income includes all changes in the Company's equity except investments by and
distributions to owners and includes, among other things, foreign currency
translation adjustments. In June 1997, the FASB also issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for reporting information about operating
segments in annual
47 Seagull Energy Corporation
<PAGE>
financial statements and requires selected information about operating segments
be included in interim reports issued to shareholders. Both of these statements
are effective for financial statements for periods beginning after December 15,
1997. As both SFAS Nos. 130 and 131 establish standards for reporting and
display, the Company does not expect the adoption of these statements to have a
material impact on its financial condition or results of operations.
3. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Supplemental disclosures of cash flow information (stated in thousands) are as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1997 1996 1995
------------------ ----------------- ---------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest, net of amount capitalized.............................. $34,947 $44,033 $46,804
Income taxes..................................................... $25,684 $12,046 $14,074
</TABLE>
4. ACQUISITION AND DISPOSITION OF ASSETS
Sale of Canadian Oil and Gas Properties -- On October 6, 1997, Seagull sold
its Canadian oil and gas subsidiary, Seagull Energy Canada Ltd. ("Seagull
Canada"), to Rio Alto Exploration Ltd. Seagull realized approximately $185
million of net sales proceeds and recognized a pre-tax gain of approximately $12
million in the fourth quarter of 1997. The sales proceeds were used to repay
existing long-term debt, including all U.S. and Canadian bank debt, and for
general corporate purposes.
The Company's operations in Canada consisted of oil and gas exploration and
production activities through interests in fields located in Alberta, Canada
with proved reserves of approximately 60 million barrels of oil equivalents at
the date of the sale. The Company's Canadian operations contributed
approximately $26 million, $34 million and $29 million in revenue and $6
million, $(5) million and $(11) million in income (loss) before taxes for the
years ended December 31, 1997, 1996 and 1995, respectively.
The following table presents the unaudited pro forma results (stated in
thousands except per share data) of Seagull as though the disposition of Seagull
Canada had occurred on January 1, 1996:
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA INFORMATION
Year Ended December 31,
------------------------------------------------------
1997 1996
---------------------- -----------------------
<S> <C> <C>
Revenues ................................................................... $523,411 $483,395
Net income.................................................................. 36,520 39,168
Basic earnings per share.................................................... 0.58 0.63
Diluted earnings per share.................................................. 0.57 0.62
</TABLE>
48 Seagull Energy Corporation
<PAGE>
The unaudited pro forma information does not purport to be indicative of
actual results, if the disposition of Seagull Canada had been in effect for the
periods indicated, or of future results.
Purchase of Egyptian Concessions -- In September 1996, Seagull purchased
interests in two Egyptian concessions from units of Exxon Corporation for a net
purchase price of approximately $74 million in cash financed through additional
borrowings under Seagull's revolving credit facility. The transaction was
accounted for as a purchase. The Company acquired a 100% working interest in
both the East Zeit oil producing concession in the offshore Gulf of Suez and the
South Hurghada exploratory concession located onshore on the coast of the Gulf
of Suez approximately 250 miles southeast of Cairo.
Sale of Pipeline Assets -- In September 1995, the Company and three other
sellers completed the sale of their disparate interests in 19 natural gas
gathering systems and a gas processing plant (the "Pipeline Assets"). From its
share of the proceeds, Seagull realized a one-time, pre-tax gain of
approximately $82 million recorded in the third quarter of 1995. For the year
ended December 31, 1995, the Pipeline Assets contributed approximately $18
million to the revenues and $6 million to the operating profit of the Oil and
Gas Operations segment.
Sale of Section 29 Properties -- In September 1995, the Company sold
certain Internal Revenue Code Section 29 Tax Credit-bearing gas properties (the
"Section 29 Properties") to an investment group which includes a Seagull
subsidiary and two financial investors. For accounting purposes, the Company has
treated the sale as a non-recourse monetary production payment reflected in
long-term debt on the balance sheet (see Note 6).
5. OTHER NONCURRENT ASSETS
Other noncurrent assets (stated in thousands) include the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
Oil, gas and marketing imbalances............................................................ $ 27,428 $ 24,673
Deferred financing costs..................................................................... 10,437 10,935
Other........................................................................................ 5,396 7,197
---------------- ---------------
$ 43,261 $ 42,805
================ ===============
</TABLE>
49 Seagull Energy Corporation
<PAGE>
Oil, Gas and Marketing Imbalances -- As discussed in Note 2, the Company
records oil and gas revenues following the entitlement method of accounting for
production. The Company records revenue from gas marketing sales net of the cost
of gas and third-party delivery fees, with any resulting imbalances recorded as
a current receivable or payable. The Company's oil, gas and marketing imbalance
assets and liabilities (stated in thousands) were as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------------
1997 1996
--------------------------------------- -------------------------------------
Volume Volume
Amount (Bcfe) Amount (Bcfe)
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Current........................................ $ 13,117 6.5 $ 17,650 9.8
Noncurrent..................................... 27,428 16.8 24,673 15.9
---------------- ---------------- ---------------- ---------------
$ 40,545 23.3 $ 42,323 25.7
================ ================ ================ ===============
Liabilities:
Current........................................ $ 8,009 5.5 $ 12,060 6.5
Noncurrent..................................... 16,405 10.4 20,047 13.4
---------------- ---------------- ---------------- ---------------
$ 24,414 15.9 $ 32,107 19.9
================ ================ ================ ===============
</TABLE>
Deferred Financing Costs -- Deferred financing costs represent financing
costs incurred in connection with the execution of various debt facilities
entered into or securities issued by the Company. These costs are capitalized
and amortized to interest expense over the life of the related debt.
6. DEBT
Money Market Facilities -- Seagull has money market facilities with two
U.S. banks with a combined maximum commitment of $100 million. These facilities
bear interest at rates made available by the banks at their discretion (7.5% at
December 31, 1996) and may be canceled at either Seagull's or the banks'
discretion. At December 31, 1997 and 1996, the total amounts outstanding under
the money market facilities of none and $17 million, respectively, were
classified as a current liability and included in accounts and notes payable
since it was Seagull's intent to repay these amounts within the following year.
Long-term debt (stated in thousands) for 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1997 1996
------------------ -----------------
<S> <C> <C>
Revolving credit.................................................................... $ - $236,620
1997 Senior notes................................................................... 150,000 -
1993 Senior notes................................................................... 100,000 100,000
1993 Senior subordinated notes...................................................... 150,000 150,000
Monetary production payment......................................................... 25,384 34,378
ENSTAR Alaska:
Unsecured industrial development bonds.......................................... 9,305 10,230
Other unsecured notes........................................................... 44,158 50,460
------------------ -----------------
478,847 581,688
Less: Current maturities........................................................... 7,097 7,227
Unamortized debt discount.................................................... 2,733 1,006
------------------ -----------------
$ 469,017 $573,455
================== =================
</TABLE>
50 Seagull Energy Corporation
<PAGE>
Revolving Credit -- The Company has a $500 million revolving credit
facility ("Revolving Credit Facility"). During 1997, the Company amended and
restated the Revolving Credit Facility to, among other things, change the
maturity date to December 31, 2002, reduce stated interest rate margins and
remove, or modify, various financial covenants. At December 31, 1997, there were
no amounts borrowed under the Revolving Credit Facility and $481 million of the
unused commitment was immediately available. The Revolving Credit Facility bears
interest, at Seagull's option, at LIBOR or prime rates plus applicable margins,
ranging from none to 0.45% or competitive bid rates. Actual interest rates
varied from 3.7% to 6.3% at December 31, 1996.
The Revolving Credit Facility contains certain covenants and restrictive
provisions, including limitations on the incurrence of additional debt or liens,
the declaration or payment of dividends and the repurchase or redemption of
capital stock and the maintenance of certain financial ratios. Under the most
restrictive of these provisions, approximately $344 million was available for
payment of cash dividends on common stock or to repurchase common stock as of
December 31, 1997.
1997 Senior Notes -- On September 30, 1997, Seagull issued $150 million of
senior notes (the "1997 Senior Notes") offered at a public offering price of
99.544% of face value. The 1997 Senior Notes have a coupon of 7.5% paid
semiannually and mature September 15, 2027. The 1997 Senior Notes are not
redeemable prior to maturity and are not subject to any sinking fund. The net
proceeds of approximately $146 million were used to repay existing debt and for
general corporate purposes. The 1997 Senior Notes represent unsecured
obligations of the Company and rank pari passu with all other unsecured,
unsubordinated obligations of the Company. The 1997 Senior Notes contain
conditions and restrictive provisions including, among other things,
restrictions on additional indebtedness by the Company and its subsidiaries and
entering into sale and leaseback transactions.
1993 Senior and Senior Subordinated Notes -- In July 1993, Seagull sold
$100 million of senior notes (the "1993 Senior Notes") and $150 million of
senior subordinated notes (the "1993 Senior Subordinated Notes") (collectively
the "1993 Notes"). The 1993 Senior Notes bear interest at 7 7/8% per annum, are
not redeemable prior to maturity or subject to any sinking fund and mature on
August 1, 2003. The 1993 Senior Subordinated Notes bear interest at 8 5/8% per
annum, are not subject to any sinking fund and mature on August 1, 2005. On or
after August 1, 2000, the 1993 Senior Subordinated Notes are redeemable at the
option of the Company, in whole or in part, at redemption prices declining from
102.59% in 2000 to 100.00% in 2003 and thereafter (expressed as a percentage of
principal amount), plus accrued interest to the redemption date. The 1993 Notes
were issued at par and interest is paid semiannually.
The 1993 Notes represent unsecured obligations of the Company. The 1993
Senior Notes rank pari passu with senior indebtedness of the Company while the
1993 Senior Subordinated Notes are subordinate in right of payment to all
existing and future senior indebtedness of the Company. The 1993 Notes contain
conditions and restrictive provisions including, among other things,
restrictions on additional indebtedness by the Company and by its subsidiaries,
the right of
51 Seagull Energy Corporation
<PAGE>
each note holder to have the notes repurchased by the Company at 101% of the
principal amount upon a change in control, as well as restrictions on the
incurrence of secured debt and entering into sale and leaseback transactions.
Monetary Production Payment -- In September 1995, the Company sold the
Section 29 Properties for approximately $46 million in net proceeds. The
transaction was recorded as a monetary production payment for accounting
purposes. The investors receive the operating cash flow from the properties,
less funds required for working capital purposes, and are expected to recoup
their investment plus their required after-tax rate of return by 2000. Seagull's
pre-tax effective interest rate is currently estimated to be approximately 4%.
ENSTAR Alaska -- All long-term debt of ENSTAR Alaska is issued by a wholly
owned subsidiary of Seagull in the form of senior unsecured notes. These senior
unsecured notes bear interest at various fixed rates ranging from 7.75% to 12.8%
with principal payments due 1998 through 2009. These senior unsecured notes of
the subsidiary provide for restrictions on dividends, additional borrowings and
purchases, redemptions or retirements of shares of capital stock, other than in
stock of the subsidiary. Under the most restrictive provisions of these
financing arrangements, ENSTAR Alaska had approximately $12 million available
for the making of restricted investments, restricted stock payments and
restricted subordinated debt payments as of December 31, 1997.
Interest Rate Swap Agreements -- The Company periodically enters into
interest rate swap agreements to manage the impact of changes in interest rates.
At December 31, 1997, the Company had no outstanding interest rate swaps in
place. At December 31, 1996, the Company had outstanding interest rate swaps
with a notional amount of $100 million whereby the Company paid a floating
interest rate and received a fixed interest rate ranging from 5.43% to 5.635%.
These interest rate swaps expired on January 31, 1997 and did not have a
material impact on the Company's results of operations or cash flow for 1997.
Annual Maturities -- At December 31, 1997, the Company's aggregate annual
maturities of long-term debt are $7 million, $7 million, $9 million, $9 million
and $3 million for the years 1998, 1999, 2000, 2001 and 2002, respectively.
7. OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities (stated in thousands) include the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1997 1996
----------------- ---------------
<S> <C> <C>
Oil, gas and marketing imbalances (see Note 5)............................................... $ 16,405 $20,047
Refundable customer advances for construction................................................ 11,940 11,567
Other........................................................................................ 22,823 33,814
----------------- ---------------
$ 51,168 $65,428
================= ===============
</TABLE>
Refundable Customer Advances for Construction -- Refundable customer
advances for construction represent customer deposits received by ENSTAR Alaska
for construction of main extensions refundable either wholly or in part over a
period not to exceed 10 years.
52 Seagull Energy Corporation
<PAGE>
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined by
the Company using available market information and valuation methodologies
described below. Considerable judgment is required in interpreting market data
to develop the estimates of fair value. The use of different market assumptions
or valuation methodologies may have a material effect on the estimated fair
value amounts. The estimated fair values of the Company's financial instruments
(stated in thousands) are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------------
1997 1996
------------------------------------- ------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------------- ---------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents................. $ 45,654 $ 45,654 $ 15,284 $ 15,284
Liabilities:
Refundable customer advances
and deposits.......................... (14,725) (11,880) (14,075) (11,405)
Debt...................................... (476,114) (497,382) (580,682) (589,815)
Redeemable bearer shares....................... (15,691) NA (16,059) NA
Derivative transactions:
Payable for interest rate swaps........... - - - (107)
Commodity hedging instruments:
In a receivable position.................. - 278 (42) 247
In a payable position..................... (287) (1,219) (291) (10,798)
</TABLE>
Cash And Cash Equivalents -- The carrying amount approximates fair value
because of the short maturity of these instruments.
Refundable Customer Advances And Deposits -- The fair value is based on
discounted cash flow analyses utilizing a discount rate of 8.5% and 8.25% at
December 31, 1997 and 1996, respectively, with monthly payments ratably over the
estimated period of deposit or advance refunding.
Debt -- The fair value of the 1993 Notes, 1997 Senior Notes and ENSTAR
Alaska debt is estimated based on quoted market prices for the same or similar
issues. The fair value of the monetary production payment is estimated using
discounted cash flow analyses utilizing a discount rate of approximately 4% at
December 31, 1997 and 1996. The carrying amount of all other debt approximates
fair value because these instruments bear interest at rates tied to current
market rates.
Redeemable Bearer Shares -- The fair value is not determinable because
reductions in the outstanding balance are on demand only to the extent necessary
to redeem bearer shares presented for exchange until July 2008 with any
remaining balance reverting to the Company. The Company is not able to determine
when the bearer shares will be presented or how many will be presented.
Interest Rate Swap Agreements -- The fair values are obtained from the
financial institutions that are counterparties to the transactions. These values
represent the estimated amount the Company would pay or receive to terminate the
agreements, taking into consideration
53 Seagull Energy Corporation
<PAGE>
current interest rates and the current creditworthiness of the counterparties.
Seagull's interest rate swap agreements were off balance sheet transactions and,
accordingly, no respective carrying amounts for these transactions were included
in the accompanying consolidated balance sheets as of December 31, 1996.
Commodity Related Transactions -- The fair value of the company's commodity
hedging instruments is the estimated amount the Company would receive or pay to
settle the applicable commodity hedging instrument at the reporting date, taking
into account the difference between New York Mercantile Exchange ("NYMEX")
prices or index prices at year-end and the contract price of the commodity
hedging instrument. Certain of the Company's commodity hedging instruments,
primarily swaps and options, are off balance sheet transactions and,
accordingly, no respective carrying amounts for these instruments were included
in the accompanying consolidated balance sheets as of December 31, 1997 and
1996.
9. REDEEMABLE BEARER SHARES
In 1983, the Company became the successor issuer to Global Natural
Resources PLC, a United Kingdom company, pursuant to the terms of a Scheme of
Arrangement (the "Arrangement") under Section 206 of the English Companies Act.
The effect of the Arrangement was to move the domicile of the parent company to
the United States from the United Kingdom.
Under the terms of the Arrangement, 24,270,876 common shares of Global were
registered in the name of Hambros Trust ("Trust Shares"). The Trust Shares were
held for the owners of bearer share warrants issued by Global Natural Resources
PLC. The Arrangement provided that Trust Shares not claimed by July 26, 1988 be
sold by the Trust and the sale proceeds together with earned interest used to
satisfy subsequent claims by the holders of bearer share warrants. Holders of
bearer shares were entitled to receive at their election either cash or Global
shares on a share-for-share basis until July 1993 and only cash thereafter.
In August 1993, Global received approximately $19 million, the remaining
cash held by the Trust, in the form of an interest-free loan. The loan is
repayable on demand only to the extent necessary to redeem bearer share warrants
presented for exchange until July 2008. Each bearer share warrant presented
during this period will be redeemed for $6.66. As of December 31, 1997 and 1996,
there were 2,418,868 and 2,463,008 outstanding bearer share warrants,
respectively. The loan is secured by a letter of credit issued under the
Revolving Credit Facility. During 1997 and 1996 there were no drawings under the
letter of credit. In July 2008, the obligation of the Company to holders of
bearer share warrants will cease, the interest-free loan will terminate, and any
remaining cash will revert to the Company and be accounted for as an increase in
additional paid-in capital.
54 Seagull Energy Corporation
<PAGE>
10. SHAREHOLDERS' EQUITY
The following table reflects the activity in shares of the Company's Common
Stock and Treasury Stock during the three years ended December 31, 1997:
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ----------------- ----------------
<S> <C> <C> <C>
Common Stock Outstanding:
Shares at beginning of year...................................... 63,073,287 65,983,199 65,767,743
Exercise of employee stock options............................... 804,155 449,256 215,104
Executive incentive compensation................................. - 3,000 -
Retirement of treasury stock pursuant to Global Merger - (3,361,185) -
Other............................................................ - (983) 352
------------------ ----------------- ----------------
Shares at end of year............................................ 63,877,442 63,073,287 65,983,199
================== ================= ================
Treasury Stock Outstanding:
Shares at beginning of year...................................... 361,314 3,729,823 3,759,425
Acquisition of treasury stock.................................... 500,000 - -
Issuance of treasury stock to 401(k) plan........................ - (7,324) (11,602)
Executive incentive compensation................................. - - (18,000)
Retirement of treasury stock pursuant to Global Merger - (3,361,185) -
------------------ ----------------- ---------------
Shares at end of year............................................ 861,314 361,314 3,729,823
================== ================= ===============
</TABLE>
Preferred Stock -- The Company is authorized to issue 5,000,000 shares of
preferred stock, par value $1.00 per share, in one or more series. There were no
shares issued or outstanding as of December 31, 1997 and 1996.
Preferred Share Purchase Rights -- Seagull has a Share Purchase Rights Plan
to protect the Company's shareholders from coercive or unfair takeover tactics.
Under this Plan, each outstanding share and each share of Common Stock
subsequently issued has attached to it one Right, exercisable at $30.75, subject
to certain adjustments. In December 1997, the Company amended the Share Purchase
Rights Plan whereby, in the event a person or group acquires 10% or more of the
outstanding Common Stock, or in the event the Company is acquired in a merger or
other business combination or 50% or more of the Company's consolidated assets
or earning power is sold, each Right entitles the holder to purchase $30.75
worth of shares of Common Stock of the Company or of the acquiring company, as
the case may be, for half of the then-current, per-share market prices. The
Rights, under certain circumstances, are redeemable at the option of Seagull's
Board of Directors at a price of $0.01 per Right, within 10 days (subject to
extension) following the day on which the acquiring person or group exceeds the
10% threshold. If any person or group acquires 10% or more (but less than 50%)
of the Company's outstanding common stock, the Board may, at its option, issue
common stock in exchange for all or part of the outstanding and exercisable
Rights (other than Rights owned by such person or group which would become null
and void) at an exchange ratio of one share of common stock for each two shares
of common stock for which each Right is then exercisable, subject to adjustment.
The Rights expire on March 22, 1999.
55 Seagull Energy Corporation
<PAGE>
11. BENEFIT PLANS
Stock Option Plans -- The Company currently has various stock option plans.
The stock options become exercisable over a three to six year period and all
options expire 10 years after the date of grant. At December 31, 1997,
approximately 0.8 million shares of Common Stock were available for grant.
Information relating to stock options is summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------- --------------------------------- -----------------------------------
Weighted Average Weighted Weighted
Exercise Average Exercise Average Exercise
Price Price Price
Shares Per Share Shares Per Share Shares Per Share
-------------- ------------------- ------------- ------------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Balance outstanding -
Beginning of year........ 4,746,792 $ 16.15 4,501,920 $ 14.67 4,065,084 $ 14.52
Granted................ 983,200 $ 19.13 844,000 $ 21.79 766,640 $ 16.08
Exercised.............. (809,764) $ 9.16 (449,256) $ 9.80 (215,104) $ 10.40
Forfeited.............. (321,976) $ 21.33 (149,872) $ 22.36 (114,700) $ 25.59
-------------- ------------------- ------------- ------------------- -------------- -------------------
Balance outstanding -
End of year.............. 4,598,252 $ 17.63 4,746,792 $ 16.15 4,501,920 $ 14.67
============== =================== ============= =================== ============== ===================
Options exercisable -
End of year.............. 2,355,972 $ 14.97 2,417,492 $ 11.19 2,265,809 $ 10.02
============== =================== ============= =================== ============== ===================
</TABLE>
The weighted average fair value of stock options granted during 1997, 1996
and 1995 was $9.28, $10.77 and $8.36 per share, respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
options-pricing model. The model assumed expected volatility of 44%, 43% and
41%, weighted average risk-free interest rates of 6.3%, 6.5% and 6.1%, for
grants in 1997, 1996 and 1995, respectively, and an expected life of three years
after the vesting term. As Seagull has not declared dividends since it became a
public entity, no dividend yield was used. Actual value realized, if any, is
dependent on the future performance of Seagull Common Stock and overall stock
market conditions. There is no assurance the value realized by an optionee will
be at or near the value estimated by the Black-Scholes model.
Information relating to stock options outstanding at December 31, 1997 is
summarized as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------- --------------------- --------------------- ----------------------------------------------
Weighted
Number Outstanding Weighted Average Average Weighted
Range of at December 31, Remaining Exercise Price Number Exercisable Average Exercise
Exercise Prices 1997 Contractual Life Per Share at December 31, 1997 Price Per Share
-------------------- ------------------- ----------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
$ 5.89 - $ 9.45 961,084 2 years $ 8.05 921,660 $ 7.99
$ 9.46 - $18.00 1,114,768 5 years $14.54 680,512 $13.19
$18.01 - $21.49 924,300 9 years $18.84 26,400 $19.13
$21.50 - $25.50 1,120,100 8 years $24.21 400,200 $24.49
$25.51 - $26.38 478,000 5 years $26.38 327,200 $26.38
-------------------- ------------------- ----------------- --------------------- ---------------------
$ 5.89 - $26.38 4,598,252 6 years $17.63 2,355,972 $14.97
==================== =================== ================= ===================== =====================
</TABLE>
56 Seagull Energy Corporation
<PAGE>
The majority of Seagull's options must be granted at the fair market value
of Seagull's Common Stock on the New York Stock Exchange on the date of grant.
The remaining stock options may have an exercise price not less than 50% of the
fair market value of Seagull's Common Stock on the date of grant. All
outstanding options, other than 44,000 granted by Global in 1993, were issued at
the fair market value of Seagull's Common Stock. Accordingly as discussed in
Note 2 for the years ending December 31, 1997, 1996 and 1995, no compensation
expense relating to these options is recognized in the Company's results of
operations. Had compensation cost for the Company's stock option plans been
determined based on the fair value at the grant dates for awards made after
December 31, 1994 under those plans, the Company's net income (loss) and
earnings (loss) per share would have been restated to the pro forma amounts
(stated in thousands except per-share data) indicated below:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1997 1996 1995
-------------------- --------------------- ----------------------
<S> <C> <C> <C>
Net income (loss) As reported......... $49,130 $28,961 $(1,738)
Pro forma........... 44,641 26,429 (2,443)
Earnings (loss) per share:
Basic As reported......... 0.78 0.46 (0.03)
Pro forma........... 0.71 0.42 (0.04)
Diluted As reported......... 0.77 0.46 (0.03)
Pro forma........... 0.70 0.42 (0.04)
</TABLE>
Under the provisions of SFAS No. 123, the pro forma disclosures above
include only the effects of stock options granted by Seagull subsequent to
December 31, 1994. During this initial phase-in period, the pro forma
disclosures as required by SFAS No. 123 are not representative of the effects on
reported net income for future years as options vest over several years and
additional awards are generally made each year.
Profit Sharing Plans -- ENSTAR Alaska has trusteed profit sharing plans for
salaried employees and union employees. Annual contributions for each plan are
determined by the Company's Board of Directors pursuant to formulae which
contain minimum contribution requirements. Profit sharing expense was
approximately $0.3 million, $0.4 million and $0.3 million for 1997, 1996 and
1995, respectively, and is included in operations and maintenance expenses.
Thrift Plans -- The Company has various thrift plans which are qualified
employee savings plans in accordance with the provisions of Section 401(k) of
the Internal Revenue Code of 1986, as amended. Company contributions to these
plans (collectively, the "Thrift Plans") were approximately $2 million for each
of the years 1997, 1996 and 1995. The Thrift Plans' costs are included in
operations and maintenance expenses and general and administrative expenses.
One of the Thrift Plans, the Employees 401(k) Savings Plan ("ESP"), was a
defined contribu-
57 Seagull Energy Corporation
<PAGE>
tion plan which covered substantially all of Global's U.S. employees. Employees'
contributions were matched by the Company with treasury shares of common stock.
The Company recorded expense of approximately $0.1 million in both of the years
1996 and 1995 relating to its contributions of 7,324 and 11,602 shares,
respectively, of common stock to the ESP. Subsequent to December 31, 1996,
contributions to the ESP were suspended and those employees eligible to
contribute to the ESP prior to the Global Merger were eligible to contribute to
the Seagull Thrift Plan.
Defined Benefit Plans -- The Company has an unfunded retirement plan which
provides for supplemental benefits to certain officers and key employees. As of
December 31, 1997, only one person was designated to participate in such plan.
Total expenses of the plan were approximately $0.2 million for each of the years
1997, 1996 and 1995. The retirement plan's costs are included in general and
administrative expenses.
ENSTAR Alaska has two defined benefit retirement plans which cover
salaried, clerical and operating employees. Determination of benefits for the
salaried employees is based upon a combination of years of service and final
monthly compensation. Benefits for operating employees are based solely on years
of service. ENSTAR Alaska's policy is to fund the minimum contributions required
by applicable regulations. The net pension costs are included in operations and
maintenance expenses.
Global sponsored a defined benefit pension plan which covered substantially
all of Global's U.S. employees. The plan provided benefits based on the
employee's years of service and compensation during the years immediately
preceding retirement. Global made annual contributions to the plan to comply
with the minimum funding provisions of the Employee Retirement Income Security
Act. The plan investments consisted primarily of common equities and fixed
income securities. During 1997, the Company terminated this defined benefit
pension plan and participants were paid the present value of their accrued
benefits. Termination of this plan did not have a material effect on Seagull's
financial position or results of operations.
58 Seagull Energy Corporation
<PAGE>
The following table (stated in thousands) details the components of pension
income and expense, the funded status of the Company's plans, amounts recognized
in the Company's consolidated balance sheets and major assumptions used to
determine these projected benefit obligations. Certain assumptions are based on
factors, such as interest rates and long-term rates of return on investments,
which are subject to change due to forces beyond the Company's control. Changes
in the various assumptions utilized could have a significant effect on the
amounts reported.
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1997 1996
----------------- ----------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation........................................................... $ (11,896) $ (16,242)
================= ================
Accumulated benefit obligation...................................................... $ (11,955) $ (16,278)
================= ================
Projected benefit obligation for services rendered to date.............................. $ (13,623) $ (17,740)
Plan assets at fair value, primarily listed stocks and
corporate and U. S. bonds........................................................... 13,859 15,520
----------------- ----------------
Plan assets at fair value in excess of (less than) projected benefit
obligation.........
236 (2,220)
Unrecognized prior service cost......................................................... 80 91
Unrecognized net (gain) loss............................................................ (1,045) 753
Unrecognized net obligation arising out of the initial application of
SFAS No. 87, amortized over 15 years to 18 years ................................... 309 394
----------------- ----------------
Accrued pension cost.................................................................... $ (420) $ (982)
================= ================
Net pension cost includes the following components:
Service cost-benefits earned during the period...................................... $ 479 $ 1,025
Interest cost on projected benefit obligation....................................... 901 1,212
Actual return on plan assets ....................................................... (3,320) (2,605)
Net amortization and deferral....................................................... 2,578 1,835
----------------- ----------------
Net periodic pension cost............................................................... $ 638 $ 1,467
================= ================
Assumptions:
Discount rate....................................................................... 7% 7%
Rate of increase in future compensation............................................. 3% 2%
Expected long-term rate of return on plan assets.................................... 8% 8%
</TABLE>
Employee Stock Ownership Plan -- On November 15, 1989, the Company formed
the Seagull Employee Stock Ownership Plan (the "ESOP") for the benefit of the
non-Alaskan employees of the Company. The ESOP borrowed from the Company $8
million at an interest rate of 10 percent per annum to be repaid in twelve equal
annual installments of principal and interest. The ESOP used the borrowed funds
and the 1989 contributions from the Company to purchase 948,150 shares of Common
Stock at $8.438 per share from Seagull's treasury. The purchase price was based
upon the closing price of the Common Stock on the New York Stock Exchange on the
date the ESOP was formed.
The promissory note has been and will be funded entirely by contributions
from Seagull. Such contributions, included in operations and
59 Seagull Energy Corporation
<PAGE>
maintenance expenses and administrative expenses, were approximately $1.3
million in 1997 and $0.6 million in both 1996 and 1995.
Postretirement Medical Plan -- ENSTAR Alaska has a postretirement medical
plan which covers all of its salaried employees. Determination of benefits is
based upon a combination of the retiree's age and years of service at
retirement. The Company accrues for such benefits during the years the plan
participants render service. Expenses related to the postretirement medical plan
of $0.2 million, $0.3 million and $0.2 million in 1997, 1996 and 1995,
respectively, are included in operations and maintenance expenses.
12. INCOME TAXES
The income (loss) before income taxes and the components of income tax
expense (benefit) (stated in thousands) for each of the years ended December 31,
1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ------------------ ------------------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic......................................................... $ 43,530 $ 38,200 $ 6,841
Foreign.......................................................... 42,670 16,656 (5,797)
----------------- ------------------ ------------------
$ 86,200 $ 54,856 $ 1,044
================= ================== ==================
Current income tax expense (benefit):
Federal......................................................... $ 3,503 $ (643) $ 6,236
Foreign......................................................... 22,899 17,737 9,376
State........................................................... 1,250 100 3,462
----------------- ------------------ -------------------
Total current................................................ 27,652 17,194 19,074
----------------- ------------------ -------------------
Deferred income tax expense (benefit):
Federal......................................................... 5,787 7,605 (13,570)
Foreign......................................................... 3,893 815 (1,935)
State........................................................... (262) 281 (787)
----------------- ------------------ -------------------
Total deferred............................................... 9,418 8,701 (16,292)
----------------- ------------------ ------------------
Income tax expense.................................................. $ 37,070 $ 25,895 $ 2,782
================= ================== ==================
</TABLE>
In addition to the income tax expense detailed above, the Company had
income tax benefits, related to the tax effect of compensation expense, of $3
million, $1 million and $0.4 million for each of the years ended December 31,
1997, 1996 and 1995, respectively, which were recorded in paid-in capital.
Seagull also had current income tax receivables of $2 million and $1 million at
December 31, 1997 and 1996, respectively.
60 Seagull Energy Corporation
<PAGE>
The provision for income taxes (stated in thousands) for each of the years
ended December 31, 1997, 1996 and 1995 was different than the amount computed
using the federal statutory rate (35%) for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- ---------------- ---------------
<S> <C> <C> <C>
Amount computed using the statutory rate.................................. $ 30,170 $ 19,200 $ 365
Increase (reduction) in taxes resulting from:
Utilization of Internal Revenue Code Section 29 credits................ (81) (171) (3,096)
State income taxes, net of federal income tax benefits................. 642 248 1,739
Taxation of foreign operations, net of
federal income tax benefits.......................................... 6,209 13,613 8,494
Decrease in deferred tax asset valuation allowance..................... - (8,430) (6,194)
Adjustments to beginning-of-the-year tax bases
per the 1995 tax returns and effects of IRS exam..................... - -
(1,385)
Other.................................................................. 130 1,435 2,859
---------------- ---------------- ---------------
Income tax expense........................................................ $ 37,070 $ 25,895 $ 2,782
================ ================ ===============
</TABLE>
The net decrease in the valuation allowance for the year ended December 31,
1996 of approximately $8 million included $6 million related to the utilization
in 1996 of net operating losses. The remaining change for 1996 and the change
for 1995 are related to management's belief that, due to events occurring in the
year of change, it is more likely than not such deferred tax assets, for which a
valuation allowance had previously been established, will be realized.
The significant components of deferred income tax expense (benefit) (stated
in thousands) attributable to income from continuing operations for the years
ended December 31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------- ---------------- --------------
<S> <C> <C> <C>
Deferred tax expense (benefit) (exclusive of the effects of other
components listed below)................................................ $ 9,418 $ 17,131 $ (10,098)
Decrease in deferred tax asset valuation allowance........................... - (8,430) (6,194)
--------------- ---------------- --------------
$ 9,418 $ 8,701 $ (16,292)
=============== ================ ==============
</TABLE>
61 Seagull Energy Corporation
<PAGE>
The tax effects of temporary differences (stated in thousands) that gave
rise to significant portions of the deferred tax liabilities and deferred tax
assets as of December 31, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------------- --------------
<S> <C> <C> <C>
Deferred tax liabilities:
Property, plant and equipment, due to
differences in depreciation, depletion and amortization................... $ 49,815 $ 66,242 $ 50,783
Other....................................................................... 456 583 197
---------------- --------------- --------------
Deferred tax liabilities........................................................ 50,271 66,825 50,980
---------------- --------------- --------------
Deferred tax assets:
Minimum tax credit carryforwards............................................ (16,352) (15,972) (18,950)
Investment tax credit carryforwards (expiring in 1999 and 2000)............. (1,462) (1,851) (1,682)
Net operating loss carryforwards............................................ - (1,727) (7,129)
Capital loss carryback...................................................... (2,847) - -
Deferred compensation/retirement related
items accrued for financial reporting purposes............................ (5,390) (5,464) (4,349)
Contingent considerations................................................... (4,897) (5,018) (651)
Notes receivable............................................................ (5,262) (6,209) (5,333)
Other....................................................................... (4,364) (3,636) (3,178)
---------------- --------------- --------------
Deferred tax assets............................................................. (40,574) (39,877) (41,272)
Less - valuation allowance...................................................... - - 8,430
---------------- --------------- --------------
Net deferred tax assets......................................................... (40,574) (39,877) (32,842)
Less - reclassification to current deferred..................................... 4,429 4,073 5,239
---------------- --------------- --------------
Non-current deferred tax assets................................................. (36,145) (35,804) (27,603)
---------------- --------------- --------------
Net non-current deferred tax liabilities........................................ $ 14,126 $ 31,021 $ 23,377
================ =============== ==============
</TABLE>
62 Seagull Energy Corporation
<PAGE>
13. BUSINESS SEGMENTS
Information on the Company's operations by business segment (stated in
thousands) is summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------
1997 1996 1995
------------------- ------------------- ------------------
<S> <C> <C> <C>
Revenues:
Oil and gas operations..................................... $ 453,648 $ 419,595 $ 308,510
Alaska transmission and distribution....................... 95,719 97,616 97,770
------------------- ------------------- ------------------
$ 549,367 $ 517,211 $ 406,280
=================== =================== ==================
Operating Profit (Loss):
Oil and gas operations(*).................................. $ 106,983 $ 97,192 $ (35,867)
Alaska transmission and distribution....................... 22,588 25,781 22,896
Corporate.................................................. (19,095) (19,530) (23,798)
------------------- ------------------- ------------------
$ 110,476 $ 103,443 $ (36,769)
=================== =================== ==================
Depreciation, Depletion And Amortization:
Oil and gas operations(*).................................. $ 160,197 $ 145,382 $ 188,455
Alaska transmission and distribution....................... 8,368 8,190 8,042
Corporate.................................................. 2,951 2,097 2,030
------------------- ------------------- ------------------
$ 171,516 $ 155,669 $ 198,527
=================== =================== ==================
Identifiable Assets:
Oil and gas operations..................................... $ 1,161,108 $ 1,267,481 $ 1,118,216
Alaska transmission and distribution....................... 184,422 189,867 189,081
Corporate.................................................. 65,536 57,715 51,828
------------------- ------------------- ------------------
$ 1,411,066 $ 1,515,063 $ 1,359,125
=================== =================== ==================
Capital Expenditures:
Oil and gas operations:
Leasehold................................................. $ 23,141 $ 12,986 $ 18,000
Exploration............................................... 95,681 77,774 46,575
Development............................................... 137,806 108,763 69,260
------------------- ------------------- ------------------
256,628 199,523 133,835
Other oil and gas operations.............................. 885 228 441
------------------- ------------------- ------------------
Total oil and gas operations.......................... 257,513 199,751 134,276
Alaska transmission and distribution........................ 9,607 9,287 7,611
Corporate................................................... 8,488 4,424 2,214
------------------- ------------------- ------------------
$ 275,608 $ 213,462 $ 144,101
=================== =================== ==================
Acquisitions, Net of Cash Acquired:
Acquisitions of oil and gas properties..................... $ 17,665 $ 90,867 $ -
Acquisitions of other assets and liabilities............... - 13,553 -
------------------- ------------------- ------------------
$ 17,665 $ 104,420 $ -
=================== =================== ==================
</TABLE>
(*) Includes $49 million relating to the impairment of long-lived assets
for the year ended December 31, 1995.
63 Seagull Energy Corporation
<PAGE>
Identifiable assets (stated in thousands) by geographic area are summarized as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------
1997 1996 1995
---------------- ---------------- ---------------
<S> <C> <C> <C>
United States........................................................ $1,157,186 $1,138,619 $1,074,787
Canada............................................................... - 200,352 211,040
Egypt................................................................ 190,321 119,680 11,003
Cote d'Ivoire........................................................ 35,519 28,854 33,167
Tatarstan............................................................ 25,051 21,152 21,120
Indonesia............................................................ 2,956 3,487 4,237
Other(*)............................................................. 33 2,919 3,771
---------------- ---------------- ---------------
$1,411,066 $1,515,063 $1,359,125
================ ================ ===============
</TABLE>
(*) Other includes Argentina, Malaysia, Turkey and the United Kingdom.
14. COMMITMENTS AND CONTINGENCIES
Lease Commitments -- The Company leases certain office space and equipment
under operating lease arrangements which contain renewal options and escalation
clauses. Future minimum rental payments under these leases range between $2
million and $3 million in each of the years 1998-2002, and total $7 million for
all subsequent years. Total rental expense under operating leases was
approximately $3 million for each of the three years ended December 31, 1997.
Royalty Litigation -- Increasingly, royalty owners under oil and gas leases
are challenging valuation methodology and post-production deductions used by
producers. These cases have arisen because oil and gas producers such as Seagull
have begun to provide services that had previously been provided by the
interstate gas pipelines prior to the "unbundling" of gas services. For example,
in 1996, Seagull was sued in Anne K. Barnaby, et al. v. Seagull Mid-South Inc.
This case is pending in state court of Latimer County, Oklahoma. In this case,
the plaintiffs seek additional royalties based upon the alleged deduction by
Seagull of post-production costs, such as those related to transportation,
compression, dehydration and treating. In addition, the plaintiffs have
questioned the sales price used by Seagull as a basis for calculating royalties
to the extent that sales were made to Seagull's gas marketing subsidiary. While
Seagull intends to vigorously defend this case, the Company cannot predict the
outcome of these matters.
NorAm Litigation -- Seagull also was sued in NorAm Gas Transmission Co., et
al. v. Seagull Mid-South Inc. (the "NorAm Litigation"). The case relates to
Seagull's termination of a 1956 gas contract which provided for the sale of gas
by Seagull from certain wells in the Aetna Field in Arkansas for approximately
$0.16 per Mcf. NorAm Gas Transmission Co. ("NorAm") and Arkansas Western Gas
Company ("AWG") have sought a declaratory judgment that the gas contract remains
in effect with respect to these wells or, in the alternative, money damages.
Since the termination by Seagull of the gas contract, Seagull has been selling
the gas in question on the spot market. Seagull believes that it had reasonable
grounds for terminating the gas contract. NorAm and AWG have also sought a
declaratory judgment to the effect that certain additional wells in the Aetna
Field (including any new wells) would be subject to the $0.16 per Mcf price (the
"Additional Well Claim"). If NorAm and AWG were successful with the
65 Seagull Energy Corporation
<PAGE>
Additional Well Claim, Seagull's operations in the Aetna Field would be
materially affected in an adverse manner. By mid - 1997, the plaintiffs had
alleged losses in these matters of approximately $90 million plus attorney's
fees.
In November 1997, the Company , NorAm and AWG signed a Settlement Proposal
that ultimately could lead to a final settlement and resolution of the NorAm
Litigation discussed above. The Settlement Proposal calls for Seagull to make a
cash payment to deliver gas under a five-year gas sales contract. As a result of
this Settlement Proposal, the Company recorded in the fourth quarter of 1997 a
one-time pre-tax charge of approximately $4.5 million, included in general and
administrative expenses.
Gulf Coast Vacuum Site -- In 1993, the Environmental Protection Agency
("EPA") notified the Company that a subsidiary was a potentially responsible
party ("PRP") at the Gulf Coast Vacuum Services Superfund Site (the "GCV Site")
in Vermilion Parish, Louisiana. Based upon the Company's investigation of this
claim, the Company believes that the basis for its alleged liability is a series
of transactions between the Company's subsidiary and the operator of the GCV
Site that occurred during 1979 and 1980. While the EPA's cleanup cost estimate
of the GCV Site is in the range of $17 million, the Company believes that its
liability is unlikely to be material to its financial condition, results of
operations or cash flows because of the large number of PRPs at the GCV Site and
the relative amount of contamination, if any, that may have been caused at the
GCV Site by the disposal of wastes by the Company during 1979 and 1980.
Comstock Mill Site -- On February 21, 1996, the United States Department of
Interior Bureau of Land Management ("BLM") sent a letter to Houston Oil &
Minerals Corporation ("HO&M"), a wholly owned subsidiary of Seagull, requesting
HO&M to prepare and submit a plan for sampling and analyzing groundwater at a
former mining operation located near Virginia City, Nevada (the "Comstock Mill
Site"). The basis for the BLM's request was the alleged operation of the
Comstock Mill Site by HO&M between 1978 and 1982. Pursuant to an indemnity
provision in the stock purchase agreement by which Seagull acquired HO&M in 1988
(the "HO&M Purchase Agreement"), Seagull tendered the BLM's letter to Tenneco
Inc. ("Tenneco") with a demand for indemnity and notified the BLM that Tenneco
would respond to the BLM letter on behalf of HO&M. The BLM has also indicated
that Tenneco and HO&M might be required to address cyanide contamination of
groundwater at the Comstock Mill Site by separate action of the Nevada Division
of Environmental Protection. Seagull believes that any liability associated with
the Comstock Mill Site is the responsibility of Tenneco or its successors in
liability pursuant to the HO&M Purchase Agreement.
Other -- The Company is a party to other ongoing litigation in the normal
course of business. Management regularly analyzes current information and, as
necessary, provides accruals for probable liabilities on the eventual
disposition of these matters. While the outcome of lawsuits or other proceedings
against the Company cannot be predicted with certainty, management believes that
the effect on its financial condition, results of operations and cash flows, if
any, will not be material.
65 Seagull Energy Corporation
<PAGE>
15. SUPPLEMENTAL OIL AND GAS INFORMATION (Unaudited)
Capitalized Costs Relating to Oil and Gas Producing Activities (amounts in
thousands)
<TABLE>
<CAPTION>
United Cote
States Canada (*) Egypt d'Ivoire Tatarstan Indonesia Other Total
---------- ---------- -------- -------- --------- --------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
At December 31, 1997:
Proved . . . . . . . . . . . . $1,421,004 $ - $174,702 $ 45,343 $ 22,500 $ 3,962 $ - $1,667,511
Unproved. . . . . . . . . . . . 52,449 - 22,101 664 - - - 75,214
---------- ---------- -------- -------- --------- --------- ------ ----------
1,473,453 - 196,803 46,007 22,500 3,962 - 1,742,725
Accumulated depreciation,
depletion and amortization 732,627 - 28,769 15,835 8,810 3,042 - 789,083
---------- ---------- -------- -------- --------- --------- ------ ----------
$ 740,826 $ - $168,034 $ 30,172 $ 13,690 $ 920 $ - 953,642
========== ========== ======== ======== ========= ========= ====== ==========
At December 31, 1996:
Proved . . . . . . . . . . . . $1,312,448 239,323 98,407 $ 32,648 $ 17,056 $ 3,962 $ - $1,703,844
Unproved . . . . . . . . . . . 33,959 2,525 5,584 664 - - 4,208 46,940
---------- --------- -------- -------- --------- --------- ------ ----------
1,346,407 241,848 103,991 33,312 17,056 3,962 4,208 1,750,784
Accumulated depreciation,
depletion and amortization 620,602 49,561 7,442 6,245 4,979 2,911 1,441 693,181
---------- --------- -------- -------- --------- --------- ------ ----------
$ 725,805 $192,287 $ 96,549 $ 27,067 $ 12,077 $ 1,051 $2,767 $1,057,603
========== ========= ======== ======== ========= ========= ====== ==========
(*) All of the Company's Canadian oil and gas operations were sold in October
1997.
Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development
Activities (amounts in thousands)
United Cote
States Canada (*) Egypt d'Ivoire Tatarstan Indonesia Other Total
---------- ---------- -------- -------- --------- --------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Acquisition costs:
Proved. . . . . . . . . . . . . $ 7,382 $ 54 $ 4,542 $ - $ - $ - $ - $ 11,978
Unproved. . . . . . . . . . . . 21,886 595 6,285 53 - - 9 28,828
Exploration costs. . . . . . . . . 51,058 2,999 38,086 3,357 181 - - 95,681
Development costs. . . . . . . . . 68,059 9,749 43,900 10,801 5,297 - - 137,806
---------- --------- ------- -------- --------- --------- ------ ----------
$ 148,385 $ 13,397 $92,813 $14,211 $ 5,478 $ - $ 9 $ 274,293
========== ========= ======= ======== ========= ========= ====== ==========
Year ended December 31, 1996:
Acquisition costs:
Proved. . . . . . . . . . . . . $ 29,102 $ 1,000 $56,051 $ - $ - $ - $ - $ 86,153
Unproved. . . . . . . . . . . . 10,371 862 5,584 782 - - 101 17,700
Exploration costs. . . . . . . . . 64,066 3,332 6,934 2,823 - - 619 77,774
Development costs. . . . . . . . . 65,309 10,992 25,176 3,255 4,031 - - 108,763
---------- --------- ------- ------- --------- --------- ------ ----------
$ 168,848 $ 16,186 $93,745 $ 6,860 $ 4,031 $ - $ 720 $ 290,390
========== ========= ======= ======== ========= ========= ====== ==========
Year ended December 31, 1995:
Acquisition costs:
Proved. . . . . . . . . . . . . $ 3,193 $ 553 $ - $ - $ - $ - $ - $ 3,746
Unproved. . . . . . . . . . . . 13,036 873 13 126 - - 206 14,254
Exploration costs. . . . . . . . . 38,762 764 3,412 (29) 312 - 3,354 46,575
Development costs. . . . . . . . . 39,669 2,507 4,792 18,359 3,933 - - 69,260
---------- --------- ------- ------- --------- --------- ------ ----------
$ 94,660 $ 4,697 $ 8,217 $18,456 $ 4,245 $ - $3,560 $ 133,835
========== ========= ======= ======== ========= ========= ====== ==========
(*) All of the Company's Canadian oil and gas operations were sold in October
1997.
</TABLE>
66 Seagull Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
Results of Operations for Oil and Gas Producing Activities (amounts in
thousands) (1)
United Cote
States Canada (*) Egypt d'Ivoire Tatarstan Indonesia Other Total
---------- ---------- -------- -------- --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1997:
Revenues . . . . . . . . . . . . . $ 290,337 $ 25,956 $ 61,772 $ 15,995 $ 21,558 $ 13,551 $ 150 $ 429,319
Operating expense (3). . . . . . . 75,692 8,541 11,701 3,864 13,994 - 1,921 115,713
Exploration charges. . . . . . . . 31,259 2,193 2,553 3,218 (48) - 2,910 42,085
DD&A (4) . . . . . . . . . . . . . 116,257 7,595 21,615 9,641 3,093 131 273 158,605
Income tax expense (5) . . . . . . 23,495 4,156 11,763 2,474 811 7,589 - 50,288
--------- --------- -------- -------- --------- --------- ------- ----------
Results of activities. . . . . . . $ 43,634 $ 3,471 $ 14,140 $ (3,202) $ 3,708 $ 5,831 $(4,954) $ 62,628
========== ========= ======== ======== ========= ========= ======= ==========
Year Ended December 31, 1996:
Revenues . . . . . . . . . . . . . $ 282,508 $ 34,006 $ 28,126 $ 12,798 $ 15,626 $ 15,892 $ 58 $ 389,014
Operating expense (3). . . . . . . 68,409 13,889 5,806 2,673 11,364 - 17 102,158
Exploration charges. . . . . . . . 36,098 4,295 2,725 5,401 (133) - 2,386 50,772
DD&A (4) . . . . . . . . . . . . . 110,989 17,114 7,416 4,151 2,830 131 878 143,509
Income tax expense (5) . . . . . . 23,047 1,375 5,579 2,158 541 8,899 - 41,599
--------- --------- -------- -------- --------- --------- ------- ----------
Results of activities. . . . . . . $ 43,965 $ (2,667) $ 6,600 $ (1,585) $ 1,024 $ 6,862 $(3,223) $ 50,976
========== ========= ======== ======== ========= ========= ======= ==========
Year Ended December 31, 1995:
Revenues . . . . . . . . . . . . . $ 205,706 $ 28,849 $ 442 $ 4,377 $ 16,037 $ 12,418 $ 7 $ 267,836
Operating expense (3). . . . . . . 61,784 12,934 56 1,400 8,872 - (21) 85,025
Exploration charges. . . . . . . . 26,156 2,866 2,086 471 367 - 8,277 40,223
DD&A (4) . . . . . . . . . . . . . 113,430 18,046 136 2,106 2,111 131 536 136,496
Impairment of oil and gas
properties. . . . . . . . . . . 46,122 - - - - - - 46,122
Income tax expense (benefit)(5). (20,776) (2,233) - 832 1,066 6,953 - (14,158)
--------- --------- --------- --------- --------- --------- ------- ----------
Results of activities. . . . . . . $ (21,010) $ (2,764) $ (1,836) $ (432) $ 3,621 $ 5,334 $(8,785) $ (25,872)
========== ========= ========= ========= ========= ========= ======= ==========
</TABLE>
(1) Excludes revenues and expenses associated with pipeline and marketing
activities, interest expense and general corporate expenses. Revenues and
expenses associated with pipeline and marketing activities are directly
related to Oil and Gas Operations with regard to segment reporting as
defined in SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise, but are not part of Disclosures about Oil and Gas Producing
Activities as defined by SFAS No. 69.
(2) All of the Company's Canadian oil and gas operations were sold in October
1997.
(3) Operating expense represents cost incurred to operate and maintain wells
and related equipment and facilities. These costs include, among other
things, repairs and maintenance, labor, materials, supplies, property
taxes, insurance, severance taxes, transportation costs and all overhead
expenses directly related to oil and gas producing activities.
(4) DD&A represents depreciation, depletion and amortization.
(5) Income tax expense (benefit) is calculated by applying the statutory tax
rate to operating profit then adjusting for any applicable permanent tax
differences or tax credits or allowances.
67 Seagull Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
Reserve Quantity Information - Thousand Equivalent Barrels of Proved Reserves (MBOE)
United Cote Indonesia
States Canada (2) Egypt d'Ivoire Tatarstan and Other Total
----------- ------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1997 . . . . . . . . . . 155,847 42,682 25,965 5,132 16,338 11,993 257,957
Revisions of previous estimates . (1,744) 8,896 3,752 978 (3,155) 18 8,745
Extensions and discoveries. . . . 14,150 11,105 7,796 219 4,784 - 38,054
Purchases of reserves in place. . 1,157 - 1,171 - - - 2,328
Sales of reserves in place. . . . (666) (60,189) - - - - (60,855)
Production. . . . . . . . . . . . (20,195) (2,494) (3,383) (978) (1,512) (717) (29,279)
----------- ------------ ------------ ------------ ------------ ------------ -----------
December 31, 1997 (1). . . . . . . . 148,549 - 35,301 5,351 16,455 11,294 216,950
=========== ============ ============ ============ ============ ============ ===========
January 1, 1996 . . . . . . . . . . 153,794 45,816 8,151 6,521 15,570 13,300 243,152
Revisions of previous estimates . 4,021 (2,713) 386 (900) 651 (518) 927
Extensions and discoveries. . . . 12,769 5,261 1,798 263 1,234 - 21,325
Purchases of reserves in place. . 6,217 288 16,935 - - - 23,440
Sales of reserves in place. . . . (20) (2,075) - - - - (2,095)
Production. . . . . . . . . . . . (20,934) (3,895) (1,305) (752) (1,117) (789) (28,792)
----------- ------------ ------------ ------------ ------------ ------------ -----------
December 31, 1996 (1). . . . . . . . 155,847 42,682 25,965 5,132 16,338 11,993 257,957
=========== ============ ============ ============ ============ ============ ===========
January 1, 1995 . . . . . . . . . . 158,848 48,714 3,520 5,282 13,157 14,397 243,918
Revisions of previous estimates . 3,515 363 4,656 118 1,497 (396) 9,753
Extensions and discoveries . . . 11,242 1,054 - 1,416 1,978 - 15,690
Purchases of reserves in place. . 1,254 323 - - - - 1,577
Sales of reserves in place. . . . (748) (563) - - - - (1,311)
Production . . . . . . . . . . . (20,317) (4,075) (25) (295) (1,062) (701) (26,475)
----------- ------------ ------------ ------------ ------------ ------------ -----------
December 31, 1995 (1). . . . . . . . 153,794 45,816 8,151 6,521 15,570 13,300 243,152
=========== ============ ============ ============ ============ ============ ===========
Proved developed reserves (MBOE):
December 31, 1997 . . . . . . . . 126,439 - 20,706 4,004 10,919 11,294 173,362
December 31, 1996 . . . . . . . . 127,871 37,150 14,502 3,092 10,806 9,528 202,949
December 31, 1995 . . . . . . . . 122,918 40,787 265 3,623 9,176 10,652 187,421
</TABLE>
(1) At December 31, 1997, 1996 and 1995, approximately 12,963 MBOE, 14,072 MBOE
and 14,733 MBOE, respectively, were dedicated to the monetary production
payment.
(2) All of the Company's Canadian oil and gas operations were sold in October
1997.
The reserve volumes presented are estimates only and should not be
construed as being exact quantities. These reserves may or may not be recovered
and may increase or decrease as a result of future operations of the Company and
changes in economic conditions.
68 Seagull Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
United Cote Indonesia
States Canada (3) Egypt d'Ivoire Tatarstan and Other Total
------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Reserve Quantity Information - Proved Oil Reserves (Mbbl)
January 1, 1997 . . . . . . . . . . 19,885 3,725 25,724 1,525 16,338 1,125 68,322
Revisions of previous estimates . (487) 2,137 3,708 263 (3,155) 5 2,471
Extension and discoveries . . . . 754 969 7,783 27 4,784 - 14,317
Purchases of reserves in place. . 204 - 1,171 - - - 1,375
Sales of reserves in place. . . . (52) (6,588) - - - - (6,640)
Production. . . . . . . . . . . . (1,763) (243) (3,383) (603) (1,512) (56) (7,560)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1997 (1) . . . . . . . 18,541 - 35,003 1,212 16,455 1,074 72,285
============= ============ ============ ============ ============ ============ ============
January 1, 1996 . . . . . . . . . . 20,163 3,667 7,918 3,010 15,570 1,153 51,481
Revisions of previous estimates . (800) (47) 384 (1,038) 651 23 (827)
Extension and discoveries . . . . 1,656 916 1,792 64 1,234 - 5,662
Purchases of reserves in place. . 429 21 16,935 - - - 17,385
Sales of reserves in place. . . . (2) (471) - - - - (473)
Production . . . . . . . . . . . (1,561) (361) (1,305) (511) (1,117) (51) (4,906)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1996 (1) . . . . . . . 19,885 3,725 25,724 1,525 16,338 1,125 68,322
============= ============ ============ ============ ============ ============ ============
January 1, 1995 . . . . . . . . . . 15,481 4,051 3,520 2,210 13,157 1,066 39,485
Revisions of previous estimates . 4,000 (164) 4,423 72 1,497 132 9,960
Extension and discoveries . . . . 1,382 258 - 989 1,978 - 4,607
Purchases of reserves in place. . 781 74 - - - - 855
Sales of reserves in place. . . . (78) (153) - - - - (231)
Production. . . . . . . . . . . . (1,403) (399) (25) (261) (1,062) (45) (3,195)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1995 (1) . . . . . . . 20,163 3,667 7,918 3,010 15,570 1,153 51,481
============= ============ ============ ============ ============ ============ ============
Reserve Quantity Information - Proved Gas Reserves (Mmcf)
January 1, 1997 . . . . . . . . . . 815,781 233,744 1,447 21,644 - 65,217 1,137,833
Revisions of previous estimates . (7,548) 40,558 256 4,287 - 72 37,625
Extension and discoveries . . . . 80,372 60,817 83 1,149 - - 142,421
Purchases of reserves in place. . 5,717 - - - - - 5,717
Sales of reserves in place. . . . (3,681) (321,609) - - - - (325,290)
Production. . . . . . . . . . . . (110,595) (13,510) - (2,245) - (3,965 (130,315)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1997 (2) . . . . . . . 780,046 - 1,786 24,835 - 61,324 867,991
============= ============ ============ ============ ============ ============ ============
January 1, 1996 . . . . . . . . . . 801,797 252,892 1,399 21,066 - 72,892 1,150,046
Revisions of previous estimates . 28,925 (15,994) 13 828 - (3,246) 10,526
Extension and discoveries . . . . 66,678 26,071 35 1,195 - - 93,979
Purchases of reserves in place. . 34,729 1,603 - - - - 36,332
Sales of reserves in place. . . . (110) (9,625) - - - - (9,735)
Production. . . . . . . . . . . . (116,238) (21,203) - (1,445) - (4,429) (143,315)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1996 (2) . . . . . . . 815,781 233,744 1,447 21,644 - 65,217 1,137,833
============= ============ ============ ============ ============ ============ ============
January 1, 1995 . . . . . . . . . . 860,209 267,980 - 18,432 - 79,990 1,226,611
Revisions of previous estimates . (2,908) 3,159 1,399 278 - (3,165) (1,237)
Extension and discoveries . . . . 59,157 4,773 - - - - 63,930
Purchases of reserves in place. . 2,840 1,494 - 2,559 - - 6,893
Sales of reserves in place. . . . (4,019) (2,457) - - - - (6,476)
Production. . . . . . . . . . . . (113,482) (22,057) - (203) - (3,933) (139,675)
------------- ------------ ------------ ------------ ------------ ------------ ------------
December 31, 1995 (2) . . . . . . . 801,797 252,892 1,399 21,066 - 72,892 1,150,046
============= ============ ============ ============ ============ ============ ============
</TABLE>
(1) At December 31, 1997, 1996 and 1995, includes approximately 2,079 Mbbl,
2,248 Mbbl and 2,281 Mbbl, respectively, of oil dedicated to the monetary
production payment.
(2) At December 31, 1997, 1996 and 1995, includes approximately 65,306 MMcf,
70,914 MMcf and 74,713 MMcf, respectively, of gas dedicated to the monetary
production payment.
(3) All of the Company's Canadian oil and gas operations were sold in October
1997.
69 Seagul Energy Corporation
<PAGE>
<TABLE>
<CAPTION>
Reserve Quantity Information - Proved Developed Reserves
United Cote Indonesia
States Canada (*) Egypt d'Ivoire Tatarstan and Other Total
------------- ------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Proved developed oil reserves (Mbbl):
December 31, 1997 . . . . . . . 14,406 - 20,452 866 10,919 1,074 47,717
December 31, 1996 . . . . . . . 12,855 2,913 14,336 1,035 10,806 936 42,881
December 31, 1995 . . . . . . . 11,205 3,196 265 1,720 9,176 1,022 26,584
Proved developed gas reserves (MMcf):
December 31, 1997 . . . . . . . 672,195 - 1,522 18,826 - 61,324 753,867
December 31, 1996 . . . . . . . 690,095 205,422 993 12,344 - 51,554 960,408
December 31, 1995 . . . . . . . 670,277 225,544 - 11,415 - 57,777 965,013
</TABLE>
(*) All of the Company's Canadian oil and gas operations were sold in October
1997.
The Company's standardized measure of discounted future net cash flows as
of December 31, 1997 and 1996 and changes therein for each of the years 1997,
1996 and 1995 are provided based on the present value of future net revenues
from proved oil and gas reserves estimated by independent petroleum engineers in
accordance with guidelines established by the Securities and Exchange
Commission. These estimates were computed by applying appropriate year-end
prices for oil and gas to estimated future production of proved oil and gas
reserves over the economic lives of the reserves and assuming continuation of
existing operating conditions. Year-end 1997 calculations were made using prices
of $15.41 per Bbl and $2.42 per Mcf for oil and gas, respectively. The Company's
average realized prices for the year ended December 31, 1997 were $17.34 per Bbl
and $2.29 per Mcf for oil and gas, respectively. Seagull's average prices for
the month ended January 31, 1998 were $14.47 per Bbl and $2.21 per Mcf for oil
and gas, respectively. Because the disclosure requirements are standardized,
significant changes can occur in these estimates based upon oil and gas prices
in effect at year-end. The following estimates should not be viewed as an
estimate of fair market value. Income taxes are computed by applying the
statutory income tax rate in the jurisdiction to the net cash inflows relating
to proved oil and gas reserves less the tax bases of the properties involved and
giving effect to appropriate net operating loss carryforwards, tax credits and
allowances relating to such properties.
70 Seagull Energy Corporation
<PAGE>
Standardized Measure of Discounted Future Net Cash Flows (amounts in thousands)
<TABLE>
<CAPTION>
United Cote Indonesia
States Canada (*) Egypt d'Ivoire Tatarstan and Other Total
-------------- ----------- ------------ ----------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1997:
Future cash inflows . . . . . . . $2,174,296 $ - $ 576,178 $ 67,976 $ 227,401 $ 169,394 $3,215,245
Future development costs. . . . . (140,603) - (122,066) (6,661) (33,395) - (302,725)
Future production costs . . . . . (552,878) - (156,970) (19,048) (103,453) (40,248) (872,597)
-------------- ----------- ------------ ----------- ------------- ------------ ----------
Future net cash flows before
income taxes . . . . . . . . . 1,480,815 - 297,142 42,267 90,553 129,146 2,039,923
10% annual discount . . . . . . . (606,449) - (93,567) (11,239) (42,846) (66,459) (820,560)
-------------- ----------- ------------ ----------- ------------- ------------ ----------
Discounted future net cash flows
before income taxes. . . . . . 874,366 - 203,575 31,028 47,707 62,687 1,219,363
Discounted income taxes . . . . . (165,620) - (70,935) (8,028) (12,664) (29,673) (286,920)
-------------- ----------- ------------ ----------- ------------- ------------ ----------
Standardized measure of dis-
counted future net cash flows . $ 708,746 $ - $ 132,640 $ 23,000 $ 35,043 $ 33,014 $ 932,443
============== =========== ============ =========== ============= ============ ==========
December 31, 1996:
Future cash inflows . . . . . . . $3,489,097 $ 481,159 $ 604,613 $ 80,526 $ 266,304 $ 229,497 $5,151,196
Future development costs. . . . . (169,240) (20,487) (115,639) (15,529) (30,896) - (351,791)
Future production costs . . . . . (712,881) (129,313) (122,697) (17,700) (121,137) (41,640) (1,145,368)
-------------- ----------- ------------ ----------- ------------- ----------- -----------
Future net cash flows before
income taxes . . . . . . . . . 2,606,976 331,359 366,277 47,297 114,271 187,857 3,654,037
10% annual discount . . . . . . . (1,086,947) (153,161) (114,772) (11,121) (54,171) (95,995) (1,516,167)
-------------- ----------- ------------ ----------- ------------- ----------- -----------
Discounted future net cash flows
before income taxes. . . . . . 1,520,029 178,198 251,505 36,176 60,100 91,862 2,137,870
Discounted income taxes . . . . . (383,032) (63,079) (75,306) (5,072) (18,236) (48,623) (593,348)
-------------- ----------- ------------ ----------- ------------- ----------- -----------
Standardized measure of dis-
counted future net cash flows . $1,136,997 $ 115,119 $ 176,199 $ 31,104 $ 41,864 $ 43,239 $1,544,522
============== =========== ============ =========== ============= =========== ===========
</TABLE>
(*) All of the Company's Canadian oil and gas operations were sold in October
1997.
Principal Sources of Change in the Standardized Measure of Discounted Future Net
Cash Flows (amounts in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,544,522 $ 861,351 $ 728,303
Revisions of previous quantity estimates less related costs . . . . . . . . . 58,132 3,825 54,287
Extensions and discoveries less related costs . . . . . . . . . . . . . . . . 196,358 209,860 163,131
Purchases of reserves in place. . . . . . . . . . . . . . . . . . . . . . . . 12,082 219,510 11,967
Sales of reserves in place. . . . . . . . . . . . . . . . . . . . . . . . . . (212,125) (6,593) (5,238)
Net changes in future prices and production costs . . . . . . . . . . . . . . (811,501) 785,928 166,325
Development costs incurred during the period . . . . . . . . . . . . . . . . 137,806 108,763 69,260
Sales of oil and gas produced, net of production costs. . . . . . . . . . . . (313,606) (299,702) (196,123)
Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213,787 110,396 86,151
Net changes in income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 306,428 (350,738) (105,655)
Changes in production, timing and other . . . . . . . . . . . . . . . . . . . (199,440) (98,078) (111,057)
--------------- --------------- ---------------
(612,079) 683,171 133,048
--------------- --------------- ---------------
End of Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 932,443 $1,544,522 $ 861,351
=============== =============== ===============
</TABLE>
71 Seagull Energy Corporation
<PAGE>
AMONG
SEAGULL ENERGY CORPORATION,
THE CHASE MANHATTAN BANK,
Individually and as Administrative Agent,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
Individually, and as Documentation Agent,
NATIONSBANK OF TEXAS, N.A.,
Individually, and as Syndication Agent,
AND
THE OTHER BANKS SIGNATORY HERETO
December 24, 1997
-----------------
CHASE SECURITIES INC.,
as Arranger
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Section 1. Definitions and Accounting Matters........................ 1
1.1 Certain Defined Terms..................................... 1
1.2 Accounting Terms and Determinations.......................17
1.3 Types of Loans............................................17
1.4 Miscellaneous.............................................17
Section 2. Commitments; Competitive Bid Facility.....................17
2.1 Committed Loans...........................................17
2.2 Letters of Credit.........................................17
2.3 Reductions and Changes of Commitments.....................20
2.4 Fees......................................................21
2.5 Affiliates; Lending Offices...............................21
2.6 Several Obligations.......................................21
2.7 Repayment of Loans; Evidence of Debt......................21
2.8 Use of Proceeds...........................................22
2.9 Competitive Bid Procedure.................................22
Section 3. Borrowings, Prepayments and Selection of Interest Rates...24
3.1 Borrowings................................................24
3.2 Prepayments...............................................24
3.3 Selection of Interest Rates...............................25
Section 4. Payments of Principal and Interest........................25
4.1 Repayment of Loans and Reimbursement Obligations..........25
4.2 Interest..................................................25
Section 5. Payments; Pro Rata Treatment; Computations, Etc...........26
5.1 Payments..................................................26
5.2 Pro Rata Treatment........................................27
5.3 Computations..............................................27
5.4 Minimum and Maximum Amounts...............................27
5.5 Certain Actions, Notices, Etc.............................27
5.6 Non-Receipt of Funds by Administrative Agent..............28
5.7 Sharing of Payments, Etc..................................29
Section 6. Yield Protection and Illegality...........................30
6.1 Additional Costs..........................................30
6.2 Limitation on Types of Loans..............................31
(1)
<PAGE>
6.3 Illegality................................................32
6.4 Substitute Alternate Base Rate Loans......................32
6.5 Compensation..............................................33
6.6 Additional Costs in Respect of Letters of Credit..........33
6.7 Capital Adequacy..........................................34
6.8 Limitation on Additional Charges; Substitute Banks;
Non-Discrimination.......................................34
Section 7. Conditions Precedent......................................35
7.1 Initial Loans.............................................35
7.2 Initial and Subsequent Loans..............................36
Section 8. Representations and Warranties............................37
8.1 Corporate Existence.......................................37
8.2 Corporate Power and Authorization.........................37
8.3 Binding Obligations.......................................37
8.4 No Legal Bar or Resultant Lien............................38
8.5 No Consent................................................38
8.6 Financial Condition.......................................38
8.7 Investments and Guaranties................................38
8.8 Liabilities and Litigation................................38
8.9 Taxes and Governmental Charges............................39
8.10 Title to Properties.......................................39
8.11 Defaults..................................................39
8.12 Location of Businesses and Offices........................39
8.13 Compliance with Law.......................................39
8.14 Margin Stock..............................................40
8.15 Subsidiaries..............................................40
8.16 ERISA.....................................................40
8.17 Investment Company Act....................................40
8.18 Public Utility Holding Company Act........................40
8.19 Environmental Matters.....................................41
8.20 Claims and Liabilities....................................42
8.21 Solvency..................................................42
Section 9. Affirmative Covenants.....................................42
9.1 Financial Statements and Reports..........................42
9.2 Officers' Certificates....................................44
9.3 Taxes and Other Liens.....................................44
9.4 Maintenance...............................................44
9.5 Further Assurances........................................45
9.6 Performance of Obligations................................45
9.7 Reimbursement of Expenses.................................45
(2)
<PAGE>
9.8 Insurance.................................................46
9.9 Accounts and Records......................................46
9.10 Notice of Certain Events..................................47
9.11 ERISA Information and Compliance..........................48
Section 10. Negative Covenants........................................49
10.1 Debts, Guaranties and Other Obligations...................49
10.2 Liens.....................................................51
10.3 Guarantees................................................54
10.4 Dividend Payment Restrictions.............................54
10.5 Mergers and Sales of Assets...............................54
10.6 Proceeds of Loans.........................................55
10.7 ERISA Compliance..........................................55
10.8 Amendment of Certain Documents............................55
10.9 Total Debt/Capitalization Ratio...........................55
10.10 EBITDAX/Interest Ratio....................................55
10.11 Nature of Business........................................55
10.12 Covenants in Other Agreements.............................56
Section 11. Defaults..................................................56
11.1 Events of Default.........................................56
11.2 Collateral Account........................................59
11.3 Preservation of Security for Unmatured Reimbursement
Obligations..............................................59
11.4 Right of Setoff...........................................59
Section 12. Agents....................................................60
12.1 Appointment, Powers and Immunities........................60
12.2 Reliance by Agents........................................61
12.3 Defaults..................................................61
12.4 Rights as a Bank..........................................61
12.5 Indemnification...........................................62
12.6 Non-Reliance on Agents and Other Banks....................62
12.7 Failure to Act............................................63
12.8 Resignation or Removal of Administrative Agent............63
Section 13. Miscellaneous.............................................63
13.1 Waiver....................................................63
13.2 Notices...................................................64
13.3 Indemnification...........................................64
13.4 Amendments, Etc...........................................65
13.5 Successors and Assigns....................................65
13.6 Limitation of Interest....................................68
(3)
<PAGE>
13.7 Survival..................................................69
13.8 Captions..................................................69
13.9 Counterparts..............................................69
13.10 Governing Law.............................................69
13.11 Severability..............................................70
13.12 Chapter 15 Not Applicable.................................70
13.13 Confidential Information..................................70
13.14 Tax Forms.................................................71
13.15 Amendment and Restatement.................................72
</TABLE>
EXHIBITS:
Exhibit A Unrestricted Subsidiaries
Exhibit B Form of Request for Extension of Credit
Exhibit C Existing Competitive Loans
Exhibit D Subsidiaries (with Addresses)
Exhibit E Form of Compliance Certificate
Exhibit F Assignment and Acceptance
Exhibit G Form of Competitive Bid Request
Exhibit H Form of Notice to Banks of Competitive Bid Request
Exhibit I Form of Competitive Bid
Exhibit J Form of Competitive Bid Administrative Questionnaire
Exhibit K Continuing Letters of Credit
(4)
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 24, 1997
(the "Effective Date"), is by and among SEAGULL ENERGY CORPORATION (the
"Company"), a corporation duly organized and validly existing under the laws of
the State of Texas; each of the banks which is or which may from time to time
become a signatory hereto (individually, a "Bank" and, collectively, the
"Banks"); MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Morgan"), as Documentation
Agent for the Banks (in such capacity, the "Documentation Agent"); NATIONSBANK
OF TEXAS, N.A. ("NationsBank"), as Syndication Agent for the Banks (in such
capacity, the "Syndication Agent"); and THE CHASE MANHATTAN BANK, as
Administrative Agent for the Banks (in such capacity, together with its
successors in such capacity, "Administrative Agent").
The parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.1 Certain Defined Terms. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.1 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"Additional Costs" shall have the meaning ascribed to such term in Section
6.1 hereof.
"Affiliate" shall mean, as to any Person, any other Person which directly
or indirectly controls, or is under common control with, or is controlled by,
such Person and, if such Person is an individual, any member of the immediate
family (including parents, siblings, spouse, children, stepchildren,
grandchildren, nephews and nieces) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise).
"Agents" shall mean the Administrative Agent, the Documentation Agent and
the Syndication Agent, together with any successors in any such capacities.
"Agreement" shall mean this Amended and Restated Credit Agreement, as the
same may be amended, modified, restated or supplemented from time to time.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
the higher of (a) the Prime Rate in effect on such day or (b) 1/2 of 1% plus the
<PAGE>
Federal Funds Rate in effect for such day (rounded upwards, if necessary, to the
nearest 1/16th of 1%). For purposes hereof, "Federal Funds Rate" shall mean, for
any period, a fluctuating interest rate per annum equal for each day during such
period to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
Administrative Agent from three Federal funds brokers of recognized standing
selected by it. For purposes of this Agreement, any change in the Alternate Base
Rate due to a change in the Federal Funds Rate shall be effective on the
effective date of such change in the Federal Funds Rate. If for any reason
Administrative Agent shall have determined (which determination shall be
conclusive and binding, absent manifest error) that it is unable to ascertain
the Federal Funds Rate for any reason, including, without limitation, the
inability or failure of Administrative Agent to obtain sufficient bids or
publications in accordance with the terms hereof, the Alternate Base Rate shall
be the Prime Rate until the circumstances giving rise to such inability no
longer exist. For the purposes hereof, "Prime Rate" shall mean the prime rate as
announced from time to time by Administrative Agent, and thereafter entered in
the minutes of Administrative Agent's Loan and Discount Committee. Without
notice to the Company or any other Person, the Prime Rate shall change
automatically from time to time as and in the amount by which said prime rate
shall fluctuate. The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer.
Administrative Agent may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate. For purposes of this Agreement any
change in the Alternate Base Rate due to a change in the Prime Rate shall be
effective on the date such change in the Prime Rate is announced.
"Alternate Base Rate Loans" shall mean Loans which bear interest at a rate
based upon the Alternate Base Rate.
"APC" shall mean Alaska Pipeline Company, an Alaska corporation, a
Subsidiary of the Company.
"APC Long Term Financing Documents" shall mean that certain Inducement
Agreement and that certain Note Agreement (together with the Notes, as defined
therein), each dated as of May 14, 1992, by and among the Company, Aid
Association for Lutherans, The Equitable Life Assurance Society of the United
States, Equitable Variable Life Insurance Company, Provident Life and Accident
Insurance Company and Teachers Insurance & Annuity Association of America, any
documentation executed in connection with any renewal, extension or
rearrangement of the Indebtedness that is the subject of the foregoing
documents, the Gas Sales Contract, the Intercompany Mortgage, as defined in the
above-mentioned Note Agreement, and any documents executed in replacement of any
of the foregoing documents, if any, and only if Administrative Agent has
received notice thereof pursuant to Section 10.8.
"Applicable Lending Office" shall mean, for each Bank and for each Type of
Loan, such office of such Bank (or of an affiliate of such Bank) as such Bank
(2)
<PAGE>
may from time to time specify to Administrative Agent and the Company as the
office by which its Loans of such Type are to be made and/or issued and
maintained.
"Applicable Margin" shall mean, on any day, (i) zero percent (0%) with
respect to any Alternate Base Rate Loan and (ii) with respect to any Eurodollar
Loan, the applicable per annum percentage set forth at the appropriate
intersection in the table shown below, based on the Rating as of the close of
business on the preceding Business Day:
Eurodollar Loan
Rating Applicable Margin
BBB/Baa2 and higher 0.20
BBB-/Baa3 0.275
BB+/Ba1 0.40
BB/Ba2 and lower 0.45
"Applications" shall mean all applications and agreements for Letters of
Credit, or similar instruments or agreements, now or hereafter executed by any
Person in connection with any Letter of Credit now or hereafter issued or to be
issued.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as amended,
and any successor statute.
"Beluga Financing Documents" shall mean that certain Inducement Agreement
and that certain Note Agreement (together with the Notes, as defined therein),
each dated June 17, 1985, and amended as of June 15, 1990, by and among the
Company, The Equitable Life Assurance Society of the United States, and the
Travelers Insurance Company, any documentation executed in connection with any
renewal, extension or rearrangement of the Indebtedness that is the subject of
the foregoing documents, the Gas Sales Contract, the Intercompany Mortgage, as
defined in the above-mentioned Note Agreement, and any documents executed in
replacement of any of the foregoing documents, if and only if Administrative
Agent has received notice thereof pursuant to Section 10.8.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas or New York, New
York, and where such term is used in the definition of "Quarterly Date" in this
Section 1.1 or if such day relates to a borrowing of, a payment or prepayment of
principal of or interest on, or an Interest Period for, a Eurodollar Loan or a
notice by the Company with respect to any such borrowing, payment, prepayment or
Interest Period, a day which is also a day on which dealings in Dollar deposits
are carried out in the relevant interbank market.
(3)
<PAGE>
"Capital Expenditures" shall mean expenditures in respect of fixed or
capital assets (calculated in accordance with GAAP) excluding expenditures for
the restoration, repair or replacement of any fixed or capital asset which was
destroyed or damaged, in whole or in part, to the extent financed by the
proceeds of an insurance policy. Expenditures in respect of replacements and
maintenance consistent with the business practices of the Company and its
Subsidiaries in respect of plant facilities, machinery, fixtures and other like
capital assets utilized in the ordinary course of business are not Capital
Expenditures to the extent such expenditures are not capitalized in preparing a
balance sheet of the Company in accordance with GAAP.
"Capital Lease Obligations" shall mean, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP and, for purposes of this Agreement, the amount
of such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP.
"Capitalization" shall mean an amount equal to the sum of (a) Total Debt
plus (b) the shareholder's equity of the Company and its Subsidiaries on a
consolidated basis.
"Change of Control" shall mean a change resulting when any Unrelated Person
or any Unrelated Persons acting together which would constitute a Group together
with any Affiliates or Related Persons thereof (in each case also constituting
Unrelated Persons) shall at any time either (i) Beneficially Own more than 35%
of the aggregate voting power of all classes of Voting Stock of the Company or
(ii) during any period of two consecutive years ending on or after the Effective
Date, as determined as of the last day of each calendar quarter after the
Effective Date, the individuals (the "Incumbent Directors") who at the beginning
of such period constituted the Board of Directors of the Company (other than
additions thereto or removals therefrom from time to time thereafter approved by
a vote of the Board of Directors in accordance with the Company's by-laws) shall
cease for any reason to constitute 51% or more of the Board of Directors of the
Company. As used herein (a)"Beneficially Own" means "beneficially own" as
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, or any
successor provision thereto; provided, however, that, for purposes of this
definition, a Person shall not be deemed to Beneficially Own securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates until such tendered securities are accepted for
purchase or exchange; (b)"Group" means a "group" for purposes of Section 13(d)
of the Securities Exchange Act of 1934, as amended; (c)"Unrelated Person" means
at any time any Person other than the Company or any Subsidiary and other than
any trust for any employee benefit plan of the Company or any Subsidiary of the
Company; (d) "Related Person" of any Person shall mean any other Person owning
(1) 5% or more of the outstanding common stock of such Person or (2) 5% or more
of the Voting Stock of such Person; and (e) "Voting Stock" of any Person shall
mean capital stock of such Person which ordinarily has voting power for the
election of directors (or persons performing similar functions) of such Person,
whether at all times or only so long as no senior class of securities has such
voting power by reason of any contingency.
(4)
<PAGE>
"Chapter 1D" shall mean Chapter 1D of Article 5069 of the Texas Credit
Title, Title 79, Vernon's Texas Civil Statutes, as amended (formerly Article
5069-1.04, Vernon's Texas Civil Statutes, as amended).
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
successor statute, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
"Commitment Percentage" shall mean, as to any Bank, the percentage
equivalent of a fraction the numerator of which is the amount of such Bank's
Commitment and the denominator of which is the aggregate amount of the
Commitments of all Banks.
"Commitment" shall mean, as to any Bank, the obligation, if any, of such
Bank to make Committed Loans and incur Letter of Credit Liabilities in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount, if any, set forth opposite such Bank's name on the signature pages
hereof under the caption "Commitment" (as the same may be reduced from time to
time pursuant to Section 2.3).
"Committed Loans" shall mean the loans provided for in Section 2.1 hereof.
"Competitive Bid" shall mean an offer by a Bank to make a Competitive Loan
pursuant to Section 2.9 hereof.
"Competitive Bid Administrative Questionnaire" shall mean a questionnaire
substantially in the form of Exhibit J hereto.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by a Bank
pursuant to Section 2.9 hereof, the fixed rate of interest, in each case,
offered by the Bank making such Competitive Bid.
"Competitive Bid Request" shall have the meaning ascribed to such term in
Section 2.9 hereof.
"Competitive Loans" shall mean the Existing Competitive Loans and loans
provided for in Section 2.9 hereof.
"Cover" for Letter of Credit Liabilities shall be effected by paying to
Administrative Agent immediately available funds, to be held by Administrative
Agent in a collateral account maintained by Administrative Agent at its
Principal Office and collaterally assigned as security for the financial
accommodations extended pursuant to this Agreement using documentation
satisfactory to Administrative Agent, in an amount equal to any required
prepayment. Such amount shall be retained by Administrative Agent in such
collateral account until such time as (x) in the case of Cover being provided
(5)
<PAGE>
pursuant to Section 2.2(a), the applicable Letter of Credit shall have expired
and Reimbursement Obligations, if any, with respect thereto shall have been
fully satisfied or (y) in the case of Cover being provided pursuant to Section
3.2(b)(1), the outstanding principal amount of all Revolving Credit Obligations
is not greater than the aggregate amount of the Commitments.
"Current Maturities" shall mean, on any day on which Current Maturities are
calculated, the sum of (a) scheduled principal payments on Funded Indebtedness
which are payable within one (1) year after such day plus (b) the principal
component of payments required to be made with respect to Capital Lease
Obligations within one (1) year of said date plus (c), to the extent not
included above, all items which in accordance with GAAP would be classified as
current maturities of long term debt.
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would, unless cured or waived, become an Event of Default.
"Disclosure Statement" shall mean the Disclosure Statement dated December
31, 1992 delivered to Administrative Agent by the Company.
"Dividend Payment" shall mean, with respect to any Person, dividends (in
cash, property or obligations) on, or other payments or distributions on account
of, or the redemption of, or the setting apart of money for a sinking or other
analogous fund for the purchase, redemption, retirement or other acquisition of,
any shares of any class of capital stock of such Person, or the exchange or
conversion of any shares of any class of capital stock of such Person for or
into any obligations of or shares of any other class of capital stock of such
Person or any other property, but excluding dividends to the extent payable in,
or exchanges or conversions for or into, shares of common stock of the Company
or options or warrants to purchase common stock of the Company.
"Dollars" and "$" shall mean lawful money of the United States of America.
"EBITDAX" shall mean net earnings (excluding material gains and losses on
sales and retirement of assets, non-cash write downs, charges resulting from
accounting convention changes and deductions for exploration expenses) before
deduction for federal and state taxes, interest expense (including capitalized
interest), operating lease rentals or depreciation, depletion and amortization
expense, all determined in accordance with GAAP.
"EBITDAX/Interest Ratio" shall mean the ratio of (a) EBITDAX of the Company
and its Restricted Subsidiaries on a consolidated basis to (b) operating lease
rentals and cash interest expense on all Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis for any rolling four calendar
quarter period ending on the last day of every calendar quarter during the
period with respect to which the EBITDAX/Interest Ratio is to be calculated.
"ENSTAR Alaska" shall collectively mean (i) the gas distribution system in
south-central Alaska known as ENSTAR Natural Gas Company, a division of the
Company, and (ii) APC.
(6)
<PAGE>
"Environmental Claim" means any third party (including Governmental
Authorities and employees) action, lawsuit, claim or proceeding (including
claims or proceedings at common law or under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air, surface
water, ground water or land or the clean-up of such pollution or contamination;
(iii) solid, gaseous or liquid waste generation, handling, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) the manufacture, processing, distribution
in commerce or use of Hazardous Substances. An "Environmental Claim" includes,
but is not limited to, a common law action, as well as a proceeding to issue,
modify or terminate an Environmental Permit, or to adopt or amend a regulation
to the extent that such a proceeding attempts to redress violations of an
applicable permit, license, or regulation as alleged by any Governmental
Authority.
"Environmental Liabilities" includes all liabilities arising from any
Environmental Claim, Environmental Permit or Requirement of Environmental Law
under any theory of recovery, at law or in equity, and whether based on
negligence, strict liability or otherwise, including but not limited to:
remedial, removal, response, abatement, investigative, monitoring, personal
injury and damage to property or injuries to persons, and any other related
costs, expenses, losses, damages, penalties, fines, liabilities and obligations,
and all costs and expenses necessary to cause the issuance, reissuance or
renewal of any Environmental Permit including reasonable attorneys' fees and
court costs.
"Environmental Permit" means any permit, license, approval or other
authorization under any applicable Legal Requirement relating to pollution or
protection of health or the environment, including laws, regulations or other
requirements relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or hazardous substances or toxic materials or wastes
into ambient air, surface water, ground water or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations and interpretations by the
Internal Revenue Service or the Department of Labor thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which is a member of a group of which the Company is a member and
which is under common control within the meaning of the regulations under
Section 414 of the Code.
"Eurodollar Base Rate" shall mean, with respect to any Interest Period for
any Eurodollar 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 as may be selected by
Administrative Agent and the Company) as of 11:00 a.m., Houston, Texas time (or
(7)
<PAGE>
as soon thereafter as practicable) on the day two Business Days prior to the
first day of such Interest Period for Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan to which such Interest Period relates or (B) the Highest
Lawful Rate. If none of such Telerate Page 3750 nor any successor or similar
service is available, then the "Eurodollar Base Rate" shall mean, with respect
to any Interest Period for any applicable Eurodollar Loan, the lesser of (A) the
rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%)
determined by Administrative Agent to be the average of the rates quoted by the
Reference Banks at approximately 11:00 a.m., Houston, Texas time (or as soon
thereafter as practicable) on the day two Business Days prior to the first day
of such Interest Period for the offering by such Reference Banks to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan to which such Interest Period relates or (B) the Highest
Lawful Rate. If any Reference Bank does not furnish a timely quotation,
Administrative Agent shall determine the relevant interest rate on the basis of
the quotation or quotations furnished by the remaining Reference Bank or Banks;
if none of such quotations is available on a timely basis, the provisions of
Section 6.2 shall apply. Each determination of the Eurodollar Base Rate shall be
conclusive and binding, absent manifest error, and may be computed using any
reasonable averaging and attribution method.
"Eurodollar Loans" shall mean Loans the interest on which is determined on
the basis of rates referred to in the definition of "Eurodollar Base Rate" in
this Section 1.1.
"Eurodollar Rate" shall mean, for any Interest Period for any Eurodollar
Loan, a rate per annum determined by Administrative Agent to be equal to the
Eurodollar Base Rate for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in Section
11 hereof.
"Existing Competitive Loans" shall mean the Competitive Loans described on
Exhibit C hereto.
"Facility Amount" shall mean the aggregate amount of the Commitments (which
amount shall initially be $500,000,000), as such amount may be reduced from time
to time pursuant to the terms of this Agreement.
"Facility Fee Percentage" shall mean, on any date, the applicable per annum
percentage set forth at the appropriate intersection in the table shown below,
based on the Rating as of the close of business on the preceding Business Day:
Facility Fee
Rating Percentage
BBB/Baa2 and higher 0.125
(8)
<PAGE>
BBB-/Baa3 0.150
BB+/Ba1 0.20
BB/Ba2 and lower 0.30
"Financial Statements" shall mean the financial statement or statements,
together with the notes and schedules thereto, described or referred to in
Sections 8.6 and 9.1.
"Funded Indebtedness" shall mean all Indebtedness which by its terms
matures more than one (1) year from the date as of which any calculation of
Funded Indebtedness is made, and any Indebtedness maturing within one (1) year
from such date which is renewable at the option of the obligor to a date beyond
one (1) year from such date (if any Indebtedness provides for amortization, only
the amount of the principal payment required to be made within one (1) year from
the date as of "Funded Indebtedness").
"GAAP" shall mean as to a particular Person, such accounting practice as,
in the opinion of KPMG Peat Marwick or other independent accountants of
recognized national standing retained by such Person and acceptable to the
Majority Banks, conforms at the time to generally accepted accounting
principles, consistently applied. Generally accepted accounting principles means
those principles and practices (a) which are recognized as such by the Financial
Accounting Standards Board, (b) which are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the most recent audited financial statements of the
relevant Person furnished to the Banks, except only for such changes in
principles and practices with which the applicable independent public
accountants concur and which are disclosed to the Banks in writing, and (c)
which are consistently applied for all periods after the date hereof so as to
reflect properly the financial condition and results of operations of such
Person.
"Gas Sale Contract" shall mean that certain Gas Sale Contract dated January
1, 1984, between APC, as Seller, and ENSTAR Natural Gas Company, as Purchaser,
as amended on June 17, 1985, and from time to time thereafter, if and only if
Administrative Agent has received notice thereof pursuant to Section 10.8.
"Governmental Authority" shall mean any sovereign governmental authority, the
United States of America, any State of the United States and any political
subdivision of any of the foregoing, and any central bank, agency,
instrumentality, department, commission, board, bureau, authority, court or
other tribunal or quasi-governmental authority in each case whether executive,
legislative, judicial, regulatory or administrative, having jurisdiction over
the Company, any of its Subsidiaries, any of their respective property,
Administrative Agent or any Bank.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
any such Person directly or indirectly guaranteeing any Indebtedness of any
(9)
<PAGE>
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise, other
than agreements to purchase assets, goods, securities or services at an arm's
length price in the ordinary course of business) or (ii) entered into for the
purpose of assuring in any other manner the holder of such Indebtedness of the
payment thereof or to protect such holder against loss in respect thereof (in
whole or in part), provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substance" shall mean petroleum products, and any hazardous or
toxic waste or substance defined or regulated as such from time to time by any
law, rule, regulation or order described in the definition of "Requirements of
Environmental Law".
"Highest Lawful Rate" shall mean, on any day, the maximum nonusurious rate
of interest permitted for that day by whichever of applicable federal or Texas
law permits the higher interest rate, stated as a rate per annum. On each day,
if any, that Chapter 1D establishes the Highest Lawful Rate, the Highest Lawful
Rate shall be the "applicable interest rate ceiling" (as defined in Chapter 1D)
for that day.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate and all other liquid or gaseous hydrocarbons and related
minerals, in each case whether in a natural or a processed state.
"Indebtedness" shall mean, as to any Person: (i) indebtedness of such
Person for borrowed money (whether by loan or the issuance and sale of debt
securities) or for the deferred purchase or acquisition price of property or
services, including, without limitation, obligations payable out of Hydrocarbon
production; (ii) obligations, whether fixed or contingent, of such Person in
respect of letters of credit, acceptances or similar instruments issued or
accepted by banks and other financial institutions for the account of such
Person or any other Person; (iii) Capital Lease Obligations of such Person; (iv)
Redemption Obligations of such Person and other obligations of such Person to
redeem or otherwise retire shares of capital stock of such Person or any other
Person, in each case to the extent that the redemption obligations will arise
prior to the stated maturity of the Obligations; (v) indebtedness of others of
the type described in clause (i), (ii), (iii) or (iv) above secured by a Lien on
the property of such Person, whether or not the respective obligation so secured
has been assumed by such Person; and (vii) indebtedness of others of the type
described in clause (i), (ii), (iii) or (iv) above Guaranteed by such Person.
"Interest Period" shall mean:
(a) With respect to any Eurodollar Loan, the period commencing on (i) the
date such Loan is made or converted into or continued as a Eurodollar Loan or
(10)
<PAGE>
(ii) in the case of a roll-over to a successive Interest Period, the last day of
the immediately preceding Interest Period and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the Company may select as provided in Section 3.3 hereof, except
that each such Interest Period which commences on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month shall
end on the last Business Day of the appropriate subsequent calendar month.
(b) With respect to any Alternate Base Rate Loan, the period commencing on
the date such Loan is made and ending on the next succeeding Quarterly Date.
(c) With respect to any Existing Competitive Loan, the applicable interest
period specified on Exhibit C hereto, and with respect to any other Competitive
Loan, the period commencing on the date such Loan is made and ending on the date
specified in the Competitive Bid in which the offer to make the Competitive Loan
was extended; provided, however, that each such period shall have a duration of
not less than seven calendar days or more than 180 calendar days.
Notwithstanding the foregoing: (i) no Interest Period applicable to any
Eurodollar Loan or any Competitive Loan may commence before and end after the
date of any scheduled reduction in the Commitments if, after giving effect
thereto, the aggregate principal amount of the Eurodollar Loans or Competitive
Loans which have Interest Periods which end after such reduction date shall be
greater than the aggregate principal amount of the Commitments scheduled to be
in effect after such reduction date; (ii) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, in the case of an Interest Period for Eurodollar
Loans, if such next succeeding Business Day falls in the next succeeding
calendar month, on the next preceding Business Day); (iii) no Interest Period
applicable to any Eurodollar Loan or any Competitive Loan shall extend beyond
the end of the scheduled Revolving Credit Availability Period, and (iv) no
Interest Period for any Eurodollar Loans shall have a duration of less than one
month and, if the Interest Period therefor would otherwise be a shorter period,
such Loans shall not be available hereunder.
"Investments" shall mean with respect to any Person any advance, loan or
other extension of credit or capital contribution (other than prepaid expenses
in the ordinary course of business) to (by means of transfers of property or
assets or otherwise) purchase or own any stocks, bonds, notes, debentures or
other securities of, or incur contingent liability with respect to (except for
the endorsement of checks in the ordinary course of business and except for the
Indebtedness and Liens permitted under this Agreement), any other Person.
"Issuer" shall mean each Bank issuing a Letter of Credit hereunder.
"Legal Requirement" shall mean any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, now or hereafter in effect.
(11)
<PAGE>
"Letter of Credit" shall mean (i) any letter of credit issued by an Issuer
in the manner and subject to the terms and provisions of Section 2.2 hereof and
(ii) each letter of credit outstanding on the Effective Date listed on Exhibit K
hereto which letters of credit will be deemed to be issued and outstanding under
this Agreement as of the Effective Date.
"Letter of Credit Fee" shall mean a per annum rate equal to the Applicable
Margin for Eurodollar Loans in effect from time to time.
"Letter of Credit Liabilities" shall mean, at any time and in respect of
any Letter of Credit, the sum of (i) the amount available for drawings under
such Letter of Credit plus (ii) the aggregate unpaid amount of all Reimbursement
Obligations at the time due and payable in respect of previous drawings made
under such Letter of Credit.
"Lien" shall mean, with respect to any asset, any mortgage, lien, pledge,
charge, collateral assignment, security interest or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement, a Person shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loan Documents" shall mean this Agreement, all Applications, all
instruments, certificates and agreements now or hereafter executed or delivered
to Administrative Agent or any Bank pursuant to any of the foregoing, and all
amendments, modifications, renewals, extensions, increases and rearrangements
of, and substitutions for, any of the foregoing.
"Loans" shall mean Committed Loans and Competitive Loans.
"Majority Banks" shall mean (a) prior to the termination of the
Commitments, Banks having greater than 50% of the aggregate amount of the
Commitments and (b) after the termination of the Commitments, Banks having
greater than 50% of the aggregate principal amount of the Loans and the Letter
of Credit Liabilities. "Material Adverse Effect" shall mean a material adverse
effect on the business, condition (financial or otherwise), operations or
properties (including proven oil and gas reserves) of the Company and its
Subsidiaries, taken as a whole, or on the ability of the Company to perform its
material obligations under any Loan Document to which it is a party.
"Mesa Contract" shall mean that certain Purchase and Sale Agreement dated
February 6, 1991 executed by and among Mesa Limited Partnership, a Delaware
limited partnership, Mesa Operating Limited Partnership, a Delaware limited
partnership, and Mesa Midcontinent Limited Partnership, a Delaware limited
partnership, as Sellers, and the Company, as Buyer, as amended by that certain
First Amendment to Purchase and Sale Agreement dated February 22, 1991 and as
further amended by that certain Second Amendment to Purchase and Sale Agreement
dated March 8, 1991.
(12)
<PAGE>
"Obligations" shall mean, as at any date of determination thereof, the sum
of the following: (i) the aggregate principal amount of Loans outstanding
hereunder plus (ii) the aggregate amount of the Letter of Credit Liabilities
hereunder plus (iii) all other liabilities, obligations and indebtedness of the
Company or any Subsidiary of the Company under any Loan Document.
"Organizational Documents" shall mean, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture; with respect to a limited
liability company, the certificate of formation and operating agreement (or
comparable documents) of such limited liability company; and with respect to a
trust, the instrument establishing such trust; in each case including any and
all modifications thereof as of the date of the Loan Document referring to such
Organizational Document.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean an individual, a corporation, a company, a bank, a
voluntary association, a partnership, a trust, an unincorporated organization,
any Governmental Authority or any other entity.
"Plan" shall mean an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (a) maintained by the Company or any ERISA Affiliate
for employees of the Company or any ERISA Affiliate or (b) maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which the Company or any ERISA
Affiliate is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions.
"Post-Default Rate" shall mean, in respect of any principal of any Loan,
any Reimbursement Obligation or any other amount payable by the Company under
this Agreement or any other Loan Document which is not paid when due (whether at
stated maturity, by acceleration, or otherwise), a rate per annum during the
period commencing on the due date until such amount is paid in full equal to the
lesser of (a) the sum of (x) with respect to Eurodollar Loans, 2% per annum plus
the applicable Eurodollar Rate then in effect plus the Applicable Margin for
Eurodollar Loans until the expiration of the applicable Interest Period, (y)
with respect to Competitive Loans, 2% per annum plus the applicable fixed rate
offered by the applicable Bank and accepted by the Company in accordance with
Section 2.9 hereof (or, in the case of the Existing Competitive Loans, the
applicable fixed rate specified on Exhibit C hereto), and (z) with respect to
Alternate Base Rate Loans and with respect to Eurodollar Loans after the
expiration of the applicable Interest Period (and also with respect to
indebtedness other than Loans), 2% plus the Alternate Base Rate as in effect
from time to time plus the Applicable Margin for Alternate Base Rate Loans or
(b) the Highest Lawful Rate.
(13)
<PAGE>
"Principal Office" shall mean the principal office of Administrative Agent,
presently located at 1 Chase Manhattan Plaza, 8th Floor, New York, New York
10081, Attention: Agent Services.
"Quarterly Dates" shall mean the last day of each March, June, September
and December, provided that, if any such date is not a Business Day, then the
relevant Quarterly Date shall be the next succeeding Business Day.
"Rating" shall mean the senior debt rating for the Company publicly
announced by Standard & Poor's Ratings Group or Moody's Investors Service, Inc.
In the event the ratings are not equivalent, the higher rating shall be treated
as the "Rating" hereunder; provided, that if such ratings differ by more than
one (1) level, the Rating shall be the average, rounded upwards, of the two
ratings.
"Redemption Obligations" shall mean with respect to any Person all
mandatory redemption obligations of such Person with respect to preferred stock
or other equity securities issued by such Person or put rights in favor of the
holder of such preferred stock or other equity securities, to the extent that
the redemption obligations will arise prior to the stated maturity of the
Obligations.
"Reference Banks" shall mean Chase and such other Banks (up to a maximum of
two (2) additional Banks) as the Company, with the approval of Administrative
Agent (which approval shall not be unreasonably withheld), may from time to time
designate.
"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 and any successor or other regulation relating to reserve requirements.
"Regulatory Chang" shall mean, with respect to any Bank, any change on or
after the date of this Agreement in Legal Requirements (including Regulation D)
or the adoption or making on or after such date of any interpretation, directive
or request applying to a class of banks including such Bank under any Legal
Requirements (whether or not having the force of law) by any Governmental
Authority.
"Reimbursement Obligations" shall mean, as at any date, the obligations of
the Company then outstanding in respect of Letters of Credit under this
Agreement, to reimburse Administrative Agent for the account of the applicable
Issuer for the amount paid by the applicable Issuer in respect of any drawing
under such Letter of Credit.
"Relevant Party" shall mean the Company and each other party to any of the
Loan Documents other than (a) the Banks and (b) the Agents.
"Request for Extension of Credit" shall mean a request for extension of
credit duly executed by any Responsible Officer of the Company, appropriately
completed and substantially in the form of Exhibit B attached hereto.
(14)
<PAGE>
"Requirements of Environmental Law" means all requirements imposed by any
law (including for example and without limitation The Resource Conservation and
Recovery Act and The Comprehensive Environmental Response, Compensation, and
Liability Act), rule, regulation, or order of any federal, state or local
executive, legislative, judicial, regulatory or administrative agency, board or
authority in effect at the applicable time which relate to (i) noise; (ii)
pollution, protection or clean-up of the air, surface water, ground water or
land; (iii) solid, gaseous or liquid waste generation, treatment, storage,
disposal or transportation; (iv) exposure to Hazardous Substances; (v) the
safety or health of employees or (vi) regulation of the manufacture, processing,
distribution in commerce, use, discharge or storage of Hazardous Substances.
"Reserve Requirement" shall mean, for any Eurodollar Loan for any Interest
Period therefor, the stated maximum rate for all reserves (including any
marginal, supplemental or emergency reserves) required to be maintained during
such Interest Period under Regulation D by any member bank of the Federal
Reserve System or any Bank against "Eurocurrency liabilities" (as such term is
used in Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect and include any other reserves required to be
maintained by such member banks by reason of any Regulatory Change against (i)
any category of liabilities which includes deposits by reference to which the
Eurodollar Rate is to be determined as provided in the definition of "Eurodollar
Base Rate" in this Section 1.1 or (ii) any category of extensions of credit or
other assets which include Eurodollar Loans. Any determination by Administrative
Agent of the Reserve Requirement shall be conclusive and binding, absent
manifest error, and may be made using any reasonable averaging and attribution
method.
"Responsible Officer" shall mean the chairman of the board, the president,
any executive vice president, the vice president of finance and administration,
the chief executive officer or the chief operating officer or any equivalent
officer (regardless of title) and in the case of the Company, any other vice
president, and in respect of financial or accounting matters, shall also include
the chief financial officer, the treasurer and the controller or any equivalent
officer (regardless of title).
"Restricted Subsidiary" shall mean each Subsidiary of the Company that, at
the particular time in question, (i) owns directly or indirectly any material
assets or any interest in any other Restricted Subsidiary and (ii) has been
designated as a Restricted Subsidiary by the Company or has not been designated
as an Unrestricted Subsidiary by the Company either (a) on Exhibit A attached
hereto or (b) in accordance with the terms and provisions of this Agreement. The
Unrestricted Subsidiaries on the Effective Date are listed on Exhibit A attached
hereto and each other Subsidiary of Company as of the Effective Date shall be a
Restricted Subsidiary. A Restricted Subsidiary shall remain such (even if it no
longer owns directly or indirectly any interest in any of the material assets or
any interest in any other Restricted Subsidiary) until designated as an
Unrestricted Subsidiary in accordance with the terms and provisions of this
Agreement.
"Revolving Credit Availability Period" shall mean the period from and
including the date hereof to but not including December 31, 2002 or the date the
Commitments are terminated pursuant to Section 11.1, whichever is first to
occur.
(15)
<PAGE>
"Revolving Credit Obligations" shall mean, as at any date of determination
thereof, the sum of the following (determined without duplication): (i) the
aggregate principal amount of Loans outstanding hereunder plus (ii) the
aggregate amount of the Letter of Credit Liabilities hereunder.
"Subsidiary" shall mean, with respect to any Person (the "parent"), (a) any
corporation of which at least a majority of the outstanding shares of stock
having by the terms thereof ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by the parent or one or more of the
Subsidiaries of the parent or by the parent and one or more of the Subsidiaries
of the parent, and (b) any partnership, limited partnership, joint venture or
other form of entity, the majority of the legal or beneficial ownership of which
is at the time directly or indirectly owned or controlled by the parent or one
or more of the Subsidiaries of the parent or by the parent and one or more of
the Subsidiaries of the parent.
"Tangible Net Worth" shall mean with respect to any Person the sum of the
redemption price of preferred stock, par value of common stock, capital in
excess of par value of common stock (additional paid-in capital) and retained
earnings, less treasury stock, goodwill, deferred development costs, franchises,
licenses, patents, trademarks and copyrights and all other assets which are
properly classified as intangible assets in accordance with GAAP less any
Redemption Obligations.
"Total Debt" shall mean the sum, without duplication, of (i) Funded
Indebtedness of the Company and its Subsidiaries on a consolidated basis plus
(ii) Current Maturities of the Company and its Subsidiaries on a consolidated
basis plus (iii) borrowed money Indebtedness of the Company and its Subsidiaries
on a consolidated basis that is not Funded Indebtedness.
"Total Debt/Capitalization Ratio" shall mean the ratio of (a) Total Debt to
(b) Capitalization.
"Type" shall have the meaning assigned to such term in Section 1.3 hereof.
"Unfunded Liabilities" shall mean, with respect to any Plan, at any time,
the amount (if any) by which (a) the present value of all benefits under such
Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent actuarial valuation report
for such Plan, but only to the extent that such excess represents a potential
liability of any ERISA Affiliate to the PBGC or a Plan under Title IV of ERISA.
"United States" or "U.S." shall mean the United States of America, its
fifty states and the District of Columbia.
"Unrestricted Subsidiary" shall mean each Subsidiary of the Company which
is (i) an entity undertaking oil and gas operations with all or substantially
all of its business activities occurring outside the United States and (ii) (A)
designated as an Unrestricted Subsidiary on Exhibit A attached hereto or (B)
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designated as an Unrestricted Subsidiary by the Company at any time after the
Effective Date and either (I) such Subsidiary has a Tangible Net Worth of less
than $25,000,000 or (II) with the consent of the Administrative Agent and the
Majority Banks. An Unrestricted Subsidiary shall remain such until designated as
a Restricted Subsidiary in accordance with the terms and provisions of this
Agreement.
1.2 Accounting Terms and Determinations. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all financial
statements and certificates and reports as to financial matters required to be
delivered hereunder shall be prepared, in accordance with GAAP. To enable the
ready determination of compliance with the provisions hereof, the Company will
not change from December 31 in each year the date on which its fiscal year ends,
nor from March 31, June 30 and September 30 the dates on which the first three
fiscal quarters in each fiscal year end.
1.3 Types of Loans. Loans hereunder are distinguished by "Type". The "Type"
of a Loan refers to the determination whether such Loan is a Eurodollar Loan, a
Competitive Loan or an Alternate Base Rate Loan.
1.4 Miscellaneous. The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. Any reference to
Sections shall refer to Sections of this Agreement.
2.1 Section 2. Commitments; Competitive Bid Facility.
2.2 Committed Loans. From time to time on or after the date hereof and
during the Revolving Credit Availability Period, each Bank shall make Committed
Loans under this Section to the Company in an aggregate principal amount at any
one time outstanding up to but not exceeding such Bank's Commitment Percentage
of the amount by which the Facility Amount exceeds the aggregate unpaid
principal balance of all Competitive Loans and Letter of Credit Liabilities from
time to time outstanding. Subject to the conditions herein, any such Committed
Loan repaid prior to the end of the Revolving Credit Availability Period may be
reborrowed pursuant to the terms of this Agreement; provided, that any and all
such Committed Loans shall be due and payable in full at the end of the
Revolving Credit Availability Period.
Letters of Credit. of Credit
(a) Letters of Credit. Subject to the terms and conditions hereof, and on
the condition that aggregate Letter of Credit Liabilities shall never exceed
$100,000,000, the Company shall have the right, in addition to Committed Loans
provided for in Section 2.1 hereof, to utilize the Commitments from time to time
from and after the Effective Date through the expiration of the Revolving Credit
Availability Period by obtaining the issuance of letters of credit for the
account of the Company and on behalf of the Company by the applicable Issuer if
the Company shall so request in the notice referred to in Section 2.2(b)(i).
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Upon the date of the issuance of a Letter of Credit, the applicable Issuer shall
be deemed, without further action by any party hereto, to have sold to each
Bank, and each Bank shall be deemed, without further action by any party hereto,
to have purchased from the applicable Issuer, a participation, to the extent of
such Bank's Commitment Percentage, in such Letter of Credit and the related
Letter of Credit Liabilities. Any Letter of Credit having an expiry date after
the end of the Revolving Credit Availability Period shall have been fully
Covered or shall be backed by a letter of credit in form and substance, and
issued by an issuer, acceptable to Administrative Agent in its reasonably
exercised discretion. Subject to the terms and conditions hereof, upon the
request of the Company, if Chase is the designated Issuer, Chase shall issue the
applicable Letter of Credit and if any other Bank is the designated Issuer, such
Bank may, but shall not be obligated to, issue such Letter of Credit.
(b) Additional Provisions. The following additional provisions shall apply
to each Letter of Credit:
(i) The Company shall give Administrative Agent at least three (3)
Business Days' prior notice (effective upon receipt) specifying the
proposed Issuer and the date such Letter of Credit is to be issued and
describing the proposed terms of such Letter of Credit and the nature of
the transaction proposed to be supported thereby, and shall furnish such
additional information regarding such transaction as Administrative Agent
or the applicable Issuer may reasonably request. Upon receipt of such
notice Administrative Agent shall promptly notify each Bank of the contents
thereof and of such Bank's Commitment Percentage of the amount of such
proposed Letter of Credit.
(ii) No Letter of Credit may be issued if after giving effect thereto
the Revolving Credit Obligations would exceed the Facility Amount. On each
day during the period commencing with the issuance of any Letter of Credit
and until such Letter of Credit shall have expired or been terminated, the
Commitment of each Bank shall be deemed to be utilized for all purposes
hereof in an amount equal to such Bank's Commitment Percentage of the
amount then available for drawings under such Letter of Credit.
(iii) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment thereunder, the applicable Issuer shall promptly notify
the Company and each Bank as to the amount to be paid as a result of such
demand and the payment date. If at any time the applicable Issuer shall
have made a payment to a beneficiary of a Letter of Credit in respect of a
drawing under such Letter of Credit, each Bank will pay to the applicable
Issuer immediately upon demand by the applicable Issuer at any time during
the period commencing after such payment until reimbursement thereof in
full by the Company, an amount equal to such Bank's Commitment Percentage
of such payment, together with interest on such amount for each day from
the date of demand for such payment (or, if such demand is made after 11:00
a.m. Houston, Texas time on such date, from the next succeeding Business
Day) to the date of payment by such Bank of such amount at a rate of
interest per annum equal to the Federal Funds Rate for such period.
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(iv) The Company shall be irrevocably and unconditionally obligated
forthwith to reimburse the applicable Issuer for any amount paid by the
applicable Issuer upon any drawing under any Letter of Credit, without
presentment, demand, protest or other formalities of any kind. Such
reimbursement may, subject to satisfaction of any other applicable
conditions set forth in this Agreement be made by borrowing of Loans. In
the event any such reimbursement is not made by borrowing of Loans, the
Company shall make such reimbursement in immediately available funds within
five (5) days after demand therefor by the applicable Issuer. The
applicable Issuer will pay to each Bank such Bank's Commitment Percentage
of all amounts received from the Company for application in payment, in
whole or in part, of the Reimbursement Obligation in respect of any Letter
of Credit, but only to the extent such Bank has made payment to the
applicable Issuer in respect of such Letter of Credit pursuant to clause
(iii) above.
(v) The Company will pay to Administrative Agent at the Principal
Office for the account of each Bank a fee on such Bank's Commitment
Percentage of the daily average amount available for drawings under each
Letter of Credit, in each case for the period from and including the date
of issuance of such Letter of Credit to and including the date of
expiration or termination thereof at a rate per annum equal to the Letter
of Credit Fee in effect from time to time, such fee to be paid in arrears
on the Quarterly Dates and on the date of the expiration or termination
thereof. Administrative Agent will pay to each Bank, promptly after
receiving any payment in respect of letter of credit fees referred to in
the preceding sentence of this clause (v), an amount equal to such Bank's
Commitment Percentage of such fees. The Company shall pay to the applicable
Issuer an administration and issuance fee in an amount equal to 1/8 of 1%
per annum of the daily average amount available for drawings under such
Letter of Credit, in each case for the period from and including the date
of issuance of such Letter of Credit to and including the date of
expiration or termination thereof, such fee to be paid in arrears on the
Quarterly Dates and on the date of the expiration or termination thereof.
Such administration and issuance fee shall be retained by the applicable
Issuer.
(vi) The issuance by the applicable Issuer of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 7
hereof, be subject to the conditions precedent that such Letter of Credit
shall be in such form and contain such terms as shall be reasonably
satisfactory to the applicable Issuer and that the Company shall have
executed and delivered such other instruments and agreements relating to
such Letter of Credit as the applicable Issuer shall have reasonably
requested and are not inconsistent with the terms of this Agreement
including an Application therefor. In the event of a conflict between the
terms of this Agreement and the terms of any Application, the terms of this
Agreement shall control. Without limiting the generality of the foregoing
sentence, in the event any such Application shall include requirements for
Cover, it is agreed that there shall be no requirements for the Company to
provide Cover except as expressly required in this Agreement.
(c) Indemnification. The Company hereby indemnifies and holds harmless the
Agents, the applicable Issuer and each Bank from and against any and all claims
and damages, losses, liabilities, costs or expenses which such Bank, the
applicable Issuer or Agent may incur (or which may be claimed against such Bank,
the applicable Issuer or any Agent by any Person whatsoever) in connection with
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the execution and delivery or transfer of or payment or failure to pay under any
Letter of Credit, including, without limitation, any claims, damages, losses,
liabilities, costs or expenses which such Agent, the applicable Issuer or such
Bank, as the case may be, may incur (WHETHER INCURRED AS A RESULT OF ITS OWN
NEGLIGENCE OR OTHERWISE) by reason of or in connection with the failure of any
other Bank (whether as a result of its own negligence or otherwise) to fulfill
or comply with its obligations to such Agent, the applicable Issuer or such
Bank, as the case may be, hereunder (but nothing herein contained shall affect
any rights the Company may have against such defaulting Bank); provided that,
the Company shall not be required to indemnify any Bank, the applicable Issuer
or such Agent for any claims, damages, losses, liabilities, costs or expenses to
the extent, but only to the extent, caused by (i) the willful misconduct or
gross negligence of the party seeking indemnification, or (ii) by such Bank's,
the applicable Issuer's or the applicable Agent's, as the case may be, failure
to pay under any Letter of Credit after the presentation to it of a request
required to be paid under applicable law. Nothing in this Section 2.2(c) is
intended to limit the obligations of the Company under any other provision of
this Agreement.
(d) Co-issuance or Separate Issuance of Letters of Credit. The Company may,
at its option, request that any requested Letter of Credit which exceeds
$1,000,000 be issued severally, but not jointly, by any two or more of the Banks
or issued through separate Letters of Credit issued by any two or more of the
Banks, respectively, each in an amount equal to a portion of the amount of the
applicable Letter of Credit requested by the Company. In either such event, the
Banks issuing such Letters of Credit shall each constitute an "Issuer" and the
Letters of Credit so issued shall each constitute a "Letter of Credit" for all
purposes hereunder and under the Loan Documents. Notwithstanding the foregoing,
no Bank other than Chase shall have any obligation to issue any Letter of
Credit, but may do so at its option.
2.3 Reductions and Changes of Commitments.ommitments
(a) Mandatory. On December 31, 2002, all Commitments shall be terminated in
their entirety unless terminated at an earlier date pursuant to Section 11.1.
(b) Optional. The Company shall have the right to terminate or reduce the
unused portion of the Commitments at any time or from time to time, provided
that: (i) the Company shall give notice of each such termination or reduction to
Administrative Agent as provided in Section 5.5 hereof and (ii) each such
partial reduction shall be permanent and in an aggregate amount at least equal
to $5,000,000.
(c) No Reinstatement. Any reduction in or termination of the Commitments
may not be reinstated without the approval of Administrative Agent and any Bank
whose Commitment (or the applicable part thereof) is to be so reinstated.
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2.4 Fees.
(a) The Company shall pay to Administrative Agent for the account of each
Bank a facility fee accruing from the Effective Date, computed for each day at a
rate per annum equal to the Facility Fee Percentage times such Bank's pro rata
share (based on its respective Commitment) of the Facility Amount on such day.
Such facility fees shall be payable on the Quarterly Dates and on the earlier of
the date the Commitments are terminated in their entirety or the last day of the
Revolving Credit Availability Period.
(b) The Company agrees to pay to Administrative Agent fees as provided in
the separate letter agreements executed by and between Administrative Agent and
the Company.
2.5 Affiliates; Lending Offices.ng Offices
(a) Any Bank may, if it so elects, fulfill any obligation to make a
Eurodollar Loan or Competitive Loan by causing a branch, foreign or otherwise,
or Affiliate of such Bank to make such Loan and may transfer and carry such Loan
at, to or for the account of any branch office or Affiliate of such Bank;
provided that, in such event for the purposes of this Agreement such Loan shall
be deemed to have been made by such Bank and the obligation of the Company to
repay such Loan shall nevertheless be to such Bank and shall be deemed to be
held by such Bank and, to the extent of such Loan, to have been made for the
account of such branch or Affiliate.
(b) Notwithstanding any provision of this Agreement to the contrary, each
Bank shall be entitled to fund and maintain its funding of all or any part of
its Loans hereunder in any manner it sees fit, it being understood, however,
that for the purposes of this Agreement all determinations hereunder shall be
made as if such Bank had actually funded and maintained each Eurodollar Loan
during each Interest Period through the purchase of deposits having a maturity
corresponding to such Interest Period and bearing an interest rate equal to the
Eurodollar Rate for such Interest Period.
2.6 Several Obligations. The failure of any Bank to make any Loan to be
made by it on the date specified therefor shall not relieve any other Bank of
its obligation to make its Loan on such date, but neither Administrative Agent
nor any Bank shall be responsible for the failure of any other Bank to make a
Loan to be made by such other Bank.
2.7 Repayment of Loans; Evidence of Debt.
(a) Each Bank shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of Company to such Bank
resulting from each Loan made by such Bank, including the amounts of principal
and interest payable and paid to such Bank from time to time hereunder.
(b) Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder and the Interest Period applicable
thereto, (ii) the amount of any principal or interest due and payable or to
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become due and payable from Company to each Bank hereunder and (iii) the amount
of any sum received by Administrative Agent hereunder for the account of the
Banks and each Bank's share thereof.
(c) The entries made in the accounts maintained pursuant to paragraph (a)
or (b) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Bank or Administrative Agent to maintain such accounts or any error therein
shall not in any manner affect the obligation of Company to repay the Loans in
accordance with the terms of this Agreement.
(d) Any Bank may request that Loans made by it be evidenced by a promissory
note. In such event, Company shall prepare, execute and deliver to such Bank
promissory notes payable to the order of such Bank (or, if requested by such
Bank, to such Bank and its registered assigns and in a form approved by
Administrative Agent). Thereafter, the Loans evidenced by such promissory notes
and interest thereon may (including after assignment pursuant to Section 13.5)
be represented by one or more promissory notes in such form payable to the order
of the payee named therein.
2.8 Use of Proceeds. The proceeds of the Loans shall be used for general
corporate purposes.
2.9 Competitive Bid Procedure. Procedure
(a) In order to request Competitive Bids, the Company shall hand deliver,
telex or telecopy to Administrative Agent a duly completed request substantially
in the form of Exhibit G, with the blanks appropriately completed (a
"Competitive Bid Request"), to be received by Administrative Agent not later
than 11:00 a.m., Houston, Texas time, five Business Days before the date
specified for a proposed Competitive Loan. No Alternate Base Rate Loan shall be
requested in, or, except pursuant to Section 6, made pursuant to, a Competitive
Bid Request. A Competitive Bid Request that does not conform substantially to
the format of Exhibit G may be rejected at Administrative Agent's sole
discretion, and Administrative Agent shall promptly notify the Company of such
rejection by telecopier. Each Competitive Bid Request shall in each case refer
to this Agreement and specify (x) the date of such Competitive Loans (which
shall be a Business Day) and the aggregate principal amount thereof (which shall
not be less than $25,000,000 or greater than the unused portion of the Facility
Amount on such date and shall be an integral multiple of $5,000,000) and (y) the
Interest Period with respect thereto (which may not end after the termination of
the Revolving Credit Availability Period). Promptly after its receipt of a
Competitive Bid Request that is not rejected as aforesaid, Administrative Agent
shall invite by telecopier (in substantially the form set forth in Exhibit H
hereto) the Banks to bid, on the terms and conditions of this Agreement, to make
Competitive Loans pursuant to such Competitive Bid Request. Notwithstanding the
foregoing, Administrative Agent shall have no obligation to invite any Bank to
make a Competitive Bid pursuant to this Section 2.9(a) until such Bank has
delivered a properly completed Competitive Bid Administrative Questionnaire to
Administrative Agent.
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(b) Each Bank may, in its sole discretion, make one or more Competitive
Bids to the Company responsive to each Competitive Bid Request. Each Competitive
Bid by a Bank must be received by Administrative Agent via telecopier, in the
form of Exhibit I hereto, not later than 11:00 a.m., Houston, Texas time, four
Business Days before the date specified for a proposed Competitive Loan.
Competitive Bids that do not conform substantially to the format of Exhibit I
may be rejected by Administrative Agent after conferring with, and upon the
instruction of, the Company, and Administrative Agent shall notify the Bank of
such rejection as soon as practicable. Each Competitive Bid shall refer to this
Agreement and (x) specify the principal amount (which shall be in a minimum
principal amount of $5,000,000 and in an integral multiple of $1,000,000 and
which may equal the entire aggregate principal amount of the Competitive Loan
requested by the Company) of the Competitive Loan that the Bank is willing to
make to the Company, (y) specify the Competitive Bid Rate at which the Bank is
prepared to make the Competitive Loan and (z) confirm the Interest Period with
respect thereto specified by the Company in its Competitive Bid Request. A
Competitive Bid submitted by a Bank pursuant to this paragraph (b) shall be
irrevocable.
(c) Administrative Agent shall, by 2:00 p.m. four Business Days before the
date specified for a proposed Competitive Loan, notify the Company by telecopier
of all the Competitive Bids made, the Competitive Bid Rate and the maximum
principal amount of each Competitive Loan in respect of which a Competitive Bid
was made and the identity of the Bank that made each bid. Administrative Agent
shall send a copy of all Competitive Bids to the Company for its records as soon
as practicable after completion of the bidding process set forth in this Section
2.9.
(d) The Company may in its sole and absolute discretion, subject only to
the provisions of this Section 2.9(d), accept or reject any Competitive Bid
referred to in Section 2.9(c); provided, however, that the aggregate amount of
the Competitive Bids so accepted by the Company may not exceed the principal
amount of the Competitive Loan requested by the Company. The Company shall
notify Administrative Agent by telecopier whether and to what extent it has
decided to accept or reject any or all of the bids referred to in Section
2.9(c), not later than 11:00 a.m., Houston, Texas time, three Business Days
before the date specified for a proposed Competitive Loan; provided, however,
that (w) the failure by the Company to give such notice shall be deemed to be a
rejection of all the bids referred to in Section 2.9(c) and (x) no bid shall be
accepted for a Competitive Loan unless such Competitive Loan is in a minimum
principal amount of $5,000,000 and an integral multiple of $1,000,000.
Notwithstanding the foregoing, if the Company accepts more than one bid made in
response to a Competitive Bid Request and the available principal amount of
Competitive Loans to be allocated among the Banks is not sufficient to enable
Competitive Loans to be allocated to each Bank in a minimum principal amount of
$5,000,000 and in integral multiples of $1,000,000, then the Company shall
select the Banks to be allocated such Competitive Loans and shall round
allocations up or down to the next higher or lower multiple of $1,000,000 as it
shall deem appropriate. In addition, the Company shall be permitted under the
foregoing procedures to accept a bid or bids in a principal amount of less than
$5,000,000 (i) in order to enable the Company to accept bids equal to (but not
in excess of) the principal amount of the Competitive Loan requested by the
Company or (ii) in order to enable the Company to accept all remaining bids, or
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all remaining bids at a particular Competitive Bid Rate. A notice given by
Company pursuant to this paragraph (d) shall be irrevocable.
(e) Administrative Agent shall promptly notify each bidding Bank whether or
not its Competitive Bid has been accepted (and if so, in what amount and at what
Competitive Bid Rate) by telex or telecopier sent by Administrative Agent, and
each successful bidder will thereupon become bound, subject to the other
applicable conditions hereof, to make the Competitive Loan in respect of which
its bid has been accepted. After completing the notifications referred to in the
immediately preceding sentence, Administrative Agent shall (i) notify
Administrative Agent of each Competitive Bid that has been accepted, the amount
thereof and the Competitive Bid Rate therefor and (ii) notify each Bank of the
aggregate principal amount of all Competitive Bids accepted.
(f) No Competitive Loan shall be made within five Business Days of the date
of any other Competitive Loan, unless the Company and Administrative Agent shall
mutually agree otherwise.
(g) If Administrative Agent shall at any time have a Commitment hereunder
and shall elect to submit a Competitive Bid in its capacity as a Bank, it shall
submit such bid directly to the Company one quarter of an hour earlier than the
latest time at which the other Banks are required to submit their bids to
Administrative Agent pursuant to paragraph (b) above.
(h) All notices required by this Section 2.9 shall be made in accordance
with Section 3.2 and the Competitive Bid Administrative Questionnaire most
recently placed on file by each Bank with Administrative Agent.
Section 3. Borrowings, Prepayments and Selection of Interest Rates.
3.1 Borrowings. The Company shall give Administrative Agent notice of each
borrowing to be made hereunder as provided in Sections 2.9 and 5.5 hereof. Not
later than 2:00 p.m. Houston, Texas time on the date specified for each such
borrowing hereunder, each Bank shall make available the amount of the Loan, if
any, to be made by it on such date to Administrative Agent, at its Principal
Office, in immediately available funds, for the account of the Company. The
amount so received by Administrative Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Company by depositing the
same, in immediately available funds, in an account designated by the Company
maintained with Administrative Agent at the Principal Office.
3.2 Prepayments.
(a) Optional Prepayments. Subject to the provisions of Sections 4, 5 and 6,
the Company shall have the right to prepay, on any Business Day, in whole or in
part, without the payment of any penalty or fee, Loans at any time or from time
to time, provided that, the Company shall give Administrative Agent notice of
each such prepayment as provided in Section 5.5 hereof. Eurodollar Loans and
Competitive Loans may be prepaid on the last day of an Interest Period
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applicable thereto. Neither Eurodollar Loans nor Competitive Loans may be
otherwise prepaid unless prepayment is accompanied by payment of all
compensation required by Section 6.
(b) Mandatory Prepayments and Cover. The Company shall from time to time on
demand by Administrative Agent prepay the Loans (or provide Cover for Letter of
Credit Liabilities) in such amounts as shall be necessary so that at all times
the aggregate outstanding principal amount of all Revolving Credit Obligations
shall not be in excess of the sum of (i) the aggregate amount of the
Commitments, as reduced from time to time pursuant to Section 2.3 hereof plus
(ii) any Cover provided under this Section 3.2(b).
3.3 Selection of Interest Rates. Subject to the terms and provisions of
this Agreement, the Company shall have the right either to convert any Loan (in
whole or in part) into a Loan of another Type (provided that no such conversion
of Eurodollar Loans or Competitive Loans shall be permitted other than on the
last day of an Interest Period applicable thereto) or to continue such Loan (in
whole or in part) as a Loan of the same Type. In the event the Company fails to
so give such notice prior to the end of the applicable Interest Period with
respect to any Eurodollar Loan or Competitive Loan, such Loan shall become an
Alternate Base Rate Loan on the last day of such Interest Period.
Section 4. Payments of Principal and Interest.
4.1 Repayment of Loans and Reimbursement Obligations. The Company hereby
unconditionally promises to pay to Administrative Agent for the account of each
Bank (a) (i) each Loan in full at the end of the Interest Period applicable to
such Loan unless such Loan is continued in accordance with the terms hereof, and
(ii) the then unpaid principal amount of all outstanding Loans on the date of
the expiration of the Revolving Credit Availability Period, and (b) the amount
of each Reimbursement Obligation promptly upon its occurrence. The amount of any
Reimbursement Obligation may, if the applicable conditions precedent specified
in Section 7 hereof have been satisfied, be paid with the proceeds of Loans.
4.2 Interest.
(a) Subject to Section 13.6 hereof, the Company will pay to Administrative
Agent for the account of each Bank interest on the unpaid principal amount of
each Loan made by such Bank for the period commencing on the date of such Loan
to but excluding the date such Loan shall be paid in full, at the lesser of (I)
the following rates per annum:
(i) if such Loan is an Alternate Base Rate Loan, the Alternate Base
Rate plus the Applicable Margin,
(ii) if such Loan is a Eurodollar Loan, the applicable Eurodollar Rate
plus the Applicable Margin, and
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(iii) if such Loan is a Competitive Loan, the applicable fixed rate
offered by the applicable Bank and accepted by the Company in accordance
with Section 2.9 hereof (or, in the case of Existing Competitive Loans, the
applicable fixed rate specified on Exhibit C hereto),
or (II) the Highest Lawful Rate.
(b) Notwithstanding any of the foregoing but subject to Section 13.6
hereof, the Company will pay to Administrative Agent for the account of each
Bank interest at the applicable Post-Default Rate on any principal of any Loan
made by such Bank, on any Reimbursement Obligation and on any other amount
payable by the Company hereunder to or for the account of such Bank (but, if
such amount is interest, only to the extent legally allowed), which shall not be
paid in full when due (whether at stated maturity, by acceleration or
otherwise), for the period commencing on the due date thereof until the same is
paid in full.
(c) Accrued interest on each Loan shall be payable on the last day of each
Interest Period for such Loan (and, if such Interest Period exceeds three
months' duration, quarterly, commencing on the first quarterly anniversary of
the first day of such Interest Period), except that (i) accrued interest payable
at the Post-Default Rate shall be due and payable from time to time on demand of
Administrative Agent or the Majority Banks (through Administrative Agent) and
(ii) accrued interest on any amount prepaid or converted pursuant to Section 6
hereof shall be paid on the amount so prepaid or converted.
Section 5. Payments; Pro Rata Treatment; Computations, Etc.
5.1 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Company hereunder shall be made in Dollars, in immediately available funds,
to Administrative Agent at the Principal Office (or in the case of a successor
Administrative Agent, at the principal office of such successor Administrative
Agent in the United States), not later than 11:00 a.m. Houston, Texas time on
the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) The Company shall, at the time of making each payment hereunder,
specify to Administrative Agent the Loans or other amounts payable by the
Company hereunder or thereunder to which such payment is to be applied. Each
payment received by Administrative Agent hereunder or any other Loan Document
for the account of a Bank shall be paid promptly to such Bank, in immediately
available funds for the account of such Bank's Applicable Lending Office.
(c) If the due date of any payment hereunder or any other Loan Document
falls on a day which is not a Business Day, the due date for such payment
(subject to the definition of Interest Period) shall be extended to the next
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succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension.
5.2 Pro Rata Treatment. Except to the extent otherwise provided herein: (a)
each borrowing from the Banks under Section 2.1 hereof shall be made ratably
from the Banks on the basis of their respective Commitments and each payment of
commitment or facility fees shall be made for the account of the Banks, and each
termination or reduction of the Commitments of the Banks under Section 2.3
hereof shall be applied, pro rata, according to the Banks' respective
Commitments; (b) each payment by the Company of principal of or interest on
Loans of a particular Type shall be made to Administrative Agent for the account
of the Banks pro rata in accordance with the respective unpaid principal amounts
of such Loans held by the Banks; and (c) the Banks (other than the applicable
Issuer) shall purchase from the applicable Issuer participations in the Letters
of Credit to the extent of their respective Commitment Percentages.
5.3 Computations. Interest on Competitive Loans and interest based on the
Eurodollar Base Rate or the Federal Funds Rate will be computed on the basis of
a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable, unless the
effect of so computing shall be to cause the rate of interest to exceed the
Highest Lawful Rate, in which case interest shall be calculated on the basis of
the actual number of days elapsed in a year composed of 365 or 366 days, as the
case may be. All other interest and fees shall be computed on the basis of a
year of 365 (or 366) days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
5.4 Minimum and Maximum Amounts. Except for prepayments made pursuant to
Section 3.2(b) hereof, and subject to the provisions of Section 2.9 hereof with
respect to Competitive Loans, each borrowing and repayment of principal of
Loans, each termination or reduction of Commitments, each optional prepayment
and each conversion of Type shall be in an aggregate principal amount at least
equal to (a) in the case of Eurodollar Loans and Competitive Loans, $5,000,000,
and (b) in the case of Alternate Base Rate Loans, $1,000,000 (borrowings or
prepayments of Loans of different Types or, in the case of Eurodollar Loans and
Competitive Loans, having different Interest Periods at the same time hereunder
to be deemed separate borrowings and prepayments for purposes of the foregoing,
one for each Type or Interest Period). Upon any mandatory prepayment that would
reduce Eurodollar Loans or Competitive Loans, respectively, having the same
Interest Period to less than $5,000,000 such Loans shall automatically be
converted into Alternate Base Rate Loans on the last day of the applicable
Interest Period. Notwithstanding anything to the contrary contained in this
Agreement, there shall not be, at any one time, more than eight (8) Interest
Periods in effect with respect to Eurodollar Loans or Competitive Loans, in the
aggregate.
5.5 Certain Actions, Notices, Etc. Notices to Administrative Agent of any
termination or reduction of Commitments, of borrowings and prepayments,
conversions and continuations of Loans and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by Administrative
Agent not later than 11:00 a.m. Houston, Texas time on the number of Business
(27)
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Days prior to the date of the relevant termination, reduction, borrowing and/or
repayment, conversion or continuance specified below:
Number of Business
Notice Days Prior
Termination or
Reduction of Commitments 2
Borrowing or prepayment
of or conversion into or
continuance of Alternate Base
Rate Loans same day
Borrowing or
prepayment of or conversion
into or continuance of
Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing or
prepayment shall specify the amount and Type of the Loans to be borrowed or
prepaid (subject to Sections 3.2(a) and 5.4 hereof), the date of borrowing or
prepayment (which shall be a Business Day) and, in the case of Eurodollar Loans,
the duration of the Interest Period therefor (subject to the definition of
"Interest Period"). Each such notice of conversion of a Loan into a Loan of
another Type shall identify such Loan (or portion thereof) being converted and
specify the Type of Loan into which such Loan is being converted (subject to
Section 5.4 hereof) and the date for conversion (which shall be a Business Day)
and, unless such Loan is being converted into an Alternate Base Rate Loan, the
duration (subject to the definition of "Interest Period") of the Interest Period
therefor which is to commence as of the last day of the then current Interest
Period therefor (or the date of conversion, if such Loan is being converted from
an Alternate Base Rate Loan). Each such notice of continuation of a Loan (or
portion thereof) as the same Type of Loan shall identify such Loan (or portion
thereof) being continued (subject to Section 5.4 hereof) and, unless such Loan
is an Alternate Base Rate Loan, the duration (subject to the definition of
"Interest Period") of the Interest Period therefor which is to commence as of
the last day of the then current Interest Period therefor. Administrative Agent
shall promptly notify the affected Banks of the contents of each such notice.
Notice of any prepayment having been given, the principal amount specified in
such notice, together with interest thereon to the date of prepayment, shall be
due and payable on such prepayment date. Section 2.9 hereof shall control the
time periods applicable to Competitive Loans.
5.6 Non-Receipt of Funds by Administrative Agent. Unless Administrative
Agent shall have been notified by a Bank or the Company (the "Payor") prior to
the date on which such Bank is to make payment to Administrative Agent of the
proceeds of a Loan to be made by it hereunder (or the payment of any amount by
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such Bank to reimburse the applicable Issuer for a drawing under any Letter of
Credit) or the Company is to make a payment to Administrative Agent for the
account of one or more of the Banks, as the case may be (such payment being
herein called the "Required Payment"), which notice shall be effective upon
receipt, that the Payor does not intend to make the Required Payment to
Administrative Agent, Administrative Agent may assume that the Required Payment
has been made and may, in reliance upon such assumption (but shall not be
required to), make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required Payment to
Administrative Agent on or before such date, the recipient of such payment (or,
if such recipient is the beneficiary of a Letter of Credit, the Company and, if
the Company fails to pay the amount thereof to Administrative Agent forthwith
upon demand, the Banks ratably in proportion to their respective Commitment
Percentages) shall, on demand, pay to Administrative Agent the amount made
available to it together with interest thereon in respect of the period
commencing on the date such amount was so made available by Administrative Agent
until the date Administrative Agent recovers such amount at a rate per annum
equal to the Federal Funds Rate for such period.
5.7 Sharing of Payments, Etc. If a Bank shall obtain payment of any
principal of or interest on any Loan made by it under this Agreement, or on any
Reimbursement Obligation or other obligation then due to such Bank hereunder,
through the exercise of any right of set-off, banker's lien, counterclaim or
similar right, or otherwise, it shall promptly purchase from the other Banks
participations in the Loans made, or Reimbursement Obligations or other
obligations held, by the other Banks in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that all the
Banks shall share the benefit of such payment (net of any expenses which may be
incurred by such Bank in obtaining or preserving such benefit) pro rata in
accordance with the unpaid principal and interest on the Obligations then due to
each of them (provided, however, that the foregoing shall not apply to payments
of Competitive Loans made prior to the termination of the Commitments following
the occurrence of an Event of Default). To such end all the Banks shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored. The
Company agrees, to the fullest extent it may effectively do so under applicable
law, that any Bank so purchasing a participation in the Loans made, or
Reimbursement Obligations or other obligations held, by other Banks may exercise
all rights of set-off, bankers' lien, counterclaim or similar rights with
respect to such participation as fully as if such Bank were a direct holder of
Loans and Reimbursement Obligations or other obligations in the amount of such
participation. Nothing contained herein shall require any Bank to exercise any
such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other Indebtedness or
obligation of the Company.
(29)
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Section 6. Yield Protection and Illegality.
6.1 Additional Costs.
(a) Subject to Section 13.6, the Company shall pay to Administrative Agent,
on demand for the account of each Bank from time to time such amounts as such
Bank may determine to be necessary to compensate it for any costs incurred by
such Bank which such Bank determines are attributable to its making or
maintaining of any Eurodollar Loan or any Competitive Loan hereunder or its
obligation to make any such Loan hereunder, or any reduction in any amount
receivable by such Bank hereunder in respect of any of such Loans or such
obligation (such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), in each case resulting from any Regulatory
Change which:
(i) subjects such Bank (or makes it apparent that such Bank is
subject) to any tax (including without limitation any United States
interest equalization tax), levy, impost, duty, charge or fee
(collectively, "Taxes"), or any deduction or withholding for any Taxes on
or from the payment due under any Eurodollar Loan or any Competitive Loan
or other amounts due hereunder, other than income and franchise taxes of
each jurisdiction (or any subdivision thereof) in which such Bank has an
office or its Applicable Lending Office; or
(ii) changes the basis of taxation of any amounts payable to such Bank
under this Agreement in respect of any of such Loans (other than changes
which affect taxes measured by or imposed on the overall net income or
franchise taxes of such Bank or of its Applicable Lending Office for any of
such Loans by each jurisdiction (or any subdivision thereof) in which such
Bank has an office or such Applicable Lending Office); or
(iii) imposes or modifies or increases or deems applicable any
reserve, special deposit or similar requirements (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, such Bank or loans
made by such Bank, or against any other funds, obligations or other
property owned or held by such Bank (including any of such Loans or any
deposits referred to in the definition of "Eurodollar Base Rate" in Section
1.1 hereof) and such Bank actually incurs such additional costs.
Each Bank (if so requested by the Company through Administrative Agent) will
designate a different available Applicable Lending Office for the Eurodollar
Loans or the Competitive Loans of such Bank or take such other action as the
Company may request if such designation or action will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole opinion of
such Bank exercised in good faith, be disadvantageous to such Bank (provided
that such Bank shall have no obligation so to designate an Applicable Lending
Office for Eurodollar Loans located in the United States of America). Each Bank
will furnish the Company with a statement setting forth the basis and amount of
each request by such Bank for compensation under this Section 6.1(a); subject to
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Section 6.8, such certificate shall be conclusive, absent manifest error, and
may be prepared using any reasonable averaging and attribution methods.
(b) Without limiting the effect of the foregoing provisions of this Section
6.1, in the event that, by reason of any Regulatory Change, any Bank either (i)
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 such Bank
which includes deposits by reference to which the interest rate on Eurodollar
Loans is determined as provided in this Agreement or a category of extensions of
credit or other assets of such Bank which includes Eurodollar Loans or
Competitive Loans or (ii) becomes subject to restrictions on the amount of such
a category of liabilities or assets which it may hold, then, if such Bank so
elects by notice to the Company (with a copy to Administrative Agent), the
obligation of such Bank to make Eurodollar Loans or Competitive Loans, as the
case may be, hereunder shall be suspended until the date such Regulatory Change
ceases to be in effect (in which case the provisions of Section 6.4 hereof shall
be applicable).
(c) Good faith determinations and allocations by any Bank for purposes of
this Section 6.1 of the effect of any Regulatory Change on its costs of
maintaining its obligations to make Loans or of making or maintaining Loans or
on amounts receivable by it in respect of Loans, and of the additional amounts
required to compensate such Bank in respect of any Additional Costs, shall be
conclusive, absent manifest error.
(d) The Company's obligation to pay Additional Costs and compensation with
regard to each Eurodollar Loan and each Competitive Loan shall survive
termination of this Agreement.
6.2 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, with respect to any Eurodollar Loans:
(a) Administrative Agent determines in good faith (which determination
shall be conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.1 hereof
are not being provided by the Reference Banks in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest for such
Loans for Interest Periods therefor as provided in this Agreement; or
(b) the Majority Banks determine in good faith (which determination shall
be conclusive) and notify Administrative Agent that the relevant rates of
interest referred to in the definition of "Eurodollar Base Rate" in Section 1.1
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hereof upon the basis of which the rates of interest for such Loans are to be
determined do not accurately reflect the cost to such Banks of making or
maintaining such Loans for Interest Periods therefor; or
(c) Administrative Agent determines in good faith (which determination
shall be conclusive) that by reason of circumstances affecting the interbank
Dollar market generally, deposits in United States dollars in the relevant
interbank Dollar market are not being offered for the applicable Interest Period
and in an amount equal to the amount of the Eurodollar Loan requested by the
Company;
then Administrative Agent shall promptly notify the Company and each Bank
thereof, and, so long as such condition remains in effect, the Banks shall be
under no obligation to make Eurodollar Loans (but shall maintain until the end
of the Interest Period then in effect the Eurodollar Loans then outstanding).
6.3 Illegality. Notwithstanding any other provision of this Agreement to
the contrary, if (x) by reason of the adoption of any applicable Legal
Requirement or any change in any applicable Legal Requirement or in the
interpretation or administration thereof by any Governmental Authority or
compliance by any Bank with any request or directive (whether or not having the
force of law) of any central bank or other Governmental Authority or (y)
circumstances affecting the relevant interbank Dollar market or the position of
a Bank therein shall at any time make it unlawful or impracticable in the sole
discretion of a Bank exercised in good faith for such Bank or its Applicable
Lending Office to (a) honor its obligation to make Eurodollar Loans or
Competitive Loans hereunder, or (b) maintain Eurodollar Loans or Competitive
Loans hereunder, then such Bank shall promptly notify the Company thereof
through Administrative Agent and such Bank's obligation to make or maintain
Eurodollar Loans or Competitive Loans, as the case may be, hereunder shall be
suspended until such time as such Bank may again make and maintain Eurodollar
Loans or Competitive Loans, as the case may be (in which case the provisions of
Section 6.4 hereof shall be applicable). Before giving such notice pursuant to
this Section 6.3, such Bank will designate a different available Applicable
Lending Office for the Eurodollar Loans or the Competitive Loans, as the case
may be, of such Bank or take such other action as the Company may request if
such designation or action will avoid the need to suspend such Bank's obligation
to make Eurodollar Loans or Competitive Loans, as the case may be, hereunder and
will not, in the sole opinion of such Bank exercised in good faith, be
disadvantageous to such Bank (provided, that such Bank shall have no obligation
so to designate an Applicable Lending Office for Eurodollar Loans located in the
United States of America).
6.4 Substitute Alternate Base Rate Loans. If the obligation of any Bank to
make or maintain Eurodollar Loans or Competitive Loans, as the case may be,
shall be suspended pursuant to Section 6.1, 6.2 or 6.3 hereof, all Loans which
would otherwise be made by such Bank as Eurodollar Loans or Competitive Loans,
as the case may be, shall be made instead as Alternate Base Rate Loans (and, if
an event referred to in Section 6.1(b) or 6.3 hereof has occurred and such Bank
so requests by notice to the Company with a copy to Administrative Agent, each
Eurodollar Loan or each Competitive Loan, as the case may be, of such Bank then
outstanding shall be automatically converted into an Alternate Base Rate Loan on
the date specified by such Bank in such notice) and, to the extent that
Eurodollar Loans or Competitive Loans, as the case may be, are so made as (or
converted into) Alternate Base Rate Loans, all payments of principal which would
otherwise be applied to such Eurodollar Loans or such Competitive Loans, as the
case may be, shall be applied instead to such Alternate Base Rate Loans.
(32)
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6.5 Compensation. Subject to Section 13.6 hereof, the Company shall pay to
Administrative Agent for the account of each Bank, within four (4) Business Days
after demand therefor by such Bank through Administrative Agent, such amount or
amounts as shall be sufficient (in the reasonable opinion of such Bank) to
compensate it for any loss, cost or expense actually incurred by it (exclusive
of any lost profits or opportunity costs) as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan or a
Competitive Loan made by such Bank on a date other than the last day of an
Interest Period for such Loan; or
(b) any failure by the Company to borrow a Eurodollar Loan or a Competitive
Loan to be made by such Bank on the date for such borrowing specified in the
relevant notice of borrowing under Section 5.5 or Section 2.9 hereof;
such compensation to include, without limitation, any loss or expense actually
incurred (exclusive of any lost profits or opportunity costs) by reason of the
liquidation or reemployment of deposits or other funds acquired by the
applicable Bank to fund or maintain its share of any Loan. Subject to Section
6.8, each determination of the amount of such compensation by a Bank shall be
conclusive and binding, absent manifest error, and may be computed using any
reasonable averaging and attribution method. No costs shall be payable under
this Section solely by reason of the conversion of loans designated as
"Eurodollar Loans" under that certain Credit Agreement referred to in Section
13.15 hereof into the Existing Competitive Loans.
6.6 Additional Costs in Respect of Letters of Credit. If as a result of any
Regulatory Change there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit or similar requirement against or with respect to or
measured by reference to Letters of Credit issued or to be issued hereunder or
participations in such Letters of Credit, and the result shall be to increase
the cost to any Bank of issuing or maintaining any Letter of Credit or any
participation therein, or reduce any amount receivable by any Bank hereunder in
respect of any Letter of Credit or any participation therein (which increase in
cost, or reduction in amount receivable, shall be the result of such Bank's
reasonable allocation of the aggregate of such increases or reductions resulting
from such event), then such Bank shall notify the Company through Administrative
Agent, and upon demand therefor by such Bank through Administrative Agent, the
Company (subject to Section 13.6 hereof) shall pay to such Bank, from time to
time as specified by such Bank, such additional amounts as shall be sufficient
to compensate such Bank for such increased costs or reductions in amount. Before
making such demand pursuant to this Section 6.6, such Bank will designate a
different available Applicable Lending Office for the Letter of Credit of such
Bank or take such other action as the Company may request, if such designation
or action will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Bank exercised in good faith, be
disadvantageous to such Bank. A statement as to such increased costs or
reductions in amount incurred by such Bank, submitted by such Bank to the
Company, shall be conclusive as to the amount thereof, absent manifest error.
(33)
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6.7 Capital Adequacy. If any Bank shall have determined that a Regulatory
Change resulting in the adoption after the date hereof or effectiveness after
the date hereof (whether or not previously announced) of any applicable law,
rule, regulation or treaty regarding capital adequacy, or any change therein
after the date hereof, or any change in the interpretation or administration
thereof after the date hereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive after the date hereof
regarding capital adequacy (whether or not having the force of law) of any such
Governmental Authority has or would have the effect of reducing the rate of
return on such Bank's capital as a consequence of such Bank's obligations
hereunder, under the Loans made by it and under the Letters of Credit to a level
below that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, upon satisfaction of the conditions precedent set forth in this
Section 6.7, upon demand by such Bank (with a copy to Administrative Agent), the
Company (subject to Section 13.6 hereof) shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such reduction. A certificate
as to such amounts, submitted to the Company and Administrative Agent by such
Bank, setting forth the basis for such Bank's determination of such amounts,
shall constitute a demand therefor and shall be conclusive and binding for all
purposes, absent manifest error. The Company shall pay the amount shown as due
on any such certificate within four (4) Business Days after delivery of such
certificate. Subject to Section 6.8, in preparing such certificate, a Bank may
employ such assumptions and allocations of costs and expenses as it shall in
good faith deem reasonable and may use any reasonable averaging and attribution
method.
6.8 Limitation on Additional Charges; Substitute Banks; Non-Discrimination.
Anything in this Section 6 notwithstanding:
(a) the Company shall not be required to pay to any Bank reimbursement with
regard to any costs or expenses, unless such Bank notifies the Company of such
costs or expenses within 90 days after the date paid or incurred;
(b) none of the Banks shall be permitted to pass through to the Company
charges and costs under this Section 6 on a discriminatory basis (i.e., which
are not also passed through by such Bank to other customers of such Bank
similarly situated where such customer is subject to documents providing for
such pass through); and
(c) if any Bank elects to pass through to the Company any material charge
or cost under this Section 6 or elects to terminate the availability of
Eurodollar Loans for any material period of time, the Company may, within 60
days after the date of such event and so long as no Default shall have occurred
and be continuing, elect to terminate such Bank as a party to this Agreement;
provided that, concurrently with such termination the Company shall (i) if
Administrative Agent and each of the other Banks shall consent, pay that Bank
all principal, interest and fees and other amounts owed to such Bank through
such date of termination or (ii) have arranged for another financial institution
approved by Administrative Agent (such approval not to be unreasonably withheld)
(34)
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as of such date, to become a substitute Bank for all purposes under this
Agreement in the manner provided in Section 13.5; provided further that, prior
to substitution for any Bank, the Company shall have given written notice to
Administrative Agent of such intention and the Banks shall have the option, but
no obligation, for a period of 60 days after receipt of such notice, to increase
their Commitments in order to replace the affected Bank in lieu of such
substitution.
Section 7. Conditions Precedent.
7.1 Initial Loans. The obligation of each Bank or any applicable Issuer to
make its initial Loans after the date hereof or issue or participate in a Letter
of Credit after the date hereof (if such Letter of Credit is issued prior to the
funding of the initial Loans after the date hereof) hereunder is subject to the
following conditions precedent, each of which shall have been fulfilled or
waived to the satisfaction of the Majority Banks:
(a) Corporate Action and Status. Administrative Agent shall have received
from the appropriate Governmental Authorities certified copies of the
Organizational Documents (other than bylaws) of the Company, and evidence
satisfactory to Administrative Agent of all corporate action taken by the
Company authorizing the execution, delivery and performance of the Loan
Documents and all other documents related to this Agreement to which it is a
party (including, without limitation, a certificate of the secretary of each
such party setting forth the resolutions of its Board of Directors authorizing
the transactions contemplated thereby and attaching a copy of its bylaws),
together with such certificates as may be appropriate to demonstrate the
qualification and good standing of and payment of taxes by the Company in each
state in which such qualification is necessary.
(b) Incumbency. The Company and each Relevant Party shall have delivered to
Administrative Agent a certificate in respect of the name and signature of each
of the officers (i) who is authorized to sign on its behalf the applicable Loan
Documents related to any Loan or the issuance of any Letter of Credit and (ii)
who will, until replaced by another officer or officers duly authorized for that
purpose, act as its representative for the purposes of signing documents and
giving notices and other communications in connection with any Loan or the
issuance of any Letter of Credit. Administrative Agent and each Bank may
conclusively rely on such certificates until they receive notice in writing from
the Company or the appropriate Relevant Party to the contrary.
(c) [Intentionally omitted].
(d) Loan Documents. The Company and each other Relevant Party shall have
duly executed and delivered the other Loan Documents to which it is a party (in
such number of copies as Administrative Agent shall have requested) and each
such Loan Document shall be in form satisfactory to the Agents. Each such Loan
Document shall be in substantially the form furnished to the Banks prior to
their execution of this Agreement, together with such changes therein as the
Agents may approve.
(35)
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(e) Fees and Expenses. The Company shall have paid to Administrative Agent
for the account of each Bank all accrued and unpaid commitment fees and other
fees in the amounts previously agreed upon in writing among the Company and
Administrative Agent; and shall have in addition paid to each Agent all amounts
payable under the letter agreements referred to Section 2.4(b) hereof and under
Section 9.7 hereof on or before the date of this Agreement.
(f) Opinions of Counsel. Administrative Agent shall have received (1) an
opinion of Vinson & Elkins L.L.P., counsel to the Company, in form and substance
reasonably satisfactory to the Agents, and (2) such opinions of counsel to the
Company and other Relevant Parties as the Agents shall reasonably request with
respect to the Company and the Loan Documents.
(g) Execution by Banks and Agents. Administrative Agent shall have received
counterparts of this Agreement executed and delivered by or on behalf of each of
the Banks and the Agents or Administrative Agent shall have received evidence
satisfactory to it of the execution and delivery by each of the Banks and Agents
of a counterpart hereof.
(h) Consents. Administrative Agent shall have received evidence
satisfactory to it that, except as disclosed in the Disclosure Statement, all
material consents of each Governmental Authority and of each other Person, if
any, reasonably required in connection with (a) the Loans and the Letters of
Credit and (b) the execution, delivery and performance of this Agreement and the
other Loan Documents have been satisfactorily obtained.
(i) Other Documents. Administrative Agent shall have received such other
documents consistent with the terms of this Agreement and relating to the
transactions contemplated hereby as Administrative Agent may reasonably request.
All provisions and payments required by this Section 7.1 are subject to the
provisions of Section 13.6.
7.2 Initial and Subsequent Loans. The obligation of each Bank or any
applicable Issuer to make any Loan (including, without limitation, its initial
Loan) to be made by it hereunder or to issue or participate in any Letter of
Credit is subject to the additional conditions precedent that (i) Administrative
Agent shall have received a Request for Extension of Credit and such other
certifications as Administrative Agent may reasonably require, (ii) in the case
of Competitive Loans, the Company shall have complied with the provisions of
Section 2.9 hereof and (iii) as of the date of such Loan or such issuance, and
after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) except for facts timely disclosed to Administrative Agent from time to
time in writing, which facts (i) are not materially more adverse to the Company
and its Subsidiaries, (ii) do not materially decrease the ability of the Banks
to collect the Obligations as and when due and payable and (iii) do not
(36)
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materially increase the liability of any Agent or any of the Banks, in each case
compared to those facts existing on the date hereof and the material details of
which have been set forth in the Financial Statements delivered to
Administrative Agent prior to the date hereof or in the Disclosure Statement,
and except for the representations set forth in the Loan Documents which, by
their terms, are expressly (or by means of similar phrasing) made as of the
Effective Date or as of the date hereof, as the case may be, only, the
representations and warranties made in each Loan Document shall be true and
correct in all material respects on and as of the date of the making of such
Loan or such issuance, with the same force and effect as if made on and as of
such date;
(c) the making of such Loan or the issuance of such Letter of Credit shall
not violate any Legal Requirement applicable to any Bank.
Each Request for Extension of Credit by the Company hereunder or request
for issuance of a Letter of Credit shall include a representation and warranty
by the Company to the effect set forth in Subsections 7.2(a) and (b) (both as of
the date of such notice and, unless the Company otherwise notifies
Administrative Agent prior to the date of such borrowing or issuance, as of the
date of such borrowing or issuance).
Section 8. Representations and Warranties. To induce the Banks to enter
into this Agreement and to make the Loans and issue or participate in the
Letters of Credit, the Company represents and warrants (such representations and
warranties to survive any investigation and the making of the Loans and the
issuance of the Letters of Credit) to the Banks and the Agents as follows:
8.1 Corporate Existence. The Company and each Subsidiary of the Company are
corporations duly incorporated and organized, legally existing and in good
standing under the laws of the respective jurisdictions in which they are
incorporated, and are duly qualified as foreign corporations in all
jurisdictions wherein the property owned or the business transacted by them
makes such qualification necessary and the failure to so qualify could
reasonably be expected to result in a Material Adverse Effect.
8.2 Corporate Power and Authorization. Each of the Company and each
Subsidiary of the Company is duly authorized and empowered to execute, deliver,
and perform this Agreement and the other Loan Documents to which it is a party;
and all corporate action on the Company's part and on the part of each
Subsidiary of the Company for the due execution, delivery, and performance of
this Agreement and the other Loan Documents to which each of the Company and
each such Subsidiary is a party has been duly and effectively taken.
8.3 Binding Obligations. This Agreement and the other Loan Documents
constitute legal, valid and binding obligations of the Company and its
Subsidiaries, to the extent each is a party thereto, enforceable against the
Company and its Subsidiaries, to the extent each is a party thereto, in
accordance with their respective terms, except as may be limited by any
bankruptcy, insolvency, moratorium or other similar laws or judicial decisions
affecting creditors' rights generally and general principles of equity whether
considered at law or in equity.
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8.4 No Legal Bar or Resultant Lien. The Company's and each of its
Subsidiaries' creation, issuance, execution, delivery and performance of this
Agreement and the other Loan Documents, to the extent they are parties thereto,
do not and will not violate any provisions of the Organizational Documents of
the Company or any Subsidiary of the Company or any Legal Requirement to which
the Company or any Subsidiary of the Company is subject or by which its property
may be presently bound or encumbered, or result in the creation or imposition of
any Lien upon any properties of the Company or any Subsidiary of the Company,
other than those permitted by this Agreement.
8.5 No Consent. Except as set forth in the Disclosure Statement, the
Company's and each of its Subsidiaries' execution, delivery, and performance of
this Agreement and the other Loan Documents to which they are parties do not and
will not require the consent or approval of any Person other than such consents
and/or approvals obtained by the Company contemporaneously with or prior to the
execution of this Agreement, including, without limitation, any Governmental
Authorities, other than those consents the failure to obtain which could not be
reasonably expected to have a Material Adverse Effect.
8.6 Financial Condition. The audited consolidated annual financial
statements of the Company and its Subsidiaries for the year ended December 31,
1996 and the unaudited consolidated interim financial statements of the Company
and its Subsidiaries for the quarter and three-month period ended September 30,
1997, which have been delivered to the Banks, have been prepared in accordance
with GAAP, and present fairly the financial condition and results of the
operations of the Company and its Subsidiaries for the period or periods stated
(subject only to normal year-end audit adjustments with respect to the unaudited
interim statements). No material adverse change, either in any case or in the
aggregate, has occurred since September 30, 1997 in the assets, liabilities,
financial condition, business, operations, affairs or circumstances of the
Company and its Subsidiaries taken as a whole, except as disclosed to the Banks
in the Disclosure Statement.
8.7 Investments and Guaranties. As of the Effective Date, no Subsidiary of
the Company had made Investments in or advances to, and neither the Company nor
any Subsidiary of the Company had made Guarantees of, the obligations of any
Person, except as (a) disclosed to the Banks in the Disclosure Statement or (b)
not prohibited by applicable provisions of Section 10.
8.8 Liabilities and Litigation. Neither the Company nor any Subsidiary of
the Company has any material (individually or in the aggregate) liabilities,
direct or contingent, except as (a) disclosed or referred to in the Financial
Statements, (b) disclosed to the Banks in the Disclosure Statement, (c)
disclosed in a notice to Administrative Agent pursuant to Section 9.10 with
respect to such as could reasonably be expected to have a Material Adverse
Effect or (d) not prohibited by applicable provisions of Section 10. Except as
(a) described in the Financial Statements, (b) otherwise disclosed to the Banks
in the Disclosure Statement, (c) disclosed in a notice to Administrative Agent
pursuant to Section 9.10 with respect to such as could reasonably be expected to
have a Material Adverse Effect or (d) not prohibited by applicable provisions of
Section 10, no litigation, legal, administrative or arbitral proceeding,
investigation, or other action of any nature exists or (to the knowledge of the
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Company) is threatened against or affecting the Company or any Subsidiary of the
Company which could reasonably be expected to result in any judgment which could
reasonably be expected to have a Material Adverse Effect, or which in any manner
challenges or may challenge or draw into question the validity of this Agreement
or any other Loan Document, or enjoins or threatens to enjoin or otherwise
restrain any of the transactions contemplated by any of them.
8.9 Taxes and Governmental Charges. The Company and its Subsidiaries have
filed, or obtained extensions with respect to the filing of, all material tax
returns and reports required to be filed and have paid all material taxes,
assessments, fees and other governmental charges levied upon any of them or upon
any of their respective properties or income which are due and payable,
including interest and penalties, or have provided adequate reserves for the
payment thereof.
8.10 Title to Properties. The Company and its Subsidiaries have good and
defensible title to their respective properties (including, without limitation,
all fee and leasehold interests), free and clear of all Liens except (a) those
referred to in the Financial Statements, (b) as disclosed to the Banks in the
Disclosure Statement or (c) as permitted by Section 10.2.
8.11 Defaults. Neither the Company nor any Subsidiary of the Company is in
default, which default could reasonably be expected to have a Material Adverse
Effect, under any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company or any Subsidiary of the Company is a party or
by which the Company or any Subsidiary of the Company or the property of the
Company or any Subsidiary of the Company is bound, except as (a) disclosed to
the Banks in the Disclosure Statement, (b) disclosed in a notice to
Administrative Agent pursuant to Section 9.10 with respect to such as could
reasonably be expected to have a Material Adverse Effect or (c) specifically
permitted by applicable provisions of Section 10. No Default under this
Agreement or any other Loan Document has occurred and is continuing.
8.12 Location of Businesses and Offices. Except to the extent that
Administrative Agent has been furnished written notice to the contrary or of
additional locations, pursuant to Section 9.10, the Company's principal place of
business and chief executive offices are located at the address stated on the
signature page hereof and the principal places of business and chief executive
offices of each Subsidiary are described on Exhibit D hereto.
8.13 Compliance with Law. Neither the Company nor any Subsidiary of the
Company (except as (a) disclosed to the Banks in the Disclosure Statement, (b)
disclosed in a notice to Administrative Agent pursuant to Section 9.10 with
respect to such as could reasonably be expected to have a Material Adverse
Effect or (c) not prohibited by applicable provisions of Section 10):
(a) is in violation of any Legal Requirement; or
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(b) has failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of their respective
properties or the conduct of their respective business;
which violation or failure could reasonably be expected to have a Material
Adverse Effect.
8.14 Margin Stock. None of the proceeds of the Loans will be used for the
purpose of, and neither the Company nor any Subsidiary of the Company is engaged
in the business of extending credit for the purpose of (a) purchasing or
carrying any "margin stock" as defined in Regulation U of the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 221) or (b) reducing or retiring
any indebtedness which was originally incurred to purchase or carry margin
stock, if such purpose under either (a) or (b) above would constitute this
transaction a "purpose credit" within the meaning of said Regulation U, or for
any other purpose which would constitute this transaction a "purpose credit".
Neither the Company nor any Subsidiary of the Company is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stocks. Neither the Company nor any
Subsidiary of the Company nor any Person acting on behalf of the Company or any
Subsidiary of the Company has taken or will take any action which might cause
any of the Loan Documents, including this Agreement, to violate Regulation U or
any other regulation of the Board of Governors of the Federal Reserve System, or
to violate any similar provision of the Securities Exchange Act of 1934 or any
rule or regulation under any such provision thereof.
8.15 Subsidiaries. The Company has no Subsidiaries as of the date of this
Agreement except those shown in Exhibit D hereto.
8.16 ERISA. With respect to each Plan, the Company and each ERISA Affiliate
have fulfilled their obligations, including obligations under the minimum
funding standards of ERISA and the Code, and are in compliance in all material
respects with the provisions of ERISA and the Code. The Company has no knowledge
of any event which could result in a liability of the Company or any ERISA
Affiliate to the PBGC or a Plan (other than to make contributions in the
ordinary course). Since the effective date of Title IV of ERISA, there have not
been any nor are there now existing any events or conditions that would cause
the Lien provided under Section 4068 of ERISA to attach to any property of the
Company or any ERISA Affiliate. There are no Unfunded Liabilities with respect
to any Plan other than those specifically described in the certificate delivered
in accordance with Section 7.1(i). No "prohibited transaction" has occurred with
respect to any Plan.
8.17 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an investment company within the meaning of the Investment
Company Act of 1940, as amended, or, directly or indirectly, controlled by or
acting on behalf of any Person which is an investment company, within the
meaning of said Act.
8.18 Public Utility Holding Company Act. Neither the Company nor any of its
Subsidiaries (i) is subject to regulation under the Public Utility Holding
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Company Act of 1935, as amended (the "PUHC Act"), except as to Section 9(a)(2)
thereof (15 U.S.C.A. 79(i)(a)(2)), or (ii) is in violation of any of the
provisions, rules, regulations or orders of or under the PUHC Act. Further, none
of the transactions contemplated under this Agreement, including without
limitation, the making of the Loans and the issuance of the Letters of Credit,
shall cause or constitute a violation of any of the provisions, rules,
regulations or orders of or under the PUHC Act and the PUHC Act does not in any
manner impair the legality, validity or enforceability of this Agreement. The
Company has duly filed with the Securities and Exchange Commission good faith
applications (each an "Application") under Section 2(a)(8) of the PUHC Act (15
U.S.C.A. 79(b)(a)(8)) for a declaration of non-subsidiary status pursuant to
such Section 2(a)(8) with respect to each Person (each a "Specified
Shareholder") which owns, controls or holds with power to vote, directly or
indirectly, a sufficient quantity of the voting securities of the Company to be
construed as a "holding company", as such term is defined in the PUHC Act, in
respect of the Company. All of the information contained in such Applications,
as amended, was true as of the most recent filing date with respect thereto
(provided that the Company may, unless it has actual current knowledge to the
contrary, rely solely upon written information furnished by any Specified
Shareholder with respect to background information about the Specified
Shareholder and the nature of the ownership by such Specified Shareholder or its
Affiliates of the voting securities of the Company), and the Company knows of no
reason why each such Application, if acted upon by the Securities and Exchange
Commission, would not be approved. True and correct copies of each such
Application and any amendments thereto, as filed, have been furnished to
Administrative Agent. The Company has not received any written notice from the
Securities and Exchange Commission with respect to any such Application other
than as disclosed in writing to Administrative Agent.
8.19 Environmental Matters. Except as disclosed in the Disclosure
Statement, (i) the Company and it Subsidiaries have obtained and maintained in
effect all Environmental Permits (or has initiated the necessary steps to
transfer the Environmental Permits into its name), the failure to obtain which
could reasonably be expected to have a Material Adverse Effect, (ii) the Company
and its Subsidiaries and their properties, assets, business and operations have
been and are in compliance with all applicable Requirements of Environmental Law
and Environmental Permits failure to comply with which could reasonably be
expected to have a Material Adverse Effect, (iii) the Company and its
Subsidiaries and their properties, assets, business and operations are not
subject to any (A) Environmental Claims or (B) Environmental Liabilities, in
either case direct or contingent, and whether known or unknown, arising from or
based upon any act, omission, event, condition or circumstance occurring or
existing on or prior to the date hereof which could reasonably be expected to
have a Material Adverse Effect, and (iv) no Responsible Officer of the Company
or any of its Subsidiaries has received any notice of any violation or alleged
violation of any Requirements of Environmental Law or Environmental Permit or
any Environmental Claim in connection with its assets, properties, business or
operations which could reasonably be expected to have a Material Adverse Effect.
The liability (including without limitation any Environmental Liability and any
other damage to persons or property), if any, of the Company and its
Subsidiaries and with respect to their properties, assets, business and
operations which is reasonably expected to arise in connection with Requirements
of Environmental Laws currently in effect and other environmental matters
presently known by a Responsible Officer of the Company will not have a Material
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Adverse Effect. No Responsible Officer of the Company knows of any event or
condition with respect to Environmental Matters with respect to any of its
properties or the properties of any of its Subsidiaries which could reasonably
be expected to have a Material Adverse Effect. For purposes of this Section
8.19, "Environmental Matters" shall mean matters relating to pollution or
protection of the environment, including, without limitation, emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including, without limitation, ambient air, surface water or ground
water, or land surface or subsurface), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
8.20 Claims and Liabilities. Except as disclosed to the Banks in writing,
neither the Company nor any of its Subsidiaries has accrued any liabilities
under gas purchase contracts for gas not taken, but for which it is liable to
pay if not made up and which, if not paid, would have a Material Adverse Effect.
Except as disclosed to the Banks in writing, no claims exist against the Company
or its Subsidiaries for gas imbalances which claims if adversely determined
would have a Material Adverse Effect. No purchaser of product supplied by the
Company or any of its Subsidiaries has any claim against the Company or any of
its Subsidiaries for product paid for, but for which delivery was not taken as
and when paid for, which claim if adversely determined would have a Material
Adverse Effect.
8.21 Solvency. Neither the Company nor the Company and its Subsidiaries, on
a consolidated basis, is "insolvent", as such term is used and defined in (i)
the Bankruptcy Code and (ii) the Texas Uniform Fraudulent Transfer Act, Tex.
Bus. & Com. Code Ann. 24.001 et seq.
Section 9. Affirmative Covenants. A deviation from the provisions of this
Section 9 will not constitute a Default under this Agreement if such deviation
is consented to in writing by the Majority Banks. Without the prior written
consent of the Majority Banks, the Company agrees with the Banks and the Agents
that, so long as any of the Commitments is in effect and until payment in full
of all Loans hereunder, the termination or expiry of all Letters of Credit and
payment in full of Letter of Credit Liabilities, all interest thereon and all
other amounts payable by the Company hereunder:
9.1 Financial Statements and Reports. The Company will promptly furnish to
any Bank from time to time upon request such information regarding the business
and affairs and financial condition of the Company and its Subsidiaries as such
Bank may reasonably request, and will furnish to the Agents and each of the
Banks:
(a) Annual Reports - promptly after becoming available and in any event
within 100 days after the close of each fiscal year of the Company:
(i) the audited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such year;
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(ii) the audited consolidated statement of earnings of the Company and
its Subsidiaries for such year;
(iii) the audited consolidated statement of cash flows of the Company
and its Subsidiaries for such year;
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, and, in the case of the audited Financial Statements,
audited and accompanied by the related opinion of KPMG Peat Marwick or other
independent certified public accountants of recognized national standing
acceptable to the Majority Banks, which opinion shall state that such audited
balance sheets and statements have been prepared in accordance with GAAP
consistently followed throughout the period indicated and fairly present the
consolidated financial condition and results of operations of the applicable
Persons as at the end of, and for, such fiscal year; and
(b) Quarterly Reports - as soon as available and in any event within 50
days after the end of each of the first three quarterly periods in each fiscal
year of the Company:
(i) the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such quarter;
(ii) the unaudited consolidated statement of earnings of the Company
and its Subsidiaries for such quarter and for the period from the beginning
of the fiscal year to the close of such quarter;
(iii) the unaudited consolidated statement of cash flows of the
Company and its Subsidiaries for such quarter and for the period from the
beginning of the fiscal year to the close of such quarter;
all of items (i) through (iii) above prepared on substantially the same
accounting basis as the annual reports described in Subsection 9.1(a), subject
to normal changes resulting from year-end adjustments; and
(c) [Intentionally omitted]; and
(d) SEC and Other Reports - promptly upon their becoming publicly
available, one copy of each financial statement, report, notice or definitive
proxy statement sent by the Company or any Subsidiary to shareholders generally,
and of each regular or periodic report and any registration statement,
prospectus or written communication (other than transmittal letters) in respect
thereof filed by the Company or any of its Subsidiaries with, or received by the
Company or any of its Subsidiaries in connection therewith from, any securities
exchange or the Securities and Exchange Commission or any successor agency.
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All of the balance sheets and other financial statements referred to in
this Section 9.1 will be in such detail as any Bank may reasonably request and
will conform to GAAP applied on a basis consistent with those of the Financial
Statements as of December 31, 1996. In addition, if GAAP shall change with
respect to any matter relative to determination of compliance with this
Agreement, the Company will also provide financial information necessary for the
Banks to determine compliance with this Agreement.
9.2 Officers' Certificates.
(a) Concurrently with the furnishing of the annual financial statements
pursuant to Subsection 9.1(a), commencing with the annual financial statements
required to be delivered in 1998, the Company will furnish or cause to be
furnished to Administrative Agent certificates of compliance, as follows:
(i) a certificate signed by the principal financial officer of the
Company in the form of Exhibit E; and
(ii) a certificate from the independent public accountants stating
that their audit has not disclosed the existence of any condition which
constitutes a Default, or if their audit has disclosed the existence of any
such condition, specifying the nature and period of existence.
(b) Concurrently with the furnishing of the quarterly financial statements
pursuant to Subsection 9.1(b), the Company will furnish to Administrative Agent
a principal financial officer's certificate in the form of Exhibit E.
9.3 Taxes and Other Liens. The Company will and will cause each Subsidiary
of the Company to pay and discharge promptly all taxes, assessments and
governmental charges or levies imposed upon the Company or such Subsidiary, or
upon the income or any property of the Company or such Subsidiary, as well as
all claims of any kind (including claims for labor, materials, supplies, rent
and payment of proceeds attributable to Hydrocarbon production) which, if
unpaid, might result in or become a Lien upon any or all of the property of the
Company or such Subsidiary; provided, however, that neither the Company nor such
Subsidiary will be required to pay any such tax, assessment, charge, levy or
claims if the amount, applicability or validity thereof will currently be
contested in good faith by appropriate proceedings diligently conducted and if
the Company or such Subsidiary will have set up reserves therefor adequate under
GAAP.
9.4 Maintenance. Except as referred to in Sections 8.1 and 8.13 and except
as permitted under Section 10.5 the Company will and will cause each Subsidiary
of the Company to: (i) maintain its corporate existence; (ii) maintain its
rights and franchises, except for any mergers or consolidations otherwise
permitted by this Agreement and except to the extent failure to so maintain the
same would not have a Material Adverse Effect; (iii) observe and comply (to the
extent that any failure would have a Material Adverse Effect) with all valid
Legal Requirements (including without limitation Requirements of Environmental
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Law); and (iv) maintain (except to the extent failure to so maintain the same
would not have a Material Adverse Effect) its properties (and any properties
leased by or consigned to it or held under title retention or conditional sales
contracts) consistent with the standards of a reasonably prudent operator at all
times and make all repairs, replacements, additions, betterments and
improvements to its properties consistent with the standards of a reasonably
prudent operator.
9.5 Further Assurances. The Company will and will cause each Subsidiary of
the Company to cure promptly any defects in the execution and delivery of the
Loan Documents, including this Agreement. The Company at its expense will
promptly execute and deliver to Administrative Agent upon request all such other
and further documents, agreements and instruments (or cause any of its
Subsidiaries to take such action) in compliance with or accomplishment of the
covenants and agreements of the Company or any of its Subsidiaries in the Loan
Documents, including this Agreement, or to correct any omissions in the Loan
Documents, or to make any recordings, to file any notices, or obtain any
consents, all as may be necessary or appropriate in connection therewith.
9.6 Performance of Obligations. The Company will pay the Loans according to
the reading, tenor and effect of this Agreement; and the Company will do and
perform every act and discharge all of the obligations provided to be performed
and discharged by the Company under this Agreement and the other Loan Documents
at the time or times and in the manner specified, and cause each of its
Subsidiaries to take such action with respect to their obligations to be
performed and discharged under the Loan Documents to which they respectively are
parties.
9.7 Reimbursement of Expenses. Whether or not any Loan is ever made or any
Letter of Credit is ever issued, the Company agrees to pay or reimburse
Administrative Agent for paying the reasonable fees and expenses of Mayer, Brown
& Platt, special counsel to the Agents, together with the reasonable fees and
expenses of local counsel engaged by the Agents, in connection with the
negotiation of the terms and structure of the Obligations, the preparation,
execution and delivery of this Agreement and the other Loan Documents and the
making of the Loans and the issuance of Letters of Credit hereunder, as well as
any modification, supplement or waiver of any of the terms of this Agreement and
the other Loan Documents. The Company will promptly upon request and in any
event within 30 days from the date of receipt by the Company of a copy of a bill
for such amounts, reimburse any Bank or any Agent for all amounts reasonably
expended, advanced or incurred by such Bank or such Agent to satisfy any
obligation of the Company under this Agreement or any other Loan Document, to
protect the properties or business of the Company or any Subsidiary of the
Company, to collect the Obligations, or to enforce the rights of such Bank or
such Agent under this Agreement or any other Loan Document, which amounts will
include without limitation all court costs, attorneys' fees (but not including
allocated costs of in-house counsel), any engineering fees and expenses, fees of
auditors, accountants and appraisers, investigation expenses, all transfer,
stamp, documentary or similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of any of the Loan Documents or any
other document referred to therein, all costs, expenses, taxes, assessments and
other charges incurred in connection with any filing, registration, recording or
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perfection of any lien contemplated by any of the Loan Documents or any document
referred to therein, fees and expenses incurred in connection with such Bank's
participation as a member of a creditors' committee in a case commenced under
the Bankruptcy Code or other similar law of the United States or any state
thereof, fees and expenses incurred in connection with lifting the automatic
stay prescribed in 362 Title 11 of the United States Code, and fees and expenses
incurred in connection with any action pursuant to 1129 Title 11 of the United
States Code and all other customary out-of-pocket expenses incurred by such Bank
or such Agent in connection with such matters, together with interest after the
expiration of the 30-day period stated above in this Section if no Event of
Default has occurred and is continuing, or from the date of the request to the
Company if an Event of Default has occurred and is continuing, at either (i) the
Post-Default Rate on each such amount until the date of reimbursement to such
Bank or such Agent, or (ii) if no Event of Default will have occurred and be
continuing, the Alternate Base Rate plus the highest Applicable Margin for
Alternate Base Rate Loans (not to exceed the Highest Lawful Rate) on each such
amount until the date of the Company's receipt of written demand or request by
such Bank or such Agent for the reimbursement of same, and thereafter at the
applicable Post-Default Rate until the date of reimbursement to such Bank or
such Agent. The obligations of the Company under this Section are compensatory
in nature, shall be deemed liquidated as to amount upon receipt by the Company
of a copy of any invoice therefor, and will survive the non-assumption of this
Agreement in a case commenced under the Bankruptcy Code or other similar law of
the United States or any state thereof, and will remain binding on the Company
and any trustee, receiver, or liquidator of the Company appointed in any such
case.
9.8 Insurance. The Company and its Subsidiaries will maintain, with
financially sound and reputable insurers, insurance with respect to their
respective properties and business against such liabilities, casualties, risks
and contingencies and in such types and amounts as is customary in the case of
corporations engaged in the same or similar businesses and similarly situated.
Upon the request of Administrative Agent acting at the instruction of the
Majority Banks, the Company will furnish or cause to be furnished to
Administrative Agent from time to time a summary of the insurance coverage of
the Company and its Subsidiaries in form and substance satisfactory to the
Majority Banks in their reasonable judgment, and if requested will furnish
Administrative Agent copies of the applicable policies. Subject to the terms of
Section 3 hereof, in the case of any fire, accident or other casualty causing
loss or damage to any properties of the Company or any of its Subsidiaries, the
proceeds of such policies will be used (i) to repair or replace the damaged
property or (ii) to prepay the Obligations, at the election of the Company.
9.9 Accounts and Records. The Company will keep and will cause each
Subsidiary of the Company to keep books of record and account which fairly
reflect all dealings or transactions in relation to their respective businesses
and activities, in accordance with GAAP, which books of record and account will
be maintained, to the extent necessary to enable compliance with all provisions
of this Agreement, separately for each such Subsidiary, the Company and any
division of the Company.
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9.10 Notice of Certain Events. The Company will promptly notify
Administrative Agent (and Administrative Agent will then notify all of the Banks
and other Agents) if a Responsible Officer of the Company learns of the
occurrence of, or if the Company causes or intends to cause, as the case may be:
(i) any event which constitutes a Default, together with a detailed
statement by a Responsible Officer of the Company of the steps being taken to
cure the effect of such Default; or
(ii) the receipt of any notice from, or the taking of any other action by,
the holder of any promissory note, debenture or other evidence of indebtedness
of the Company or any Subsidiary of the Company or of any security (as defined
in the Securities Act of 1933, as amended) of the Company or any Subsidiary of
the Company with respect to a claimed default, together with a detailed
statement by a Responsible Officer of the Company specifying the notice given or
other action taken by such holder and the nature of the claimed default and what
action the Company or such Subsidiary is taking or proposes to take with respect
thereto; or
(iii) any legal, judicial or regulatory proceedings affecting the Company
or any Subsidiary of the Company or any of the properties of the Company or any
Subsidiary of the Company in which the amount involved is materially adverse to
the Company and its Subsidiaries taken as a whole, and is not covered by
insurance or which, if adversely determined, would have a Material Adverse
Effect; or
(iv) any dispute between the Company or any Subsidiary of the Company and
any Governmental Authority or any other Person which, if adversely determined,
could reasonably be expected to have a Material Adverse Effect; or
(v) the occurrence of a default or event of default by the Company or any
Subsidiary of the Company under any other agreement to which it is a party,
which default or event of default could reasonably be expected to have a
Material Adverse Effect; or
(vi) any change in the accuracy of the representations and warranties of
the Company or any Subsidiary contained in this Agreement or any other Loan
Document; or
(vii) any material violation or alleged material violation of any
Requirements of Environmental Law or Environmental Permit or any Environmental
Claim or any Environmental Liability; or
(viii) any tariff and rate cases and other material reports filed by the
Company or any of its Subsidiaries with any Governmental Authority and any
notice to the Company or any of its Subsidiaries from any Governmental Authority
concerning noncompliance with any applicable Legal Requirement; or
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(ix) within 10 days after the date on which a Responsible Officer of the
Company has actual knowledge thereof, the receipt of any notice by the Company
or any of its Subsidiaries of any claim of nonpayment of, or any attempt to
collect or enforce, accounts payable of the Company or any of its Subsidiaries
exceeding, in the case of any one account payable at one time outstanding,
$1,000,000 and in the case of all accounts payable in the aggregate at any one
time outstanding, $3,000,000; or
(x) any requirement for the payment of all or any portion of any
Indebtedness of the Company or any of its Subsidiaries prior to the stated
maturity thereof (whether by acceleration or otherwise) or as the result of any
failure to maintain or the reaching of any threshold amount provided in any
promissory note, bond, debenture, or other evidence of Indebtedness or under any
credit agreement, loan agreement, indenture or similar agreement executed in
connection with any of the foregoing; or
(xi) any notice from the Securities and Exchange Commission with respect to
any Application (as defined in Section 8.18 hereof).
9.11 ERISA Information and Compliance. The Company will promptly furnish to
Administrative Agent (i) immediately upon receipt, a copy of any notice of
complete or partial withdrawal liability under Title IV of ERISA and any notice
from the PBGC under Title IV of ERISA of an intent to terminate or appoint a
trustee to administer any Plan, (ii) if requested by Administrative Agent,
acting on the instruction of the Majority Banks, promptly after the filing
thereof with the United States Secretary of Labor or the PBGC or the Internal
Revenue Service, copies of each annual and other report with respect to each
Plan or any trust created thereunder, (iii) immediately upon becoming aware of
the occurrence of any "reportable event", as such term is defined in Section
4043 of ERISA, for which the disclosure requirements of Regulation Section
2615.3 promulgated by the PBGC have not been waived, or of any "prohibited
transaction", as such term is defined in Section 4975 of the Code, in connection
with any Plan or any trust created thereunder, a written notice signed by the
President or the principal financial officer of the Company or the applicable
ERISA Affiliate specifying the nature thereof, what action the Company or the
applicable ERISA Affiliate is taking or proposes to take with respect thereto,
and, when known, any action taken by the PBGC, the Internal Revenue Service or
the Department of Labor with respect thereto, (iv) promptly after the filing or
receiving thereof by the Company or any ERISA Affiliate of any notice of the
institution of any proceedings or other actions which may result in the
termination of any Plan, and (v) each request for waiver of the funding
standards or extension of the amortization periods required by Sections 303 and
304 of ERISA or Section 412 of the Code promptly after the request is submitted
by the Company or any ERISA Affiliate to the Secretary of the Treasury, the
Department of Labor or the Internal Revenue Service, as the case may be. To the
extent required under applicable statutory funding requirements, the Company
will fund, or will cause each ERISA Affiliate to fund, all current service
pension liabilities as they are incurred under the provisions of all Plans from
time to time in effect, and comply with all applicable provisions of ERISA,
except to the extent that any such failure to comply could not reasonably be
expected to have a Material Adverse Effect. The Company covenants that it shall
and shall cause each ERISA Affiliate to (1) make contributions to each
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Plan in a timely manner and in an amount sufficient to comply with the
contribution obligations under such Plan and the minimum funding standards
requirements of ERISA; (2) prepare and file in a timely manner all notices and
reports required under the terms of ERISA including but not limited to annual
reports; and (3) pay in a timely manner all required PBGC premiums, in each
case, to the extent failure to do so would have a Material Adverse Effect.
Section 10. Negative Covenants. A deviation from the provisions of this
Section 10 will not constitute a Default under this Agreement if such deviation
is consented to in writing by the Majority Banks. The Company agrees with the
Banks and the Agents that, so long as any of the Commitments is in effect and
until payment in full of all Loans hereunder, the termination or expiry of all
Letters of Credit and payment in full of Letter of Credit Liabilities, all
interest thereon and all amounts payable by the Company hereunder:
10.1 Debts, Guaranties and Other Obligations. (i) The Company will not
permit any of its Restricted Subsidiaries (other than APC) to incur, create,
assume or in any manner become or be liable in respect of any Indebtedness
(including obligations for the payment of rentals); and the Company will not
permit any of its Restricted Subsidiaries (other than APC) to Guarantee or
otherwise in any way become or be responsible for obligations of any other
Person, whether by agreement to purchase the Indebtedness of any other Person or
agreement for the furnishing of funds to any other Person through the purchase
or lease of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging the
Indebtedness of any other Person, or otherwise, except that the foregoing
restrictions will not apply to:
(a) liabilities, direct or contingent, of any Restricted Subsidiary
existing on the date of this Agreement which are reflected in the
Financial Statements or the Disclosure Statement and all renewals,
extensions, refinancings and rearrangements, but not increases,
thereof;
(b) endorsements of negotiable or similar instruments for collection or
deposit in the ordinary course of business;
(c) trade payables, lease acquisition and lease maintenance obligations,
extensions of credit from suppliers or contractors, liabilities
incurred in exploration, development and operation of any Restricted
Subsidiary's oil and gas properties or similar obligations from time
to time incurred in the ordinary course of business, other than for
borrowed money, which are paid within 90 days after the invoice date
(inclusive of applicable grace periods) or (i) are being contested in
good faith, if such reserve as required by GAAP has been made therefor
or (ii) trade accounts payable of any Restricted Subsidiaries (with
respect to which no legal proceeding to enforce collection has been
commenced or, to the knowledge of any Responsible Officer of the
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Company, threatened) not exceeding, in the aggregate at any time
outstanding, $25,000,000;
(d) taxes, assessments or other government charges which are not yet due
or are being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as will be
required by GAAP will have been made therefor;
(e) intercompany Indebtedness owed to the Company by any Restricted
Subsidiary and intercompany Indebtedness owed to any Restricted
Subsidiary by any other Restricted Subsidiary which is fully
subordinated to the Obligations;
(f) any Guarantee by any Restricted Subsidiary of payment or performance
by any Restricted Subsidiary under any agreement so long as the
obligation guaranteed does not constitute Indebtedness for borrowed
money; (g) any Guarantee by any Restricted Subsidiary permitted by
Section 10.3;
(h) obligations of any Restricted Subsidiary under gas purchase contracts
for gas not taken, as to which such Restricted Subsidiary is liable to
pay if not made up;
(i) obligations of any Restricted Subsidiary under any contract for sale
for future delivery of oil or gas (whether or not the subject oil or
gas is to be delivered), hedging contract, forward contract, swap
agreement, futures contract or other similar agreement;
(j) obligations of any Restricted Subsidiary under any interest rate swap
agreement, or any contract implementing any interest rate cap, collar
or floor, or any similar interest hedging contract;
(k) obligations in connection with gas imbalances arising in the ordinary
course of business;
(l) Indebtedness not exceeding $1,000,000 in the aggregate borrowed from
the Amarillo Economic Development Commission and related Guarantees
and related obligations of any Restricted Subsidiary;
(m) liabilities under leases and lease agreements which do not cover oil
and gas properties to the extent the incurrence and existence of such
liabilities will still enable each Restricted Subsidiary to comply
with all requirements of this Agreement; and
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(n) in addition to Indebtedness permitted by clauses (a) through (m)
above, Indebtedness of any Restricted Subsidiary in an aggregate
principal amount not exceeding $10,000,000 at any time outstanding.
(ii) The Company will not permit any of its Unrestricted Subsidiaries to
(a) incur, create, assume or in any manner become or be liable in respect of any
Indebtedness (including obligations for the payment of rentals), or (b)
Guarantee or otherwise in any way become or be responsible for obligations of
any other Person, whether by agreement to purchase the Indebtedness of any other
Person or agreement for the furnishing of funds to any other Person through the
purchase or lease of goods, supplies or services (or by way of stock purchase,
capital contribution, advance or loan) for the purpose of paying or discharging
the Indebtedness of any other Person, or otherwise, except that the foregoing
restrictions will not apply to any Indebtedness not exceeding $200,000,000 in
the aggregate for all Unrestricted Subsidiaries.
10.2 Liens. The Company will not and will not permit any of its Restricted
Subsidiaries to create, incur, assume or permit to exist any Lien on any of its
or their properties (now owned or hereafter acquired), except:
(a) Liens securing the Loans or other Indebtedness under the Loan
Documents;
(b) Liens for taxes, assessments or other governmental charges or levies
not yet due or which are being contested in good faith by appropriate
action promptly initiated and diligently conducted, if such reserve as
will be required by GAAP will have been made therefor;
(c) Liens of landlords, vendors, contractors, subcontractors, carriers,
warehousemen, mechanics, laborers or materialmen or other like Liens
arising by law in the ordinary course of business for sums not yet due
or being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as will be
required by GAAP will have been made therefor;
(d) Liens existing on property owned by the Company or any of its
Restricted Subsidiaries on the date of this Agreement which have been
disclosed to the Banks in the Disclosure Statement, together with any
renewals, extensions, amendments, refinancings, rearrangements,
modifications, restatements or supplements, but not increases, thereof
from time to time;
(e) pledges or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance, social
security and other like laws;
(f) inchoate liens arising under ERISA to secure the contingent liability
of the Company permitted by Section 9.11;
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(g) Liens in the ordinary course of business, not to exceed in the
aggregate $10,000,000 as to the Company and its Restricted
Subsidiaries at any time in effect, regarding (i) the performance of
bids, tenders, contracts (other than for the repayment of borrowed
money or the deferred purchase price of property or services) or
leases, (ii) statutory obligations, (iii) surety appeal bonds or (iv)
Liens to secure progress or partial payments made to the Company or
any of its Restricted Subsidiaries and other Liens of like nature;
(h) covenants, restrictions, easements, servitudes, permits, conditions,
exceptions, reservations, minor rights, minor encumbrances, minor
irregularities in title or conventional rights of reassignment prior
to abandonment which do not materially interfere with the occupation,
use and enjoyment by the Company or any Restricted Subsidiary of its
respective assets in the normal course of business as presently
conducted, or materially impair the value thereof for the purpose of
such business;
(i) Liens of operators under joint operating agreements or similar
contractual arrangements with respect to the relevant entity's
proportionate share of the expense of exploration, development and
operation of oil, gas and mineral leasehold or fee interests owned
jointly with others, to the extent that same relate to sums not yet
due or which are being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserve as will
be required by GAAP will have been made therefor;
(j) Liens created pursuant to the creation of trusts or other arrangements
funded solely with cash, cash equivalents or other marketable
investments or securities of the type customarily subject to such
arrangements in customary financial practice with respect to long-term
or medium-term indebtedness for borrowed money, the sole purpose of
which is to make provision for the retirement or defeasance, without
prepayment, of Indebtedness permitted under Section 10.1;
(k) Liens on the assets or properties of ENSTAR Alaska;
(l) the Vendor Financing Arrangements (as defined in the Mesa Contract);
(m) purchase money Liens securing an aggregate amount of Indebtedness
which shall not exceed $25,000,000 at any one time outstanding;
(n) any Lien existing on any real or personal property of any corporation
or partnership at the time it becomes a Restricted Subsidiary or of
any other Restricted Subsidiary, or existing prior to the time of
acquisition upon any real or personal property acquired by the Company
or any of its Restricted Subsidiaries;
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(o) legal or equitable encumbrances deemed to exist by reason of the
existence of any litigation or other legal proceeding or arising out
of a judgment or award with respect to which an appeal is being
prosecuted in good faith by appropriate action promptly initiated and
diligently conducted, if such reserve as will be required by GAAP will
have been made therefor;
(p) any Liens securing Indebtedness neither assumed nor guaranteed by the
Company or any of its Restricted Subsidiaries nor on which it
customarily pays interest, existing upon real estate or rights in or
relating to real estate acquired by the Company or any of its
Restricted Subsidiaries for substation, metering station, pump
station, storage, gathering line, transmission line, transportation
line, distribution line or right-of-way purposes, and any Liens
reserved in leases for rent and full compliance with the terms of the
leases in the case of leasehold estates, to the extent that any such
Lien referred to in this clause arises in the normal course of
business as presently conducted and does not materially impair the use
of the property covered by such Lien for the purposes for which such
property is held by the Company or its applicable Restricted
Subsidiary;
(q) rights reserved to or vested in any municipality or governmental,
statutory or public authority by the terms of any right, power,
franchise, grant, license or permit, or by any provision of law, to
terminate such right, power, franchise, grant, license or permit or to
purchase, condemn, expropriate or recapture or to designate a
purchaser of any of the property of the Company or any of its
Restricted Subsidiaries;
(r) rights reserved to or vested in any municipality or governmental,
statutory or public authority to control or regulate any property of
the Company or any of its Restricted Subsidiaries, or to use such
property in a manner which does not materially impair the use of such
property for the purposes for which it is held by the Company or its
applicable Restricted Subsidiary;
(s) any obligations or duties affecting the property of the Company or any
of its Restricted Subsidiaries to any municipality, governmental,
statutory or public authority with respect to any franchise, grant,
license or permit;
(t) rights of a common owner of any interest in real estate, rights-of-way
or easements held by the Company or any of its Restricted Subsidiaries
and such common owner as tenants in common or through other common
ownership;
(u) any Liens arising from the matters described in Schedule 3.19 of the
Mesa Contract;
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(v) as to assets located in Canada, reservations, limitations, provisos
and conditions in any original grant from the Crown or freehold lessor
of any of the properties of the Company or its Subsidiaries;
(w) other Liens securing Indebtedness not exceeding, in the aggregate,
$10,000,000 at any one time outstanding; and
(x) Liens (i) granted to or existing in favor of third parties on margin
accounts of the Company or any of its Restricted Subsidiaries relating
to exchange traded contracts for the delivery of natural gas pursuant
to which the Company or any such Restricted Subsidiary intends to take
actual delivery of such natural gas within forty (40) days from the
then current date in the ordinary course of business and not for
speculative purposes, and (ii) on margin accounts of the Company or
any of its Restricted Subsidiaries relating to exchange traded
contracts for the delivery of natural gas, provided, however, the
aggregate balance of the margin accounts subject to the Liens
permitted by this clause (ii) shall not exceed from time to time
$10,000,000.
10.3 Guarantees. The Company will not and will not permit any of its
Restricted Subsidiaries to enter into any Guarantees of the payment or
performance by any Unrestricted Subsidiary under any agreement in an aggregate
amount for all such Guarantees relating to such Unrestricted Subsidiaries in
excess of $50,000,000.
10.4 Dividend Payment Restrictions. The Company will not declare or make
any Dividend Payment if any Default or Event of Default has occurred and is
continuing.
10.5 Mergers and Sales of Assets. The Company will not (a) merge or
consolidate with, or sell, assign, lease or otherwise dispose of, whether in one
transaction or in a series of transactions, more than ten percent (10%) in the
aggregate of the Company's and its Restricted Subsidiaries' consolidated total
assets (whether now owned or hereafter acquired) to any Person or Persons during
any twelve month period, or permit any Restricted Subsidiary to do so (other
than to the Company or another Restricted Subsidiary or the issuance by any
Restricted Subsidiary of any stock to the Company or another Restricted
Subsidiary), or (b) sell, assign, lease or otherwise dispose of, whether in one
transaction or in a series of transactions, any other properties if receiving
therefor consideration other than cash or other consideration readily
convertible to cash or which is less than the fair market value of the relevant
properties, or permit any Restricted Subsidiary to do so; provided that the
Company or any Restricted Subsidiary may merge or consolidate with any other
Person and any Restricted Subsidiary may transfer properties to any other
Restricted Subsidiary or to the Company so long as, in each case, (i)
immediately thereafter and giving effect thereto, no event will occur and be
continuing which constitutes a Default, (ii) in the case of any such merger or
consolidation to which the Company is a party, the Company is the surviving
Person, (iii) in the case of any such merger or consolidation to which any
Restricted Subsidiary is a party (but not the Company), after giving effect to
all transactions closing concurrently relating to such merger or consolidation,
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the surviving Person is a Restricted Subsidiary and (iv) the surviving Person
ratifies each applicable Loan Document and provided further that any Restricted
Subsidiary may merge or consolidate with any other Restricted Subsidiary so long
as, in each case (i) immediately thereafter and giving effect thereto, no event
will occur and be continuing which constitutes a Default and (ii) the surviving
Person ratifies each applicable Loan Document.
10.6 Proceeds of Loans. The Company will not permit the proceeds of the
Loans to be used for any purpose other than those permitted by this Agreement.
10.7 ERISA Compliance. The Company will not at any time permit any Plan
maintained by it or any Restricted Subsidiary to:
(a) engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Code;
(b) incur any "accumulated funding deficiency" as such term is defined in
Section 302 of ERISA; or
(c) terminate or be terminated in a manner which could result in the
imposition of a Lien on the property of the Company or any Restricted
Subsidiary pursuant to Section 4068 of ERISA,
in each case, to the extent that permitting the Plan to do so would have a
Material Adverse Effect.
10.8 Amendment of Certain Documents. The Company will not amend, modify or
obtain or grant a waiver of (except for waivers only of cross-defaults created
by a Default under this Agreement), or allow APC to enter into any amendment or
modification or obtain or grant any waiver of (except for waivers only of
cross-defaults created by a Default under this Agreement), any provision of
those documents relating to or constituting the Beluga Financing Documents or
the APC Long Term Financing Documents, without prior written notification to
Administrative Agent.
10.9 Total Debt/Capitalization Ratio. The Company will not permit its Total
Debt/Capitalization Ratio to be, at any time, more than 60%.
10.10 EBITDAX/Interest Ratio. The Company will not permit the
EBITDAX/Interest Ratio to be, at any time, less than 3.75:1.00 for any rolling
four calendar quarter period ending on the last day of any calendar quarter.
10.11 Nature of Business. The Company will not engage in, and will not
permit any Restricted Subsidiary to engage in, businesses other than oil and gas
exploration and production, gas processing, transmission, distribution,
marketing and storage and gas and liquids pipeline operations and activities
related or ancillary thereto; provided, that if the Company acquires one or more
Restricted Subsidiaries in transactions otherwise permitted by the terms hereof,
any such Restricted Subsidiary may be engaged in businesses other than those
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listed in this Section so long as the assets of such Restricted Subsidiaries
which are used in the conduct of such other businesses do not constitute more
than five percent (5%) of the consolidated total assets of the Company
(inclusive of the assets of the Restricted Subsidiary so acquired).
10.12 Covenants in Other Agreements. The Company will not and will not
permit any of its Restricted Subsidiaries to become a party to or to agree that
it or any of its property is bound by any agreement, indenture, mortgage, deed
of trust or any other instrument directly or indirectly
(i) restricting any loans, advances or any other Investments to or in the
Company by any of its Restricted Subsidiaries;
(ii) restricting the ability of any Restricted Subsidiary to make tax
payments or management fee payments;
(iii)restricting the capitalization structure of any Restricted Subsidiary;
or
(iv) restricting the ability or capacity of any Restricted Subsidiary to
make Dividend Payments;
Notwithstanding the foregoing, either of ENSTAR Alaska or APC may become a party
to, or grant a Lien in any of its property by way of, or agree that it will be
bound by, any indenture, mortgage, deed of trust or other instrument containing
provisions of the types described above in this Section 10.12 so long as the
terms and provisions thereof are not materially more restrictive than the terms
or provisions which are legally binding on ENSTAR Alaska or APC on the Effective
Date.
Section 11. Defaults.
11.1 Events of Default. If one or more of the following events (herein
called "Events of Default") shall occur and be continuing:
(a) Payments - (i) the Company or any other Relevant Party fails to make
any payment or prepayment of any installment of principal on the Loans or any
Reimbursement Obligation payable under this Agreement or the other Loan
Documents when due or (ii) the Company or any other Relevant Party fails to make
any payment or prepayment of interest with respect to the Loans, any
Reimbursement Obligation or any other fee or amount under this Agreement or the
other Loan Documents and such failure to pay continues unremedied for a period
of five (5) Business Days; or
(b) Representations and Warranties - any representation or warranty made by
the Company or any other Relevant Party in this Agreement or in any other Loan
Document or in any instrument executed in connection herewith or therewith
proves to have been incorrect in any material respect as of the date thereof; or
any representation, statement (including Financial Statements), certificate or
data furnished or made by the Company or any other Relevant Party (or any
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officer of the Company or any other Relevant Party) under or in connection with
this Agreement or any other Loan Document, including without limitation in the
Disclosure Statement, proves to have been untrue in any material respect, as of
the date as of which the facts therein set forth were stated or certified; or
(c) Affirmative Covenants - (i) default shall be made in the due observance
or performance of any of the covenants or agreements contained in Sections 9.10
(or in Section 9.6 to the extent such default is considered an Event of Default
under the other Subsections of this Section 11.1) or (ii) default is made in the
due observance or performance of any of the other covenants or agreements
contained in Section 9 of this Agreement or any other affirmative covenant of
the Company or any other Relevant Party contained in this Agreement or any other
Loan Document and such default continues unremedied for a period of 30 days
after (x) notice thereof is given by Administrative Agent to the Company or (y)
such default otherwise becomes known to the Company, whichever is earlier; or
(d) Negative Covenants - (i) default shall be made in the observance or
performance of any of the covenants or agreements contained in Section 10.8 and
such default continues unremedied for a period of five (5) Business Days after
(x) notice thereof is given by Administrative Agent to the Company or (y) such
default otherwise becomes known to the Company, whichever is earlier, or (ii)
default is made in the due observance or performance by the Company of any of
the other covenants or agreements contained in Section 10 of this Agreement or
of any other negative covenant of the Company or any other Relevant Party
contained in this Agreement or any other Loan Document; or
(e) Other Obligations - default is made in the due observance or
performance by the Company or any of its Subsidiaries (as principal or guarantor
or other surety) of any of the covenants or agreements contained in any bond,
debenture, note or other evidence of Indebtedness in excess of $25,000,000
(singly or aggregating several such bonds, debentures, notes or other evidence
of Indebtedness) which default gives the holder the right to accelerate the
maturity of such Indebtedness, other than the Loan Documents, or under any
credit agreement, loan agreement, indenture, promissory note or similar
agreement or instrument executed in connection with any of the foregoing, to
which it (respectively) is a party and such default is unwaived or continues
unremedied beyond the expiration of any applicable grace period which may be
expressly allowed under such instrument or agreement; or
(f) Involuntary Bankruptcy or Receivership Proceedings - a receiver,
conservator, liquidator or trustee of the Company or of any of its property is
appointed by the order or decree of any court or agency or supervisory authority
having jurisdiction, and such decree or order remains in effect for more than 60
days; or the Company is adjudicated bankrupt or insolvent; or any of its
property is sequestered by court order and such order remains in effect for more
than 60 days; or a petition is filed against the Company under any state or
federal bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution, liquidation or receivership law of any jurisdiction, whether
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now or hereafter in effect, and is not dismissed within 60 days after such
filing; or
(g) Voluntary Petitions or Consents - the Company commences a voluntary
case or other proceeding seeking liquidation, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, liquidation or other relief with
respect to itself or its debt or other liabilities under any bankruptcy,
insolvency or other similar law nor or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or consents to any such
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or fails generally
to, or cannot, pay its debts generally as they become due or takes any corporate
action to authorize or effect any of the foregoing; or
(h) Assignments for Benefit of Creditors or Admissions of Insolvency - the
Company makes an assignment for the benefit of its creditors, or admits in
writing its inability to pay its debts generally as they become due, or consents
to the appointment of a receiver, trustee, or liquidator of the Company or of
all or any part of its property; or
(i) Undischarged Judgments - judgments (individually or in the aggregate)
for the payment of money in excess of $10,000,000 is rendered by any court or
other governmental body against the Company or any of its Subsidiaries and the
Company or such Subsidiary does not discharge the same or provide for its
discharge in accordance with its terms, or procure a stay of execution thereof
within 60 days from the date of entry thereof, and within said period of 60 days
from the date of entry thereof or such longer period during which execution of
such judgment will have been stayed, the Company or such Subsidiary fails to
appeal therefrom and cause the execution thereof to be stayed during such appeal
while providing such reserves therefor as may be required under GAAP; or
(j) Subsidiary Defaults - any Subsidiary of the Company takes, suffers, or
permits to exist any of the events or conditions referred to in Subsections
11.1(f), (g) or (h); or
(k) Change in Control - there should occur any Change of Control.
THEREUPON: Administrative Agent may (and, if directed by the Majority Banks,
shall) (a) declare the Commitments terminated (whereupon the Commitments shall
be terminated) and/or (b) terminate any Letter of Credit providing for such
termination by sending a notice of termination as provided therein and/or (c)
declare the principal amount then outstanding of and the accrued interest on the
Loans and Reimbursement Obligations and all fees and all other amounts payable
hereunder to be forthwith due and payable, whereupon such amounts shall be and
become immediately due and payable, without notice (including without limitation
notice of acceleration and notice of intent to accelerate), presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company; provided that in the case of the occurrence of an Event
of Default with respect to the Company referred to in clause (f) or (g) of this
Section 11.1 or in clause (j) of this Section 11.1 to the extent it refers to
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clauses (f) or (g), the Commitments shall be automatically terminated and the
principal amount then outstanding of and the accrued interest on the Loans and
Reimbursement Obligations and all fees and all other amounts payable hereunder
shall be and become automatically and immediately due and payable, without
notice (including but not limited to notice of intent to accelerate and notice
of acceleration) and without presentment, demand, protest or other formalities
of any kind, all of which are hereby expressly waived by the Company and/or (d)
exercise any and all other rights available to it under the Loan Documents, at
law or in equity.
11.2 Collateral Account. The Company hereby agrees, in addition to the
provisions of Section 11.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by Administrative
Agent or the Majority Banks (through Administrative Agent), pay to
Administrative Agent an amount in immediately available funds equal to the then
aggregate amount available for drawings under all Letters of Credit issued for
the account of the Company, which funds shall be held by Administrative Agent as
Cover.
11.3 Preservation of Security for Unmatured Reimbursement Obligations. In
the event that, following (i) the occurrence of an Event of Default and the
exercise of any rights available to Administrative Agent under the Loan
Documents, and (ii) payment in full of the principal amount then outstanding of
and the accrued interest on the Loans and Reimbursement Obligations and fees and
all other amounts payable hereunder and under any Letters of Credit shall remain
outstanding and undrawn upon, Administrative Agent shall be entitled to hold
(and the Company hereby grants and conveys to Administrative Agent a security
interest in and to) all cash or other property ("Proceeds of Remedies") realized
or arising out of the exercise by Administrative Agent of any rights available
to it under the Loan Documents, at law or in equity, including, without
limitation, the proceeds of any foreclosure, as collateral for the payment of
any amounts due or to become due under or in respect of such Letters of Credit.
Such Proceeds of Remedies shall be held for the ratable benefit of the
applicable Issuers. The rights, titles, benefits, privileges, duties and
obligations of Administrative Agent with respect thereto shall be governed by
the terms and provisions of this Agreement. Administrative Agent may, but shall
have no obligation to, invest any such Proceeds of Remedies in such manner as
Administrative Agent, in the exercise of its sole discretion, deems appropriate.
Such Proceeds of Remedies shall be applied to Reimbursement Obligations arising
in respect of any such Letters of Credit and/or the payment of any Issuer's
obligations under any such Letter of Credit when such Letter of Credit is drawn
upon. The Company hereby agrees to execute and deliver to the Agents and the
Banks such security agreements, pledges or other documents as any of the Agents
or any of the Banks may, from time to time, require to perfect the pledge, lien
and security interest in and to any such Proceeds of Remedies provided for in
this Section 11.3.
11.4 Right of Setoff. Upon (i) the occurrence and during the continuance of
any Event of Default referred to in clauses (f), (g) or (h) of Section 11.1, or
in clause (j) of Section 11.1 to the extent it refers to clauses (f), (g) or
(h), or upon (ii) the occurrence and continuance of any other Event of Default
and upon the making of the notice specified in Section 11.1 to authorize
Administrative Agent to declare the Loans due and payable pursuant to the
provisions of this Agreement, or if (iii) the Company or any of its Subsidiaries
becomes insolvent, however evidenced, the Banks are hereby authorized at any
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time and from time to time, without notice to the Company or any of its
Subsidiaries (any such notice being expressly waived by the Company and its
Subsidiaries), to setoff and apply any and all deposits (general or special,
time or demand, provisional or final, whether or not such setoff results in any
loss of interest or other penalty, and including without limitation all
certificates of deposit) at any time held, and any other funds or property at
any time held, and other Indebtedness at any time owing by any Bank to or for
the credit or the account of the Company against any and all of the Obligations
irrespective of whether or not such Bank will have made any demand under this
Agreement and although such obligations may be unmatured. Should the right of
any Bank to realize funds in any manner set forth hereinabove be challenged and
any application of such funds be reversed, whether by court order or otherwise,
the Banks shall make restitution or refund to the Company pro rata in accordance
with their Commitments. The Banks agree promptly to notify the Company and
Administrative Agent after any such setoff and application, provided that the
failure to give such notice will not affect the validity of such setoff and
application. The rights of the Agents and the Banks under this Section are in
addition to other rights and remedies (including without limitation other rights
of setoff) which the Agents or the Banks may have.
Section 12. Agents.
12.1 Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes each Agent to act as its agent hereunder and under the
Letters of Credit and the other Loan Documents with such powers as are
specifically delegated to such Agent by the terms hereof and thereof, together
with such other powers as are reasonably incidental thereto. Each Agent (which
term as used in this Section 12 shall include reference to its affiliates and
its own and their affiliates' officers, directors, employees and agents) shall
not (a) have any duties or responsibilities except those expressly set forth in
this Agreement, the Letters of Credit, and the other Loan Documents, or shall by
reason of this Agreement or any other Loan Document be a trustee or fiduciary
for any Bank; (b) be responsible to any Bank for any recitals, statements,
representations or warranties contained in this Agreement, the Letters of Credit
or any other Loan Document, or in any certificate or other document referred to
or provided for in, or received by any of them under, this Agreement, the
Letters of Credit or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, the
Letters of Credit, or any other Loan Document or any other document referred to
or provided for herein or therein or any property covered thereby or for any
failure by any Relevant Party or any other Person to perform any of its
obligations hereunder or thereunder; (c) be required to initiate or conduct any
litigation or collection proceedings hereunder or under the Letters of Credit or
any other Loan Document except to the extent such Agent is so requested by the
Majority Banks, or (d) be responsible for any action taken or omitted to be
taken by it hereunder or under the Letters or Credit or any other Loan Document
or any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, INCLUDING, WITHOUT LIMITATION,
PURSUANT TO THEIR OWN NEGLIGENCE, except for its own gross negligence or willful
misconduct. Each Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Without in any way
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limiting any of the foregoing, each Bank acknowledges that neither any Agent nor
any Issuer shall have any greater responsibility in the operation of the Letters
of Credit than is specified in the Uniform Customs and Practice for Documentary
Credits (1993 Revision, International Chamber of Commerce Publication No. 500).
In any foreclosure proceeding concerning any collateral for the Loans, each
holder of a Loan if bidding for its own account or for its own account and the
accounts of other Banks is prohibited from including in the amount of its bid an
amount to be applied as a credit against Obligations owing to such Bank or the
Obligations owing to the other Banks; instead, such holder must bid in cash
only; provided that this provision is for the sole benefit of the Agents and the
Banks and shall not inure to the benefit of the Company or any of its
Subsidiaries. However, in any such foreclosure proceeding, Agent may (but shall
not be obligated to) submit a bid for all Banks (including itself) in the form
of a credit against the Obligations of all of the Banks, and Administrative
Agent or its designee may (but shall not be obligated to) accept title to such
collateral for and on behalf of all Banks.
12.2 Reliance by Agents. Each Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel (which may be counsel for the
Company), independent accountants and other experts selected by such Agent. As
to any matters not expressly provided for by this Agreement, the Letters of
Credit, or any other Loan Document, each Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and thereunder in
accordance with instructions of the Majority Banks (or, where unanimous consent
is required by the terms hereof or of the other Loan Documents, all of the
Banks), and any action taken or failure to act pursuant thereto shall be binding
on all of the Banks. Pursuant to instructions of the Majority Banks (except as
otherwise provided in Section 13.4 hereof), Administrative Agent shall have the
authority to execute releases of security documents on behalf of the Banks
without the joinder of any Bank.
12.3 Defaults. Administrative Agent shall not be deemed to have knowledge
of the occurrence of a Default (other than the non-payment of principal of or
interest on Loans or Reimbursement Obligations) unless it has received notice
from a Bank or the Company specifying such Default and stating that such notice
is a "Notice of Default". In the event that Administrative Agent receives such a
notice of the occurrence of a Default, Administrative Agent shall give prompt
notice thereof to the Banks (and shall give each Bank prompt notice of each such
non-payment). Administrative Agent shall (subject to Section 12.7 hereof) take
such action with respect to such Default as shall be directed by the Majority
Banks and within its rights under the Loan Documents and at law or in equity,
provided that, unless and until Administrative Agent shall have received such
directions, Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, permitted hereby with respect to
such Default as it shall deem advisable in the best interests of the Banks and
within its rights under the Loan Documents, at law or in equity.
12.4 Rights as a Bank. With respect to its Commitments and the Loans made
and Letter of Credit Liabilities, Chase, Morgan and NationsBank, respectively,
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each in its capacity as a Bank hereunder, shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as an Agent and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include Chase, Morgan and NationsBank, respectively, each
in its individual capacity. Administrative Agent may (without having to account
therefor to any Bank) accept deposits from, lend money to and generally engage
in any kind of banking, trust, letter of credit, agency or other business with
the Company (and any of its Affiliates) as if it were not acting as
Administrative Agent, and Administrative Agent may accept fees and other
consideration from the Company and its Affiliates (in addition to the fees
heretofore agreed to between the Company and Administrative Agent) for services
in connection with this Agreement or otherwise without having to account for the
same to the Banks.
12.5 Indemnification. The Banks agree to indemnify each Agent (to the
extent not reimbursed under Section 2.2(c), Section 9.7 or Section 13.3 hereof,
but without limiting the obligations of the Company under said Sections 2.2(c),
9.7 and 13.3), ratably in accordance with their respective Commitments, for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever (INCLUDING, BUT NOT LIMITED TO, THE CONSEQUENCES OF THE NEGLIGENCE OF
AGENT) which may be imposed on, incurred by or asserted against such Agent in
any way relating to or arising out of this Agreement, the Letters of Credit or
any other Loan Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses which the Company is obligated to pay
under Sections 2.2(c), 9.8 and 13.3 hereof but excluding, unless a Default has
occurred and is continuing, normal administrative costs and expenses incident to
the performance of their respective agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or of any such other documents, provided
that no Bank shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.
The obligations of the Banks under this Section 12.5 shall survive the
termination of this Agreement and the repayment of the Obligations.
12.6 Non-Reliance on Agents and Other Banks. Each Bank agrees that it has
received current financial information with respect to the Company and that it
has, independently and without reliance on any Agent or any other Bank and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of the Company and decision to enter into this Agreement and
that it will, independently and without reliance upon any Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any of the other Loan Documents. Each
Agent shall not be required to keep itself informed as to the performance or
observance by any Relevant Party of this Agreement, the Letters of Credit or any
of the other Loan Documents or any other document referred to or provided for
herein or therein or to inspect the properties or books of the Company or any
Relevant Party. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by Administrative Agent
hereunder, under the Letters of Credit or the other Loan Documents, the Agents
shall not have any duty or responsibility to provide any Bank with any credit or
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other information concerning the affairs, financial condition or business of the
Company or any other Relevant Party (or any of their affiliates) which may come
into the possession of such Agent.
12.7 Failure to Act. Except for action expressly required of Administrative
Agent hereunder, under the Letters of Credit and under the other Loan Documents,
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction by the Banks of their indemnification obligations
under Section 12.5 hereof against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action.
12.8 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, Administrative Agent may resign at any time by giving notice thereof to
the Banks and the Company, and Administrative Agent may be removed at any time
with or without cause by the Majority Banks. Upon any such resignation or
removal, the Majority Banks shall have the right to appoint a successor
Administrative Agent, provided deposits with a successor Administrative Agent
shall be insured by the Federal Deposit Insurance Corporation or its successor.
If no successor Administrative Agent shall have been so appointed by the
Majority Banks and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Banks' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent. Any successor Administrative Agent shall be a bank which
has an office in the United States and a combined capital and surplus of at
least $250,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder 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 hereunder. A successor Administrative Agent shall promptly specify
by notice to the Company and the Banks its Principal Office referred to in
Sections 3.1 and 5.1. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Section 12
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as an Administrative Agent.
Section 13. Miscellaneous.
13.1 Waiver. No waiver of any Default shall be a waiver of any other
Default. No failure on the part of any Agent or any Bank to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege thereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law or in equity.
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13.2 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telegraph, telecopy
(confirmed by mail), cable, mail or other writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to any party, at such other address as shall be designated by such party
in a notice to the Company, Administrative Agent given in accordance with this
Section 13.2. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly received when transmitted by
telex or telecopier during regular business hours, delivered to the telegraph or
cable office or personally delivered or, in the case of a mailed notice, three
(3) days after deposit in the United States mails, postage prepaid, certified
mail with return receipt requested (or upon actual receipt, if earlier), in each
case given or addressed as aforesaid.
13.3 Indemnification. The Company shall indemnify the Agents, the Banks,
and each Affiliate thereof and their respective directors, officers, employees
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject
(REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE SIMPLE (BUT NOT GROSS)
NEGLIGENCE OF THE PERSON INDEMNIFIED), insofar as such losses, liabilities,
claims or damages arise out of or result from any (i) actual or proposed use by
the Company of the proceeds of any extension of credit (whether a Loan or a
Letter of Credit) by any Bank hereunder, (ii) breach by the Company of this
Agreement or any other Loan Document, (iii) violation by the Company or any of
its Subsidiaries of any Legal Requirement, including but not limited to those
relating to Hazardous Substances, (iv) Liens or security interests previously or
hereafter granted on any real or personal property, to the extent resulting from
any Hazardous Substance located in, on or under any such property, (v) ownership
by the Banks or the Agents of any real or personal property following
foreclosure, to the extent such losses, liabilities, claims or damages arise out
of or result from any Hazardous Substance located in, on or under such property,
including, without limitation, losses, liabilities, claims or damages which are
imposed upon Persons under laws relating to or regulating Hazardous Substances
solely by virtue of ownership, (vi) Bank's or Agent's being deemed an operator
of any such real or personal property by a court or other regulatory or
administrative agency or tribunal in circumstances in which neither any of the
Agents nor any of the Banks is generally operating or generally exercising
control over such property, to the extent such losses, liabilities, claims or
damages arise out of or result from any Hazardous Substance located in, on or
under such property, (vii) investigation, litigation or other proceeding
(including any threatened investigation or proceeding) relating to any of the
foregoing, and the Company shall reimburse each Agent, each Bank, and each
Affiliate thereof and their respective directors, officers, employees and
agents, upon demand, for any expenses (including legal fees) incurred in
connection with any such investigation or proceeding or (viii) taxes (excluding
income taxes and franchise taxes) payable or ruled payable by any Governmental
Authority in respect of any Loan Document, together with interest and penalties,
if any; provided, however, that the Company shall not have any obligations
pursuant to this Section 13.3 with respect to any losses, liabilities, claims,
damages or expenses (a) arising from or relating solely to events, conditions or
circumstances which, as to clauses (iv), (v) or (vi) above, first came into
existence or which first occurred after the date on which the Company or any of
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its Subsidiaries conveyed to an unrelated third party all of the Company's
or the applicable Subsidiary's rights, titles and interests to the applicable
real or personal property (whether by deed, deed-in-lieu, foreclosure or
otherwise) other than a conveyance made in violation of any Loan Document or (b)
incurred by the Person seeking indemnification by reason of the gross negligence
or willful misconduct of such Person. If the Company ever disputes a good faith
claim for indemnification under this Section 13.3 on the basis of the proviso
set forth in the preceding sentence, the full amount of indemnification provided
for shall nonetheless be paid, subject to later adjustment or reimbursement at
such time (if any) as a court of competent jurisdiction enters a final judgment
as to the applicability of any such exceptions.
13.4 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or any other Loan Document, nor any consent to any departure by the
Company therefrom, shall in any event be effective unless the same shall be
agreed or consented to by the Majority Banks and the Company, and each such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, that no amendment, waiver or consent
shall, unless in writing and signed by each Bank affected thereby, do any of the
following: (a) increase the Commitment of such Bank (it being understood that
the waiver of any reduction in the Commitments or any mandatory repayment other
than (x) the repayment of all Loans at the end of the Revolving Credit
Availability Period and (y) the mandatory reductions of the Commitments provided
for in Section 2.3(a) and (z) the mandatory prepayments required by the terms of
Section 3.2(b), shall not be deemed to be an increase in any Commitment) or
subject the Banks to any additional obligation; (b) reduce the principal of, or
interest on, any Loan, Reimbursement Obligation or fee hereunder; (c) postpone
any scheduled date fixed for any payment or mandatory prepayment of principal
of, or interest on, any Loan, Reimbursement Obligation, fee or other sum to be
paid hereunder; (d) change the percentage of any of the Commitments or of the
aggregate unpaid principal amount of any of the Loans and Letter of Credit
Liabilities, or the number of Banks, which shall be required for the Banks or
any of them to take any action under this Agreement; (e) change any provision
contained in Sections 2.2(c), 9.7 or 13.3 hereof or this Section 13.4 or Section
6.7 hereof, or (f) release all or substantially all of any security for the
obligations of the Company under this Agreement or all or substantially all of
the personal liability of any obligor created under any of the Loan Documents.
Anything in this Section 13.4 to the contrary, no amendment, waiver or consent
shall be made with respect to Section 12 without the consent of Administrative
Agent.
13.5 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit of the
Company, the Agents and the Banks and their respective successors and assigns.
The Company may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of all of the Banks. Each Bank may
sell participations to any Person in all or part of any Loan or Letter of
Credit, or all or part of its Commitments, in which event, without limiting the
foregoing, the provisions of Section 6 shall inure to the benefit of each
purchaser of a participation and the pro rata treatment of payments, as
described in Section 5.2, shall be determined as if such Bank had not sold such
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participation. In the event any Bank shall sell any participation, such Bank
shall retain the sole right and responsibility to enforce the obligations of the
Company relating to the Loans or Letters of Credit, including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement other than amendments, modifications or waivers with
respect to (i) any fees payable hereunder to the Banks and (ii) the amount of
principal or the rate of interest payable on, or the dates fixed for the
scheduled repayment of principal of, the Loans.
(b) Each Bank may assign to one or more Banks or any other Person all or a
portion of its interests, rights and obligations under this Agreement, provided,
however, that (i) other than in the case of an assignment to another Bank that
is, at the time of such assignment, a party hereto or an Affiliate of such Bank,
the Company must give its prior written consent, which consent will not be
unreasonably withheld, (ii) the aggregate amount of the Commitment and/or Loans
or Letters of Credit of the assigning Bank subject to each such assignment
(determined as of the date the Assignment and Acceptance (as defined below) with
respect to such assignment is delivered to Administrative Agent) shall in no
event be less than $10,000,000 (or $5,000,000 in the case of an assignment to an
Affiliate of a Bank or between Banks), (iii) no assignment shall have the effect
of reducing the pro rata share of the Loans or Letters of Credit and the
Commitments held by the assignor and its Affiliates below $10,000,000, (iv)
notwithstanding any other term or provision of this Agreement, unless the
Company shall have otherwise consented in writing (such consent not to be
unreasonably withheld), each such assignment shall be pro rata with respect to
the Loans, the Letters of Credit and the Commitment of the assignor, and (v) the
parties to each such assignment shall execute and deliver to Administrative
Agent, for its acceptance and recording in the Register (as defined below), an
Assignment and Acceptance in the form of Exhibit F hereto (each an "Assignment
and Acceptance") with blanks appropriately completed, together with any note or
notes subject to such assignment and a processing and recordation fee of $2,500
paid by the assignee (for which the Company shall have no liability). Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five Business Days after the execution thereof, (A) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder
and (B) the Bank thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement.
Notwithstanding anything contained in this Agreement to the contrary, any Bank
may at any time assign all or any portion of its rights under this Agreement and
the notes issued to it as collateral to a Federal Reserve Bank; provided, that
no such assignment shall release the assigning Bank from any of its obligations
hereunder.
(c) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than the representation
and warranty that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, such Bank assignor makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any of the other Loan Documents or the execution, legality,
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validity, enforceability, genuineness, sufficiency or value of this Agreement or
any of the other Loan Documents or any other instrument or document furnished
pursuant thereto; (ii) such Bank assignor makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Company or the performance or observance by the Company of any of its
obligations under this Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements referred to in Section 8.6 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon any Agent, such Bank assignor or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents; (v) such
assignee appoints and authorizes each Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to such Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vi) such assignee agrees that
it will perform in accordance with their terms all obligations that by the terms
of this Agreement and the other Loan Documents are required to be performed by
it as a Bank.
(d) Administrative Agent shall maintain at its office a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Banks and the Commitments of, and principal
amount of the Loans owing to, each Bank from time to time (the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Company, the Agents and the Banks may treat each person the name of
which is recorded in the Register as a Bank hereunder for all purposes of this
Agreement and the other Loan Documents. The Register shall be available for
inspection by the Company or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and the assignee thereunder together with any note or notes
subject to such assignment, the written consent to such assignment executed by
the Company and the fee payable in respect thereto, Administrative Agent shall,
if such Assignment and Acceptance has been completed with blanks appropriately
filled, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Company. If applicable, within five Business Days after receipt of notice, the
Company, at its own expense, shall execute and deliver to Administrative Agent
in exchange for the surrendered notes new notes to the order of such assignee in
an amount equal to the Commitments and/or Loans or Letters of Credit assumed by
it pursuant to such Assignment and Acceptance and, if the assigning Bank has
retained Commitments and/or Loans hereunder, new notes to the order of the
assigning Bank in an amount equal to the Commitment and/or Loans retained by it
hereunder. Such new notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the respective note. Thereafter, such surrendered
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notes, if any, shall be marked renewed and substituted and the originals
delivered to the Company (with copies, certified by the Company as true, correct
and complete, to be retained by Administrative Agent).
(f) Any Bank may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 13.5, disclose to
the assignee or participant or proposed assignee or participant, any information
relating to the Company furnished to such Bank by or on behalf of the Company;
provided, however, that, prior to any such disclosure, the Company shall have
consented thereto, which consent shall not be unreasonably withheld, and each
such assignee or participant, or proposed assignee or participant, shall execute
an agreement whereby such assignee or participant shall agree to preserve the
confidentiality of any Confidential Information (defined in Section 13.13) on
terms substantially the same as those provided in Section 13.13.
(g) The Company will have the right to consent to any material
intercreditor arrangements in connection with an assignment by any Bank of any
interest, right or obligation under this Agreement which is not pro rata with
respect to the Loans, the Letters of Credit and the Commitment of the assignor
and the Company may deny its consent to any such arrangements which, in the
reasonable judgement of the Company, would adversely affect the Company in a
material respect.
(h) The provisions of this Section shall not apply to the assignment and
pledge of a Bank's rights hereunder or under any note to any Federal Reserve
Bank for collateral purposes pursuant to Regulation A of the Board of Governors
of the Federal Reserve System and any Operating Circular issued by such Federal
Reserve Bank; provided that such assignment and pledge shall not relieve such
Bank of any of its obligations hereunder.
13.6 Limitation of Interest. The Company, the Agents and the Banks intend
to strictly comply with all applicable laws, including applicable usury laws.
Accordingly, the provisions of this Section 13.6 shall govern and control over
every other provision of this Agreement or any other Loan Document which
conflicts or is inconsistent with this Section, even if such provision declares
that it controls. As used in this Section, the term "interest" includes the
aggregate of all charges, fees, benefits or other compensation which constitute
interest under applicable law, provided that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money and not as interest, and (b) all interest at any time
contracted for, reserved, charged or received shall be amortized, prorated,
allocated and spread, in equal parts during the full term of the Obligations. In
no event shall the Company or any other Person be obligated to pay, or any Bank
have any right or privilege to reserve, receive or retain, (a) any interest in
excess of the maximum amount of nonusurious interest permitted under the laws of
the State of Texas or the applicable laws (if any) of the United States or of
any other applicable state, or (b) total interest in excess of the amount which
such Bank could lawfully have contracted for, reserved, received, retained or
charged had the interest been calculated for the full term of the Obligations at
the Highest Lawful Rate. On each day, if any, that the interest rate (the
"Stated Rate") called for under this Agreement or any other Loan Document
exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall
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automatically be fixed by operation of this sentence at the Highest Lawful Rate
for that day, and shall remain fixed at the Highest Lawful Rate for each day
thereafter until the total amount of interest accrued equals the total amount of
interest which would have accrued if there were no such ceiling rate as is
imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate
unless and until the Stated Rate again exceeds the Highest Lawful Rate when the
provisions of the immediately preceding sentence shall again automatically
operate to limit the interest accrual rate. The daily interest rates to be used
in calculating interest at the Highest Lawful Rate shall be determined by
dividing the applicable Highest Lawful Rate per annum by the number of days in
the calendar year for which such calculation is being made. None of the terms
and provisions contained in this Agreement or in any other Loan Document which
directly or indirectly relate to interest shall ever be construed without
reference to this Section 13.6, or be construed to create a contract to pay for
the use, forbearance or detention of money at an interest rate in excess of the
Highest Lawful Rate. If the term of any Obligation is shortened by reason of
acceleration of maturity as a result of any Default or by any other cause, or by
reason of any required or permitted prepayment, and if for that (or any other)
reason any Bank at any time, including but not limited to, the stated maturity,
is owed or receives (and/or has received) interest in excess of interest
calculated at the Highest Lawful Rate, then and in any such event all of any
such excess interest shall be canceled automatically as of the date of such
acceleration, prepayment or other event which produces the excess, and, if such
excess interest has been paid to such Bank, it shall be credited pro tanto
against the then-outstanding principal balance of the Company's obligations to
such Bank, effective as of the date or dates when the event occurs which causes
it to be excess interest, until such excess is exhausted or all of such
principal has been fully paid and satisfied, whichever occurs first, and any
remaining balance of such excess shall be promptly refunded to its payor.
Chapter 346 of the Texas Finance Code (which regulates certain revolving credit
accounts (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply
to this Agreement.
13.7 Survival. The obligations of the Company under Sections 2.2(c), 6, 9.7
and 13.3 hereof and the obligations of the Banks under Section 13.6 hereof shall
survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments and the Letters of Credit.
13.8 Captions. Captions and section headings appearing herein are included
solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
13.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
agreement and any of the parties hereto may execute this Agreement by signing
any such counterpart.
13.10 Governing Law. This Agreement and (except as therein provided) the
other Loan Documents are performable in Harris County, Texas, which shall be a
proper place of venue for suit on or in respect thereof. The Company irrevocably
agrees that any legal proceeding in respect of this Agreement or the other Loan
(69)
<PAGE>
Documents shall be brought in the district courts of Harris County, Texas or
the United States District Court for the Southern District of Texas, Houston
Division (collectively, the "Specified Courts"). The Company hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts of the
State of Texas. The Company hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to any
Loan Document brought in any Specified Court, and hereby further irrevocably
waives any claims that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. The Company further (1) agrees
to designate and maintain an agent for service of process in the City of Houston
in connection with any such suit, action or proceeding and to deliver to
Administrative Agent evidence thereof and (2) irrevocably consents to the
service of process out of any of the aforementioned courts in any such suit,
action or proceeding by the mailing of copies thereof by certified mail, return
receipt requested, postage prepaid, to the Company at its address as provided in
this Agreement or as otherwise provided by Texas law. Nothing herein shall
affect the right of any Agent or any Bank to commence legal proceedings or
otherwise proceed against the Company in any jurisdiction or to serve process in
any manner permitted by applicable law. The Company agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. THIS AGREEMENT AND (EXCEPT AS THEREIN PROVIDED) THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS (OTHER
THAN THE CONFLICT OF LAWS RULES) OF THE STATE OF TEXAS AND THE UNITED STATES OF
AMERICA FROM TIME TO TIME IN EFFECT.
13.11 Severability. Whenever possible, each provision of the Loan Documents
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of any Loan Document shall be invalid, illegal
or unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of such Loan Document shall not
be affected or impaired thereby.
13.12 Chapter 15 Not Applicable. Chapter 15, Subtitle 3, Title 79, Revised
Civil Statutes of Texas, 1925, as amended, shall not apply to this Agreement or
to any Loan or Letter of Credit, nor shall this Agreement or any Loan or Letter
of Credit be governed by or be subject to the provisions of such Chapter 15 in
any manner whatsoever.
13.13 Confidential Information. Each Agent and each Bank separately agrees
that:
(a) As used herein, the term "Confidential Information" means written
information about the Company or the transactions contemplated herein furnished
by the Company to the Agents and/or the Banks which is specifically designated
as confidential by the Company; Confidential Information, however, shall not
include information which (i) was publicly known or available, or otherwise
available on a non-confidential basis to any Bank, at the time of disclosure
from a source other than the Company, (ii) subsequently becomes publicly known
through no act or omission by such Bank, (iii) otherwise becomes available on a
non-confidential basis to any Bank other than through disclosure by the Company
(70)
<PAGE>
or (iv) has been in the possession of any Bank for a period of more than two
years from the date on which such information originally was furnished to such
Bank by the Company, unless the Company shall have requested the Agents and the
Banks in writing, at least 30 days prior to the end of such two-year period, to
maintain the confidentiality of such information for another two (2) year period
(or for successive two (2) year periods); provided that the Company shall not
unreasonably withhold its consent to a request made after the initial two (2)
year period to eliminate information from "Confidential Information".
(b) Each Agent and each Bank agrees that it will take normal and reasonable
precautions to maintain the confidentiality of any Confidential Information
furnished to such Person; provided, however, that such Person may disclose
Confidential Information (i) upon the Company's consent; (ii) to its auditors;
(iii) when required by any Legal Requirement; (iv) as may be required or
appropriate in any report, statement or testimony submitted to any Governmental
Authority having or claiming to have jurisdiction over it; (v) to such Person's
and its Subsidiaries' or Affiliates' officers, directors, employees, agents,
representatives and professional consultants in connection with this Agreement
or administration of the Loans and Letters of Credit; (vi) as may be required or
appropriate, should such Bank elect to assign or grant participations in any of
the Obligations in connection with (1) the enforcement of the Obligations to any
such Person under any of the Loan Documents or related agreements, or (2) any
potential transfer pursuant to this Agreement of any Obligation owned by any
Bank (provided any potential transferee has been approved by the Company if
required by this Agreement, which approval shall not be unreasonably withheld,
and has agreed in writing to be bound by substantially the same provisions
regarding Confidential Information contained in this Section); (vii) as may be
required or appropriate in response to any summons or subpoena or in connection
with any litigation or administrative proceeding; (viii) to any other Bank; (ix)
to the extent reasonably required in connection with the exercise of any remedy
hereunder or under the other Loan Documents; or (x) to correct any false or
misleading information which may become public concerning such Person's
relationship to the Company.
13.14 Tax Forms. With respect to each Bank which is organized under the
laws of a jurisdiction outside the United States, on the day of the initial
borrowing hereunder and from time to time thereafter if requested by the Company
or Administrative Agent, such Bank shall provide Administrative Agent and the
Company with the forms prescribed by the Internal Revenue Service of the United
States certifying as to such Bank's status for purposes of determining exemption
from United States withholding taxes with respect to all payments to be made to
such Bank hereunder or other documents satisfactory to the Bank and
Administrative Agent indicating that all payments to be made to such Bank
hereunder are subject to such tax at a rate reduced by an applicable tax treaty.
Unless the Company and Administrative Agent shall have received such forms or
such documents indicating that payments hereunder are not subject to United
States withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty, the Company or Administrative Agent shall withhold taxes
from such payments at the applicable statutory rate in the case of payments to
or for any Bank organized under the laws of a jurisdiction outside the United
States.
(71)
<PAGE>
13.15 Amendment and Restatement. This Agreement amends and restates in its
entirety that certain Credit Agreement dated as of June 17, 1997 executed by and
among the Company, the Banks and Administrative Agent, as amended.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
(72)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
SEAGULL ENERGY CORPORATION, a Texas corporation
By: /s/ Stephen A. Thorington
Name: Stephen A. Thorington
Title: Vice President - Finance and Treasurer
Addresses for Notices:
1001 Fannin, Suite 1700
Houston, Texas 77002
Attention: Steve Thorington
S-1
<PAGE>
THE CHASE MANHATTAN BANK, as a Bank and as
Administrative Agent
By:
Name:
Title:
Commitment:
Address for Notices:
$50,000,000
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Ms. Lisa Pucciarelli
Phone: (212) 552-7886
Fax: (212) 552-5777
with a copy to:
Texas Commerce Bank National Association
712 Main Street
Houston, Texas 77002
Attention: Manager, Energy Division
S-2
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a
Bank and as Documentation Agent
By: /s/John Kowalczuk
Commitment: Name: John Kowalczuk
Title: Vice President
$50,000,000
Address for Notices:
60 Wall Street
New York, N.Y. 10260-0060
Attention: Mr. John Kowalczuk
Phone: (212) 648-7612
Fax: (212) 648-5967
with further notice to:
Sandra H. Doherty
500 Christiana Stanton Road
Newark, DE 19713-2107
Phone: (302) 634-8122
Fax: (302) 634-1092
S-3
<PAGE>
NATIONSBANK OF TEXAS, N.A., as a Bank and as
Syndication Agent
By: /s/ James V. Ducote
Commitment: Name: James V. Ducote
Title: Vice President
$50,000,000
Address for Notices:
700 Louisiana, 8th Floor
Houston, Texas 77002
Attention: Jo A. Tamalis
Phone: (713) 247-6856
Fax: (713) 247-6568
S-4
<PAGE>
BANKBOSTON, N.A., as a Bank
By: /s/ Terrence Ronan
Commitment: Name: Terrence Ronan
Title: Vice President
$30,000,000
Address for Notices:
100 Federal Street
Energy & Utilities 01-08-04
Boston, Massachusetts 02110
Attention: Terrence Ronan
Phone: (617) 434-5472
Fax: (617) 434-3652
S-5
<PAGE>
ABN AMRO BANK N.V., HOUSTON AGENCY, as a Bank
By: /s/C. Lipshutz
Commitment: Name: Cheryl Lipshutz
Title: Group Vice President
$11,250,000
By: /s/Stephanie Ballete
Name: Stephanie Ballete
Title: Credit Officer
Address for Notices:
Three Riverway, Suite 1700
Houston, Texas 77056
Attention: Ms. Cheryl Lipshutz
Phone: (713) 964-3351
Fax: (713) 629-7533
S-6
<PAGE>
THE BANK OF NEW YORK, as a Bank
By: /s/Ian K. Stewart
Commitment: Name: Ian K. Stewart
Title: Senior Vice President
$20,000,000
Address for Notices:
One Wall Street, 19th Floor
New York, New York 10286
Attention: Ms. Felicia LaForgia
Phone: (212) 635-7861
Fax: (212) 635-7923
S-7
<PAGE>
BANQUE PARIBAS HOUSTON AGENCY, as a Bank
By: /s/Marian Livingston
Commitment: Name: Marian Livingston
Title: Vice President
$20,000,000
By: /s/Barton D. Schonest
Name: Barton D. Schonest
Title: Managing Director
Address for Notices:
1200 Smith, Suite 3100
Houston, Texas 77002
Attention: Marian Livingston
Phone: (713) 659-4811
Fax: (713) 659-6915
S-8
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH, as a Bank
By: /s/ Pascal Poupeller
Commitment: Name: Pascal Poupeller
Title: Executive Vice President
$20,000,000
Address for Notices:
1000 Louisiana, Suite #5360
Houston, Texas 77002
Attention: Mr. John Falbo
Phone: (713) 753-8704
Fax: (713) 751-0307
S-9
<PAGE>
THE FUJI BANK, LIMITED HOUSTON AGENCY, as
a Bank
By: /s/ Yoshaki Imoue
Commitment: Name: Yoshaki Imoue
Title: Vice President and Manager
$11,250,000
Address for Notices:
One Houston Center
Suite 4100
1221 McKinney Street
Houston, Texas 77010
Attention: Mr. Tommy Watts
Phone: (713) 650-7868
Fax: (713) 659-0048
S-10
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO, as a Bank
By: /s/ Dixon P. Schultz
Commitment: Name: Dixon P. Schultz
Title: Vice President
$30,000,000
Address for Notices:
One First National Plaza
10th Floor, Mail Suite 0634
Chicago, Illinois 60670
Attention: Mr. John Beirne
with a copy to:
1100 Louisiana, Suite 3200
Houston, Texas 77002
Attention: Ms. Dixon Schultz
Phone: (713) 654-7239
Fax: (713) 654-7370
S-11
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY, as
a Bank
By: /s/ Paul E. Cornell
Commitment: Name: Paul E. Cornell
Title: First Vice President
$30,000,000
Address for Notices:
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Attention: Mr. Mark Ghent
Phone: (214) 979-2792
Fax: (214) 979-1104
with a copy to:
1111 Bagby, Suite 2020
Houston, Texas 77002
Attention: Mr. Richard Erbert
Phone: (713) 759-6318
Fax: (713) 650-0824
S-12
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD., as
a Bank
By: /s/ Michael G. Meiss
Commitment: Name: Michael G. Meiss
Title: Vice President
$11,250,000
Address for Notices:
1100 Louisiana, Suite 2800
Houston, Texas 770002-5216
Attention: Mr. John M. McIntyre
Phone: (713) 655-3845
Fax: (713) 655-3855
S-13
<PAGE>
BANK OF SCOTLAND, as a Bank
By: /s/ Annie Chintat
Commitment: Name: Annie Chintat
Title: Vice President
$11,250,000
Address for Notices:
565 Fifth Avenue
New York, New York 10017
Attention: Ms. Annie Chintat
Phone: (212) 450-0871
Fax: (212) 557-9460
S-14
<PAGE>
CREDIT AGRICOLE INDOSUEZ, as a Bank
By: /s/ W. Leroy Startz
Commitment: Name: W. Leroy Startz
Title: First Vice President
$11,250,000
By: /s/ David Eouhl, FVP
Name: David Eouhl, FVP
Title: Head of Corporate Banking - Chicago
Address for Notices:
600 Travis, Suite 2340
Houston, Texas 77002
Attention: Mr. Brian Knezeak
Phone: (713) 223-7001
Fax: (713) 223-7029
S-15
<PAGE>
CHRISTIANIA BANK OG KREDITKASSE, as a Bank
By: /s/ William S. Phillips
Commitment: Name: William S. Phillips
Title: Vice President
$11,250,000
By: /s/ Peter Dodge
Name: Peter Dodge
Title: First Vice President
Address for Notices:
11 West 42nd Street
7th Floor
New York, New York 10036
Attention: Mr. Peter Dodge
Phone: (212) 827-4835
Fax: (212) 827-4888
S-16
<PAGE>
DEN NORSKE BANK AS, as a Bank
By: /s/ Byron L. Cooley
Commitment: Name: Byron L. Cooley
Title: Senior Vice President
$11,250,000
By: /s/ Morten Bjornsen
Name: Morten Bjornsen
Title: Senior Vice President
Address for Notices:
333 Clay
Suite 4890
Houston, Texas 77002
Attention: Mr. Byron L. Cooley
Phone: (713) 844-9258
Fax: (713) 757-1167
S-17
<PAGE>
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION, as a Bank
By: /s/ Alan Alexander
Commitment: Name: Alan Alexander
Title: Vice President
$20,000,000
Address for Notices:
1000 Louisiana Street
3rd Floor/MAC 5002-031
Houston, Texas 77002
Attention: Mr. Alan Alexander
Phone: (713) 250-1651
Fax: (713) 250-7912
S-18
<PAGE>
THE BANK OF NOVA SCOTIA, as a Bank
By: /s/ FCH Ashby
Commitment: Name: FCH Ashby
Title: Senior Manager Loan Operations
$30,000,000
Address for Notices:
600 Peachtree Street, Suite 2700
Atlanta, Georgia 30308
Attention: Mr. Cleve Bushey
Phone: (404) 877-1500
Fax: (404) 888-8998
S-19
<PAGE>
CIBC INC., as a Bank
By: /s/ Aleksandra K. Dymanus
Commitment: Name: Aleksandra K. Dymanus
Title: Authorized Signatory
$30,000,000
Address for Notices:
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30339
Attention: Loan Operations
with a copy to:
Canadian Imperial Bank of Commerce
Two Houston Center
909 Fannin Street
Houston, Texas 77010
Attention: Mr. Brian Myers
Phone: (713) 655-5230
Fax: (713) 650-3727
S-20
<PAGE>
MELLON BANK N.A., as a Bank
By: /s/ Roger E. Howard
Commitment: Name: Roger E. Howard
Title: Vice President
$11,250,000
Address for Notices:
Mellon Bank N.A.
One Mellon Bank Center
Room 151-4425
Pittsburgh, Pennsylvania 15258-0001
Attention: Manager, Energy Services Group
Phone: (412) 236-2785
Fax: (412) 236-1840
S-21
<PAGE>
BANK OF MONTREAL, as a Bank
By: /s/ Melissa A. Bauman
Commitment: Name: Melissa A. Bauman
Title: Director
$30,000,000
Address for Notices:
700 Louisiana, Suite 4400
Houston, Texas 77002
Attention: Mr. Brian Otis
Phone: (713) 546-9720
Fax: (713) 223-4007
S-22
<PAGE>
Exhibit A
Unrestricted Subsidiaries
1. Seagull UK Ltd.
2. SGO Isle of Man Ltd.
3. Seagull Energy International, Inc.
4. SGO Southeast Asia, Inc.
5. Seagull Ireland Ltd.
6. Seagull International Holdings Ltd.
7. Seagull East Zeit Petroleum Ltd.
8. Seagull South Hurghada Petroleum Ltd.
9. Seagull (Cote D'Ivoire) Ltd.
10. Seagull (Cote D'Ivoire) CI-12 Ltd.
11. Seagull (Cote D'Ivoire) CI-104 Ltd.
12. Seagull (Egypt) Ltd.
13. Seagull (Egypt) Darag, Ltd.
14. Seagull (Egypt) East Beni Suef, Ltd.
15. GNR International (Argentina), Inc.
16. Seagull (Malaysia) Ltd.
17. Texneft Inc.
18. GNR International (Turkey), Inc.
19. Seagull WAG Petroleum Ltd.
Exhibit A-1
<PAGE>
Exhibit B
Form of Request for Extension of Credit
[SEAGULL ENERGY CORPORATION LETTERHEAD]
REQUEST FOR EXTENSION OF CREDIT
________________, 199____
The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agent Services
Gentlemen:
The undersigned hereby certifies that he is the __________________ of
SEAGULL ENERGY CORPORATION, a Texas corporation (the "Company"), and that as
such he is authorized to execute this Request for Extension of Credit (the
"Request") on behalf of the Company pursuant to the Amended and Restated Credit
Agreement (as it may be amended, supplemented or restated from time to time, the
"Agreement") dated as of December 24, 1997, by and among the Company, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent for the Banks,
NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks, and THE CHASE
MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative Agent"),
and the Banks therein named. The Loan being requested hereby is to be in the
amount set forth in (b) below and is requested to be made on ________________,
199___, which is a Business Day. The Loan is to be (check one) [___] a
Eurodollar Loan [___] an Alternate Base Rate Loan. If the Loan is to be a
Eurodollar Loan, the Interest Period is to be (check one) [__] 1, [__] 2, [__] 3
or [__] 6 months. On behalf of the Company, the undersigned further certifies,
represents and warrants that to his knowledge, after due inquiry (each
capitalized term used herein having the same meaning given to it in the
Agreement unless otherwise specified herein):
(a) As of the date hereof:
(1) The Facility Amount [COMPLETE WITH THE AGGREGATE COMMITMENTS) is:
$----------
(2) Aggregate outstanding amount of Revolving Credit Obligations is:
$----------
Exhibit B-1
<PAGE>
(3) Amount currently available under the Agreement (the amount in (a)(1)
above minus the amount in (a)(2) above is: $__________
(b) If and only if the amount shown in Line (a)(3) above is positive, the
Company hereby requests under this Request a Loan in the amount of $__________
(which is no more than the positive amount set forth in Line (a)(3) above).
(c) Except for the facts heretofore disclosed to the Administrative Agent
in writing, which facts (I) are not materially more adverse to the Company and
its Subsidiaries, (II) do not materially decrease the ability of the Banks to
collect the Obligations as and when due and payable and (III) do not materially
increase the liability of any Agent or any of the Banks, in each case compared
to those facts existing on the date hereof and the material details of which
have been set forth in the Financial Statements delivered to the Administrative
Agent prior to the date hereof or in the Disclosure Statement, and except for
the representations set forth in the Loan Documents which, by their terms, are
expressly (or by means of similar phrasing) made as of the date of the
Agreement, only, the representations and warranties made in each Loan Document
are true and correct in all material respects on and as of the time of delivery
hereof, with the same force and effect as if made on and as of the time of
delivery hereof.
(d) The interest rate and Interest Period selected above comply with all
applicable provisions of the Agreement.
(e) No Default has occurred and is continuing.
Thank you for your attention to this matter.
Very truly yours,
SEAGULL ENERGY CORPORATION,
a Texas corporation
By: _
Name:
Title:
Exhibit B-2
<PAGE>
Exhibit C
Existing Competitive Loans
Interest
Institution Issue Date Maturity Rate Amount
NONE
Exhibit C-1
<PAGE>
Exhibit D
Subsidiaries (with Addresses)
1. Seagull Energy E&P Inc.
2. Seagull Midcon Inc.
3. Seagull Mid-South Inc.
4. Seagull Energy Canada Holding Company
5. Seagull UK Ltd.
6. SGO Isle of Man Ltd.
7. Seagull Energy International, Inc.
8. SGO Southeast Asia, Inc.
9. Seagull Ireland Ltd.
10. Seagull International Holdings Ltd.
11. Seagull East Zeit Petroleum Ltd.
12. Seagull South Hurghada Petroleum Ltd.
13. Global Natural Resources Inc.
14. Global Natural Resources Corporation of Nevada
15. Seagull (Cote D'Ivoire) Ltd.
16. Seagull (Cote D'Ivoire) CI-12 Ltd.
17. Seagull (Cote D'Ivoire) CI-104 Ltd
18. Seagull (Egypt) Ltd.
19. Seagull (Egypt) Darag, Ltd.
20. Seagull (Egypt) East Beni Suef, Ltd.
21. GNR International (Argentina), Inc.
22. Seagull (Malaysia) Ltd.
23. Texneft Inc.
24. GNR Eastern
25. GNR International (Turkey), Inc.
26. Thousand Oaks Development Corporation
27. Seagull Pipeline & Marketing Company
28. Seagull Marketing Services, Inc.
29. Seagull Power Services Inc.
30. Seagull Products Pipeline Corporation
31. Seagull Field Services Company
32. Seagull Pipeline Company
33. Alaska Pipeline Company
34. Seagull WAG Petroleum Ltd.
In each case, the address for notice is: c/o Seagull Energy Corporation
1001 Fannin, Suite 1700
Houston, Texas 77002
Exhibit D-1
<PAGE>
Exhibit E
Form of
Compliance Certificate
The undersigned, the ___________________ of SEAGULL ENERGY CORPORATION, a
Texas corporation (the "Company"), hereby certifies that he is authorized to
execute this certificate on behalf of the Company, pursuant to the Amended and
Restated Credit Agreement (the "Credit Agreement") dated as of December 24,
1997, by and among the Company, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication
Agent for the Banks, and THE CHASE MANHATTAN BANK, as Administrative Agent for
the Banks ("Administrative Agent"), and the Banks therein named, as amended; and
that a review of the Company and its Subsidiaries has been made under his
supervision with a view to determining whether the Company and its Subsidiaries
have fulfilled all of their respective obligations under the Credit Agreement
and the other Loan Documents; and on behalf of the Company further certifies,
represents and warrants that to his knowledge, after due inquiry (each
capitalized term used herein having the same meaning given to it in the Credit
Agreement unless otherwise specified):
As of ___________________, 199___:
(a) The Company and its Subsidiaries have fulfilled their respective
obligations under the Credit Agreement and the other Loan Documents as each
applies after giving effect to any amendments, consents and/or waivers that may
be in effect from time to time.
(b) Except for the facts heretofore disclosed to the Administrative Agent
under the Credit Agreement in writing, which facts (I) are not materially more
adverse to the Company and its Subsidiaries, (II) do not materially decrease the
ability of the Banks to collect the Obligations as and when due and payable and
(III) do not materially increase the liability of the Agents or any of the
Banks, in each case compared to those facts existing on the date hereof and the
material details of which have been set forth in the Financial Statements
delivered to the Administrative Agent under the Credit Agreement prior to the
date hereof or in the Disclosure Statements provided for in the Credit
Agreement, and except for the representations set forth in the Loan Documents
which, by their terms, are expressly (or by means of similar phrasing) made as
of the date of the Credit Agreement, only, the representations and warranties
made in each Loan Document are true and correct in all material respects on and
as of the time of delivery hereof, with the same force and effect as if made on
and as of the time of delivery hereof.
(c) The Financial Statements delivered to the Administrative Agent under
the Credit Agreement concurrently with this Compliance Certificate have been
prepared in accordance with GAAP consistently followed throughout the period
indicated and fairly present the consolidated financial condition and results of
Exhibit E-1
<PAGE>
operations of the applicable Persons as at the end of, and for, the period
indicated (subject, in the case of quarterly Financial Statements, to normal
changes resulting from year-end adjustments).
(d) No Default has occurred and is continuing. In this regard the
compliance with the provisions of Sections 10.9 and 10.10 of the Credit
Agreement is as follows:
(i) Section 10.9 of the Credit Agreement - Total Debt/Capitalization Ratio]
Revolving Credit Obligations (including Competitive Loans)] $__________
Other Current Maturities and borrowed money Indebtedness $__________
Total Debt (1) $__________
Total Shareholders Equity $__________
Total Capitalization (2) $__________
Total Debt/Capitalization Ratio (1) (2) ______%
Note: Must be no greater than 60%
(ii) Section 10.10 of the Credit Agreement - EBITDAX/Interest Ratio (For the
rolling four calendar quarter period ended _________________, 199____)
Earnings Applicable to Common Stock1 $__________
Interest Expense (including capitalized interest) $__________
Income Tax Expense $__________
Material Gains/Losses $__________
Depreciation, Depletion & Amortization $__________
Exploration Expenses $__________
Operating Lease Rentals $__________
1 Excludes Cumulative Effect of Changes in Accounting Methods
Exhibit E-2
<PAGE>
EBITDAX (the sum of the foregoing) (1) $__________
Operating Lease Rentals (a) $__________
Cash Interest Expense (b) $__________
Total [(a) plus (b)] (2) $__________
EBITDAX/Interest (1)/(2) __________
Note: Must be no less than 3.75:1.
(e) There has occurred no material adverse change, either in any case or in
the aggregate, in the assets, liabilities, financial condition, business,
operations, affairs or circumstances of the Company and its Subsidiaries taken
as a whole since the date of the most recent Financial Statements delivered to
the Banks.
DATED as of ____________________, 199___.
SEAGULL ENERGY CORPORATION
By:
Name:
Title:
Exhibit E-3
<PAGE>
Exhibit F
Form of
Assignment and Acceptance
Dated: _______________.199____
Reference is made to the Amended and Restated Credit Agreement dated as of
December 24, 1997 (as restated, amended, modified, supplemented and in effect
from time to time, the "Credit Agreement"), among SEAGULL ENERGY CORPORATION, a
Texas corporation (the "Company"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication
Agent for the Banks, and THE CHASE MANHATTAN BANK, as Administrative Agent for
the Banks ("Administrative Agent"), and the Banks therein named. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
such terms in the Credit Agreement. This Assignment and Acceptance, between the
Assignor (as defined and set forth on Schedule I hereto and made a part hereof)
and the Assignee (as defined and set forth on Schedule I hereto and made a part
hereof) is dated as of the Effective Date (as set forth on Schedule I hereto and
made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "Assigned Interest") in and to all
the Assignor's rights and obligations under the Credit Agreement respecting
those, and only those, credit facilities contained in the Credit Agreement as
are set forth on Schedule 1 (collectively, the "Assigned Facilities,"
individually, an "Assigned Facilities"), in a principal amount for each Assigned
Facility as set forth on Schedule I.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement, any other Loan Document or any other instrument
or document furnished pursuant thereto, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Company or its Subsidiaries or the performance or observance by the
Company or its Subsidiaries of any of its respective obligations under the
Credit Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto; and (iii) if applicable, attaches the note(s) held
by it evidencing the Assigned Facility or Facilities, as the case may be, and
requests that the Administrative Agent exchange such note(s) for a new note or
notes payable to the Assignor (if the Assignor has retained any interest in the
Assigned Facility or Facilities) and a new note or notes payable to the Assignee
in the respective amounts which reflect the assignment being made hereby (and
Exhibit F-1
<PAGE>
after giving effect to any other assignments which have become effective on the
Effective Date).
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance and that it is a permitted assignee
under Section 13.5 of the Credit Agreement; (ii) confirms that it has received a
copy of the Credit Agreement, together with copies of the financial statements
referred to in Section 8.6, or if later, the most recent financial statements
delivered pursuant to Section 9.1 thereof, and such other documents and
information as it has deemed appropriate to make its own credit analysis; (iii)
agrees that it will, independently and without reliance upon the Administrative
Agent, the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement; (iv)
appoints and authorizes the each Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Agreement as are delegated
to such Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (v) agrees that it will be bound by the provisions of the
Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank; (vi) if the Assignee is organized under the laws of a
jurisdiction outside the United States, attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee's
exemption from United States withholding taxes with respect to all payments to
be made to the Assignee under the Credit Agreement or such other documents as
are necessary to indicate that all such payments are subject to such tax at a
rate reduced by an applicable tax treaty, and (vii) has supplied the information
requested on the administrative questionnaire attached hereto as Exhibit A.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance by it and the Company and
recording by the Administrative Agent pursuant to Section 13.5(e) of the Credit
Agreement, effective as of the Effective Date (which Effective Date shall,
unless otherwise agreed to by the Administrative Agent, be at least five
Business Days after the execution of this Assignment and Acceptance).
5. Upon such acceptance and recording, from and after the Effective Date,
the Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignee, whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. The Assignor and Assignee shall make
all appropriate adjustments in payments for periods prior to the Effective Date
by the Administrative Agent or with respect to the making of this assignment
directly between themselves.
6. From and after the Effective Date, (i) the Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Bank thereunder, and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
Exhibit F-2
<PAGE>
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule I hereto.
Exhibit F-3
<PAGE>
Schedule I to Assignment and Acceptance
Legal Name of Assignor: ____________________________________
Legal Name of Assignee: ____________________________________
Effective Date of Assignment:_______________________, 199___
<TABLE>
<S> <C> <C> <C>
Percentage Assigned of Each
Facility (to at least 8
Principal decimals) (Shown as a
Amount (or, percentage of aggregate
with respect original principal amount
to Letters [or, with respect to Letters
Assigned of Credit, face Credit, fact amount]
Facilities amount) Assigned of all Banks
Committed Loans: $_______________ __________%
Letter of Credit $_______________ __________%
participation
interests:
Competitive Loans: $_______________
</TABLE>
Accepted:
THE CHASE MANHATTAN BANK, ____________________________
as Administrative Agent as Assignor
By:______________________ By:_________________________
Name: Name:
Title: Title:
Exhibit F-4
<PAGE>
SEAGULL ENERGY CORPORATION ____________________________
as Assignee
By:______________________ By:_________________________
Name: Name:
Title: Title:
Exhibit F-5
<PAGE>
Exhibit G
Form of
Competitive Bid Request
The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agent Services
Dear Sirs:
Reference is made to the Amended and Restated Credit Agreement dated as of
December 24, 1997, as modified and amended (the "Credit Agreement"), among the
undersigned, the Banks named therein, MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Documentation Agent for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication
Agent for the Banks, and THE CHASE MANHATTAN BANK, as Administrative Agent for
the Banks ("Administrative Agent"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement. The undersigned hereby gives you notice pursuant to Section
2.9 of the Credit Agreement that it requests a Competitive Loan under the Credit
Agreement, and in that connection sets forth below the terms on which such
Competitive Loan is requested to be made:
(A) Borrowing Date of Competitive Loan
(which is a Business Day) ____________________
(B) Principal Amount of Competitive Loan 1 ____________________
(C) Interest Period and the last day thereof 2 ____________________
Exhibit G-1
<PAGE>
By each of the delivery of this Request for Competitive Bids and the
acceptance of any or all of the Loans offered by the Banks in response to this
Competitive Bid Request, the undersigned represents and warrants that the
applicable conditions to lending specified in the Credit Agreement have been
satisfied with respect to the Competitive Loan requested hereby.
Very truly yours,
SEAGULL ENERGY CORPORATION
By:_______________________
Name:
Title:
Exhibit G-2
<PAGE>
Exhibit H
Form of
Notice to Banks of Competitive Bid Request
[Name of Bank]
[Address of Bank]
Attention:________________ _______________, 199___
Dear Sirs:
Reference is made to the Amended and Restated Credit Agreement dated as of
December 24, 1997, as modified and amended (the "Credit Agreement"), among
Seagull Energy Corporation (the "Company"), the Banks named therein, MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent for the Banks,
NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks, and THE CHASE
MANHATTAN BANK, as Administrative Agent for the Banks ("Administrative Agent").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement. The Company delivered a
Request for Competitive Bid by [Date] /Time].1 Your Competitive Bid must comply
with Section 2.9 of the Credit Agreement and the terms set forth below on which
the Notice of Competitive Loan was made:
(A) Date of Competitive Loan _____________________________
(B) Principal Amount of Competitive Loan _____________________________
(C) Interest Period and the last day thereof _____________________________
Very truly yours,
THE CHASE MANHATTAN BANK
By:__________________________
Name:
Title:
Exhibit H-1
<PAGE>
Exhibit I
Form of
Competitive Bid
The Chase Manhattan Bank,
as Administrative Agent
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Agent Services __________, 199___
Dear Sirs:
The undersigned, [Name of Bank], referred to in the Amended and Restated
Credit Agreement dated as of December 24, 1997, as modified and amended (the
"Credit Agreement"), among Seagull Energy Corporation (the "Company"), the Banks
named therein, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent
for the Banks, NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks,
and THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks
("Administrative Agent"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The undersigned hereby makes a Competitive Bid pursuant to Section
2.9 of the Credit Agreement, in response to the Request for Competitive Bids
(the "Competitive Bid Request") made by the Company on _______________, 19___,
and in that connection sets forth below the terms on which such Competitive Bid
is made:
(A) Principal Amount1 _____________________________
(B) Competitive Bid Rate2 _____________________________
(C) Interest Period and the last day thereof3 _____________________________
Exhibit I-1
<PAGE>
The undersigned hereby confirms that it is prepared to extend credit to the
Company upon acceptance by the Company of this bid in accordance with Section
2.9 of the Credit Agreement.
Very truly yours,
[NAME OF BANK]
By:
Name:
Title:
Exhibit I-2
<PAGE>
Exhibit J
Form of
Competitive Bid Administrative Questionnaire
Primary Contact
Competitive Auctions
Bank Name: ___________________________________________________________________
Address: ___________________________________________________________________
Primary Contact: ______________________________________________________________
Title: ___________________________________________________________________
Department: ___________________________________________________________________
Telephone Number:______________________________________________________________
Telecopier Number:_____________________________________________________________
Alternate Contact
Competitive Auctions
Alternate Contact:_____________________________________________________________
Title: __________________________________________________________________
Department: __________________________________________________________________
Telephone Number:______________________________________________________________
Telecopier Number:_____________________________________________________________
Exhibit J-1
<PAGE>
Exhibit K
Continuing Letters of Credit
1. Issuer: The Chase Manhattan Bank
Beneficiary: Insurance Company of North America
L/C No.: P259686
Amount: $300,000
Date of Issue: 03/08/91
Expiration: 01/30/99
2. Issuer: The Chase Manhattan Bank
Beneficiary: American Home Assurance Co.
L/C No.: P753483
Amount: $998,000
Date of Issue: 01/30/95
Expiration: 01/30/98
3. Issuer: The Chase Manhattan Bank
Beneficiary: American Home Assurance Co.
L/C No.: P770604
Amount: $662,000
Date of Issue: 12/01/95
Expiration: 12/01/99
4. Issuer: NationsBank of Texas, N.A.
Beneficiary: UMC Petroleum
L/C No.: NBLC2 (150039)
Amount: $50,000
Date of Issue: 06/26/95
Expiration: 01/01/98
5. Issuer: NationsBank of Texas, N.A.
Beneficiary: Michigan Dept. of Natural Resources
L/C No.: NBLC3 (413425)
Amount: $50,000
Date of Issue: 09/03/93
Expiration: 11/01/98
Exhibit K-1
<PAGE>
6. Issuer: NationsBank of Texas, N.A.
Beneficiary: Hambros Channel Island Trust
L/C No.: NBLC4 (913560)
Amount: $16,645,954.91
Date of Issue: 08/08/96
Expiration: 08/11/98
1/ Excludes Cumulative Effect of Changes in Accounting Methods
1/ Not less than $25,000,000 or greater than the unused Total Commitment and
in integral multiples of $5,000,000.
2/ Which, subject to the Credit Agreement, shall have a duration of not less
than seven calendar days nor more than 180 calendar days, and which shall
end not later than the Termination Date.
1/ The Competitive Bid must be received by the Auction Agent not later than
11:00 a.m., Houston, Texas time, four Business Days before the date of the
proposed Competitive Loan.
1/ Not less than $10,000,000 or greater than the available Total Commitment
and in integral multiples of $1,000,000. Multiple bids will be accepted by
the Auction Agent.
2/ Expressed as a percentage
3/ The Interest Period must be the Interest Period specified in the
Competitive Bid Request.
Exhibit K-2
SEAGULL ENERGY CORPORATION
AND
THE BANK OF NEW YORK
Senior Indenture
Dated as of September 1, 1997
<PAGE>
CROSS REFERENCE SHEET*
Provisions of Trust Indenture Act of 1939 and Indenture to be dated as of
September 1, 1997 between SEAGULL ENERGY CORPORATION and The Bank of New York,
<TABLE>
<CAPTION>
Trustee:
Section of the Act Section of Indenture
<S> <C>
310(a)(1), (2) and (5)................................ 6.9
310(a)(3) and (4)..................................... Inapplicable
310(b)................................................ 6.8 and 6.10(a),
(b) and (d)
310(c)................................................ Inapplicable
311(a)................................................ 6.13(a) and (c)
311(b)................................................ 6.13(b) and (c)
311(c)................................................ Inapplicable
312(a)................................................ 4.1 and 4.2(a)
312(b)................................................ 4.2(a) and (b)(i)
and (ii)
312(c)................................................ 4.2(c)
313(a)................................................ 4.4(a)(i), (ii),
(iii), (iv), (v),
(vi) and (vii)
313(a)(5)............................................. Inapplicable
313(b)(1)............................................. Inapplicable
313(b)(2)............................................. 4.4(b)
313(c)................................................ 4.4(c)
313(d)................................................ 4.4(d)
314(a)................................................ 4.3
314(b)................................................ Inapplicable
314(c)(1) and (2)..................................... 11.5
314(c)(3)............................................. Inapplicable
314(d)................................................ Inapplicable
314(e)................................................ 11.5
314(f)................................................ Inapplicable
315(a), (c) and (d)................................... 6.1
315(b)................................................ 5.8
315(e)................................................ 5.9
316(a)(1)............................................. 5.7
316(a)(2)............................................. Not required
316(a) (last sentence)................................ 7.4
316(b)................................................ 5.4
317(a)................................................ 5.2
317(b)................................................ 3.5(a)
318(a)................................................ 11.7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE ONE
DEFINITIONS
<S> <C>
Affiliate.........................................................................................................1
Authenticating Agent..............................................................................................1
Bankruptcy Code...................................................................................................2
Board of Directors................................................................................................2
Board Resolution..................................................................................................2
Business Day......................................................................................................2
Commission........................................................................................................2
Consolidated Net Tangible Assets..................................................................................2
Corporate Trust Office............................................................................................2
Depositary........................................................................................................2
ENSTAR Alaska.....................................................................................................2
Event of Default..................................................................................................2
Global Security...................................................................................................2
Holder............................................................................................................2
Holder of Securities..............................................................................................2
Securityholder....................................................................................................2
Indenture.........................................................................................................2
Interest..........................................................................................................3
Issuer............................................................................................................3
Issuer Order......................................................................................................3
Officers' Certificate.............................................................................................3
Opinion of Counsel................................................................................................3
Original Issue Date...............................................................................................3
Original Issue Discount...........................................................................................3
Original Issue Discount Security..................................................................................3
Outstanding.......................................................................................................3
Periodic Offering.................................................................................................4
Person............................................................................................................4
Place of Payment..................................................................................................4
Principal.........................................................................................................4
Principal Amount..................................................................................................4
Principal Property................................................................................................4
Record Date.......................................................................................................4
Responsible Officer...............................................................................................4
Restricted Subsidiary.............................................................................................4
Sale and Leaseback Transaction....................................................................................5
Secured Debt......................................................................................................5
Security..........................................................................................................5
Securities........................................................................................................5
Subsidiary........................................................................................................5
Trust Indenture Act of 1939.......................................................................................5
Trustee...........................................................................................................5
Unrestricted Subsidiary...........................................................................................5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
U.S. Government Obligations.......................................................................................5
Vice President....................................................................................................5
Yield to Maturity.................................................................................................5
ARTICLE TWO
SECURITIES
SECTION 2.1 Forms Generally.................................................................................6
SECTION 2.2 Form of Trustee's Certificate of Authentication.................................................6
SECTION 2.3 Amount Unlimited, Issuable in Series............................................................6
SECTION 2.4 Authentication and Delivery of Securities.......................................................8
SECTION 2.5 Execution of Securities........................................................................10
SECTION 2.6 Certificate of Authentication..................................................................10
SECTION 2.7 Denomination and Date of Securities; Payments of Inerest.......................................10
SECTION 2.8 Registration Transfer and Exchange.............................................................11
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities......................................12
SECTION 2.10 Cancellation of Securities; Disposition Thereof................................................13
SECTION 2.11 Temporary Securities...........................................................................13
SECTION 2.12 CUSIP Numbers..................................................................................13
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest..............................................................14
SECTION 3.2 Offices for Notices and Payments, etc..........................................................14
SECTION 3.3 No Interest Extension..........................................................................14
SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office.............................................14
SECTION 3.5 Provision as to Paying Agent...................................................................14
SECTION 3.6 Restriction on Creation of Secured Debt........................................................15
SECTION 3.7 Restriction on Sale and Leaseback Transactions.................................................16
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THEISSUER AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee Information as to Names and Addresses of Securityholders.............17
SECTION 4.2 Preservation and Disclosure of Securityholders Lists...........................................17
SECTION 4.3 Reports by the Issuer..........................................................................18
SECTION 4.4 Reports by the Trustee.........................................................................19
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITY HOLDERSON EVENT OF DEFAULT
SECTION 5.1 Events of Default..............................................................................20
SECTION 5.2 Payment of Securities on Default; Suit Therefor................................................21
SECTION 5.3 Application of Moneys Collected by Trustee.....................................................22
SECTION 5.4 Proceedings by Securityholders.................................................................23
SECTION 5.5 Proceedings by Trustee.........................................................................23
SECTION 5.6 Remedies Cumulative and Continuing.............................................................23
SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of Securityholders....................23
SECTION 5.8 Notice of Defaults.............................................................................24
SECTION 5.9 Undertaking to Pay Costs.......................................................................24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SIX
CONCERNING THE TRUSTEE
<S> <C>
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default; Prior to Default...................24
SECTION 6.2 Certain Rights of the Trustee..................................................................25
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities or Application of Proceeds
Thereof...............................................................................26
SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc.......................................26
SECTION 6.5 Moneys Held by Trustee.........................................................................26
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior Claim................................26
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc.........................................27
SECTION 6.8 Qualification of Trustee; Conflicting Interests................................................27
SECTION 6.9 Persons Eligible for Appointment as Trustee....................................................31
SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee......................................31
SECTION 6.11 Acceptance of Appointment by Successor Trustee.................................................32
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of Trustee.........................33
SECTION 6.13 Preferential Collection of Claims Against the Issuer...........................................33
SECTION 6.14 Appointment of Authenticating Agent............................................................35
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by Securityholders....................................................36
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities.................................36
SECTION 7.3 Holders to be Treated as Owners................................................................36
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding..............................................37
SECTION 7.5 Right of Revocation of Action Taken............................................................37
SECTION 7.6 Record Date for Consents and Waivers...........................................................37
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders.....................................37
SECTION 8.2 Supplemental Indentures with Consent of Securityholders........................................38
SECTION 8.3 Effect of Supplemental Indenture...............................................................39
SECTION 8.4 Documents to Be Given to Trustee...............................................................39
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures...................................39
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR DISPOSITION
SECTION 9.1 Issuer May Consolidate, etc....................................................................40
SECTION 9.2 Securities to be Secured in Certain Events.....................................................40
SECTION 9.3 Successor Corporation to be Substituted........................................................40
SECTION 9.4 Opinion of Counsel to be Given Trustee.........................................................41
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 10.1 Satisfaction and Discharge of Indenture........................................................41
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of Securities............................43
SECTION 10.3 Repayment of Moneys Held by Paying Agent.......................................................43
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two Years......................43
SECTION 10.5 Indemnity for U.S. Government Obligations......................................................43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE ELEVE
MISCELLANEOUS PROVISIONS
<S> <C>
SECTION 11.1 Partners, Incorporators, Stockholders, Officers and Directors of Issuer Exempt from Individual
Liability.............................................................................43
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties and Holders of Securities..............44
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture............................................44
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of Securities...............................44
SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein.............44
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays................................................45
SECTION 11.7 Conflict of Any Provision of Indenture with Trust Indenture Act of 1939........................45
SECTION 11.8 GOVERNING LAW..................................................................................45
SECTION 11.9 Counterparts...................................................................................45
SECTION 11.10 Effect of Headings................................................................................45
ARTICLE TWELVEREDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article.......................................................................45
SECTION 12.2 Notice of Redemption; Partial Redemptions......................................................45
SECTION 12.3 Payment of Securities Called for Redemption....................................................46
SECTION 12.4 Exclusion of Certain Securities from Eligibility for Selection for Redemption..................47
SECTION 12.5 Mandatory and Optional Sinking Funds...........................................................47
</TABLE>
<PAGE>
THIS SENIOR INDENTURE, dated as of September 1, 1997 between SEAGULL
ENERGY CORPORATION, a Texas corporation (the "Issuer"), and The Bank of New
York, a New York banking corporation, as trustee (the "Trustee"),
W I T N E S S E T H:
WHEREAS, the Issuer has duly authorized the issuance from time to time
of its unsecured debentures, notes or other evidences of indebtedness to be
issued in one or more series (the "Securities") up to such principal amount or
amounts as may from time to time be authorized in accordance with the terms of
this Indenture;
WHEREAS, the Issuer has duly authorized the execution and delivery of
this Indenture to provide, among other things, for the authentication, delivery
and administration of the Securities; and
WHEREAS, all things necessary to make this Indenture a valid indenture
and agreement according to its terms have been undertaken and completed;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Securities by
the Holders (as hereinafter defined) thereof, the Issuer and the Trustee
mutually covenant and agree for the equal and proportionate benefit of the
respective Holders from time to time of the Securities as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.1 For all purposes of this Indenture and of any indenture
supplemental hereto the following terms shall have the respective meanings
specified in this Section 1.1 (except as otherwise expressly provided or unless
the context otherwise clearly requires). All other terms used in this Indenture
that are defined in the Trust Indenture Act of 1939, including terms defined
therein by reference to the Securities Act of 1933, as amended, shall have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture (except as herein
otherwise expressly provided or unless the context otherwise clearly requires).
All accounting terms used herein and not expressly defined shall have
the meanings assigned to such terms in accordance with generally accepted
accounting principles, and the term "generally accepted accounting principles"
means such accounting principles as are generally accepted at the time of any
computation.
The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision. The expressions "date of this Indenture", "date
hereof", "date as of which this Indenture is dated" and "date of execution and
delivery of this Indenture" and other expressions of similar import refer to the
effective date of the original execution and delivery of this Indenture, viz.
September 1, 1997.
<PAGE>
The terms defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" shall have the meaning set forth in Section 6.14.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 United States
Codess.ss.101 et seq., or any successor statute thereto.
"Board of Directors" means either the Board of Directors of the Issuer or
any committee of such Board duly authorized to act on its behalf.
"Board of Resolution" means one or more resolutions, certified by the
secretary or an assistant secretary of the Issuer to have been duly adopted or
consented to by the Board of Directors and to be in full force and effect.
"Business Day" means, with respect to any Security, a day that (a) in the
Place of Payment (or in any of the Places of Payment, if more than one) in which
amounts are payable, as specified in the form of such Security, and (b) in the
city in which the Corporate Trust Office is located, is not a day on which
banking institutions are authorized or required by law or regulation to close.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or, if at any time after the execution and delivery of this Indenture such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act of 1939, then the body performing such duties on such
date.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
included on the most recent consolidated balance sheet of the Issuer and its
Restricted Subsidiaries, less applicable reserves and other properly deductible
items and after deducting therefrom (a) all current liabilities and (b) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all in accordance with generally accepted
accounting principles consistently applied.
<PAGE>
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located in New York, New York.
"Depositary" means, with respect to the Securities of any series issuable
or issued in the form of one or more Global Securities, the Person designated as
Depositary by the Issuer pursuant to Section 2.3 until a successor Depositary
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter "Depositary" shall mean or include each Person who is then a
Depositary hereunder, and, if at any time there is more than one such Person,
"Depositary" as used with respect to the Securities of any such series shall
mean the Depositary with respect to the Global Securities of such series.
"ENSTAR Alaska" means (i) the division of the Issuer known on the date of
this Indenture as ENSTAR Natural Gas Company, which owns on the date of this
Indenture the gas distribution system in south-central Alaska, and (ii) Alaska
Pipeline Company, an Alaska corporation and a Subsidiary of the Issuer, in each
case together with successors and assigns.
"Event of Death" means any event or condition specified as such in Section
5.1.
"Global Security" means a Security evidencing all or a part of a series of
Securities issued to the Depositary for such series in accordance with Section
2.3 and bearing the legend prescribed in Section 2.4.
"Holder", "Holder of Securities", "Securityholder" or other similar terms
mean, in the case of any Security, the person in whose name such Security is
registered in the security register kept by the Issuer for that purpose in
accordance with the terms hereof.
"Indenture" means this instrument as originally executed and delivered or,
if amended or supplemented as herein provided, as so amended or supplemented or
both, including, for all purposes of this instrument and any such supplement,
the provisions of the Trust Indenture Act of 1939 that are deemed to be a part
of and govern this instrument and any such supplement, respectively, and shall
include the forms and terms of particular series of Securities established as
contemplated hereunder.
The term "interest" means, when used with respect to non-interest bearing
Securities (including, without limitation, any Original Issue Discount Security
that by its terms bears interest only after maturity or upon default in any
other payment due on such Security), interest payable after maturity (whether at
stated maturity, upon acceleration or redemption or otherwise) or after the
date, if any, on which the Issuer becomes obligated to acquire a Security,
whether upon conversion, by purchase or otherwise.
"Issurer" means (except as otherwise provided in Section 6.8) Seagull
Energy Corporation, a Texas corporation, and, subject to Article Nine, its
successors and assigns.
<PAGE>
"Issuer Order" means a written statement, request or order of the Issuer
which is signed in its name by the chairman of the Board of Directors, the
president or any vice president of the Issuer.
"Officer Certificate", when used with respect to the Issuer, means a
certificate signed by the chairman of the Board of Directors, the president, or
any vice president and by the treasurer, any assistant treasurer, the
controller, any assistant controller, the secretary or any assistant secretary
of the Issuer. Each such certificate shall include the statements provided for
in Section 11.5 if and to the extent required by the provisions of such Section
11.5. One of the officers signing an Officers' Certificate given pursuant to
Section 4.3 shall be the principal executive, financial or accounting officer of
the Issuer.
"Opinion of Counsel" means an opinion in writing signed by the chief
counsel of the Issuer or by such other legal counsel who may be an employee of
or counsel to the Issuer and who shall be satisfactory to the Trustee. Each such
opinion shall include the statements provided for in Section 11.5, if and to the
extent required by the provisions of such Section 11.5.
The term "orginial issue date" of any Security (or portion thereof) means
the earlier of (a) the date of such Security or (b) the date of any Security (or
portion thereof) for which such Security was issued (directly or indirectly) on
registration of transfer, exchange or substitution.
The term "orginal issue discount" of any debt security, including any
Original Issue Discount Security, means the difference between the principal
amount of such debt security and the initial issue price of such debt security
(as set forth in the case of an Original Issue Discount Security on the face of
such Security).
"Original Issue Discount Security" means any Security that provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof pursuant to Section 5.1.
"Oustanding" (except as otherwise provided in Section 6.8), when used with
reference to Securities, shall, subject to the provisions of Section 7.4, mean,
as of any particular time, all Securities authenticated and delivered by the
Trustee under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities (other than Securities of any series as to which the
provisions of Article Ten hereof shall not be applicable), or portions thereof,
for the payment or redemption of which moneys or U.S. Government Obligations (as
provided for in Section 10.1) in the necessary amount shall have been deposited
in trust with the Trustee or with any paying agent (other than the Issuer) or
shall have been set aside, segregated and held in trust by the Issuer for the
Holders of such Securities (if the Issuer shall act as its own paying agent),
provided that, if such Securities, or portions thereof, are to be redeemed prior
to the maturity thereof, notice of such redemption shall have been given as
herein provided, or provision satisfactory to the Trustee shall have been made
for giving such notice; and
<PAGE>
(c) Securities which shall have been paid or in substitution for which
other Securities shall have been authenticated and delivered pursuant to the
terms of Section 2.9 (except with respect to any such Security as to which proof
satisfactory to the Trustee is presented that such Security is held by a person
in whose hands such Security is a legal, valid and binding obligation of the
Issuer).
In determining whether the Holders of the requisite aggregate principal
amount of Outstanding Securities of any or all series have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding for such purposes shall be the portion of the principal amount
thereof that would be due and payable as of the date of such determination (as
certified by the Issuer to the Trustee) upon a declaration of acceleration of
the maturity thereof pursuant to Section 5.1.
"Periodic Offering" means an offering of Securities of a series from time
to time, the specific terms of which Securities, including, without limitation,
the rate or rates of interest, if any, thereon, the stated maturity or
maturities thereof and the redemption provisions, if any, with respect thereto,
are to be determined by the Issuer or its agents upon the issuance of such
Securities.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of and interest, if any, on the
Securities of such series are payable as determined in accordance with Section
2.3.
The term "principal" of a debt security, including any Security, means the
amount (including, without limitation, if and to the extent applicable, any
premium and, in the case of an Original Issue Discount Security, any accrued
original issue discount, but excluding interest) that is payable with respect to
such debt security as of any date and for any purpose (including, without
limitation, in connection with any sinking fund, upon any redemption at the
option of the Issuer, upon any purchase or exchange at the option of the Issuer
or the holder of such debt security and upon any acceleration of the maturity of
such debt security).
The term "principal amount" of a debt security, including any Security,
means the principal amount as set forth on the face of such debt security.
"Principal Property" means any real property, manufacturing plant,
processing plant, pipeline, office building, warehouse or other physical
facility, or any other like depreciable or depletable asset of the Issuer or any
Restricted Subsidiary whether owned at September 1, 1997 or thereafter acquired
(other than any facility thereafter acquired for the control or abatement of
<PAGE>
atmospheric pollutants or contaminants or water, noise, odor or other pollution)
which in the opinion of the Board of Directors is of material importance to the
total business conducted by the Issuer and its Restricted Subsidiaries, as a
whole; provided, however, that any such property shall not be deemed a Principal
Property if such property does not have a fair value in excess of 3% of the
total assets included on a consolidated balance sheet of the Issuer and its
Restricted Subsidiaries prepared in accordance with generally accepted
accounting principles consistently applied.
The term "record date" shall have the meaning set forth in Section 2.7.
"Responsible Officer", when used with respect to the Trustee, means any
officer assigned by the Trustee to administer its corporate trust matters.
"Restricted Subisdiary" means (a) any Subsidiary other than an Unrestricted
Subsidiary, and (b) any Subsidiary which was an Unrestricted Subsidiary but
which, subsequent to the date hereof, is designated by the Issuer (by certified
resolution of the Board of Directors delivered to the Trustee) to be a
Restricted Subsidiary; provided, however, that the Issuer may not designate any
such Subsidiary to be a Restricted Subsidiary if the Issuer would thereby breach
any covenant or agreement herein contained (on the assumptions that any
outstanding indebtedness of such Subsidiary was incurred at the time of such
designation and that any Sale and Leaseback Transaction to which such Subsidiary
is then a party was entered into at the time of such designation).
"Sale and Leaseback Transaction" shall have the meaning set forth in
Section 3.7.
"Secured Debt" means indebtedness for money borrowed by the Issuer or a
Restricted Subsidiary and any other indebtedness of the Issuer or a Restricted
Subsidiary on which interest is paid or payable (other than indebtedness owed by
a Restricted Subsidiary to the Issuer, by a Restricted Subsidiary to another
Restricted Subsidiary or by the Issuer to a Restricted Subsidiary), that in any
such case is secured by (a) a mortgage or other lien on any Principal Property
of the Issuer or a Restricted Subsidiary, or (b) a pledge, lien or other
security interest on any shares of stock or indebtedness of a Restricted
Subsidiary, or (c) in the case of any such indebtedness of the Issuer, a
guaranty by any Restricted Subsidiary. The amount of Secured Debt at any time
outstanding shall be the amount then owing thereon by the Issuer or a Restricted
Subsidiary.
"Security" or "Securities" (except as otherwise provided in Section 6.8)
has the meaning stated in the first recital of this Indenture or, as the case
may be, Securities that have been authenticated and delivered pursuant to this
Indenture.
"Subsidiary" means any corporation of which the Issuer, or the Issuer and
one or more Subsidiaries, or any one or more Subsidiaries, directly or
indirectly own voting securities entitling any one or more of the Issuer and its
Subsidiaries to elect a majority of the directors, either at all times or, so
long as there is no default or contingency which permits the holders of any
<PAGE>
other class or classes of securities to vote for the election of one or more
directors.
"Trust Indenture Act of 1939" (except as otherwise provided in Sections 8.1
and 8.2) means the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990, as in force at the date as of which this Indenture
is originally executed.
"Trustee" means the Person identified as "Trustee" in the first paragraph
hereof and, subject to the provisions of Article Six, shall also include any
successor trustee. "Trustee" shall also mean or include each Person who is then
a trustee hereunder and, if at any time there is more than one such Person,
"Trustee" as used with respect to the Securities of any series shall mean the
trustee with respect to the Securities of such series.
"Unrestricted Subsidiary" means (a) any Subsidiary acquired or organized
after the date hereof, provided, however, that such Subsidiary shall not be a
successor, directly or indirectly, to any Restricted Subsidiary, and (b) any
Subsidiary whose principal business and assets are located outside the United
States of America, its territories and possessions and Canada or are located in
Puerto Rico, and (c) any Subsidiary the principal business of which consists of
financing or assisting in financing the acquisition or disposition of products
of the Issuer or a Subsidiary by dealers, distributors or other customers, and
(d) any Subsidiary the principal business of which is owning, leasing, dealing
in or developing real property, and (e) any Subsidiary substantially all the
assets of which consist of stock or other securities of a Subsidiary or
Subsidiaries of the character described in clauses (a) through (d) of this
paragraph, unless and until such Subsidiary shall have been designated to be a
Restricted Subsidiary pursuant to clause (b) of the definition of "Restricted
Subsidiary".
"U.S. Government Obligations" shall have the meaning set forth in Section
10.1(B).
The term "vice president", when used with respect to the Issuer or the
Trustee, means any vice president, regardless of whether designated by a number
or a word or words added before or after the title "vice president."
"Yield to Maturity" means the yield to maturity on a series of Securities,
calculated at the time of issuance of such series, or, if applicable, at the
most recent redetermination of interest on such series, and calculated in
accordance with generally accepted financial practice or as otherwise provided
in the terms of such series of Securities.
ARTICLE TWO
SECURITIES
SECTION 2.1 Forms Generally. The Securities of each series shall be
substantially in such form (not inconsistent with this Indenture) as shall be
established by or pursuant to one or more Board Resolutions (as set forth in a
Board Resolution or, to the extent established pursuant to rather than set forth
in a Board Resolution, an Officers' Certificate detailing such establishment) or
in one or more indentures supplemental hereto, in each case with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have imprinted or otherwise
<PAGE>
reproduced thereon such legend or legends or endorsements, not inconsistent with
the provisions of this Indenture, as may be required to comply with any law or
with any rules or regulations pursuant thereto, or with any rules of any
securities exchange or to conform to general usage, all as may be determined by
the officers executing such Securities, as evidenced by their execution of such
Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities as evidenced by their execution of
such Securities.
SECTION 2.2 Form of Trustee's Certificate of Authentication. The
Trustee's certificate of authentication on all Securities shall be substantially
as follows:
This is one of the Securities of the series designated herein referred
to in the within mentioned Indenture.
The Bank of New York, as Trustee
By:____________________________
Authorized Signatory
If at any time there shall be an Authenticating Agent appointed with
respect to any series of Securities, then the Securities of such series shall
bear, in addition to the Trustee's certificate of authentication, an alternate
Certificate of Authentication which shall be substantially as follows:
This is one of the Securities of the series designated herein referred
to in the within mentioned Indenture.
The Bank of New York, as Trustee
By:____________________________
as Authenticating Agent
By:____________________________
Authorized Signatory
SECTION 2.3 Amount Unlimited, Issuable in Series. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.
<PAGE>
The Securities may be issued in one or more series and the Securities
of each such series shall rank equally and pari passu with the Securities of
each other series and with all other unsecured and unsubordinated debt of the
Issuer. There shall be established in or pursuant to one or more Board
Resolutions (and, to the extent established pursuant to rather than set forth in
a Board Resolution, in an Officers' Certificate detailing such establishment) or
established in one or more indentures supplemental hereto, prior to the initial
issuance of Securities of any series:
(1) the designation of the Securities of the series, which shall
distinguish the Securities of such series from the Securities of all
other series;
(2) any limit upon the aggregate principal amount of the
Securities of the series that may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 2.8, 2.9, 2.11, 8.5 or
12.3);
(3) the date or dates on which the principal of the Securities of
the series is payable;
(4) the rate or rates at which the Securities of the series
shall bear interest, if any, the date or dates from which any such
interest shall accrue, on which any such interest shall be payable and
on which a record shall be taken for the determination of Holders to
whom any such interest is payable or the method by which such rate or
rates or date or dates shall be determined or both;
(5) the place or places where and the manner in which the
principal of and interest, if any, on Securities of the series shall be
payable (if other than as provided in Section 3.2) and the office or
agency for the Securities of the series maintained by the Issuer
pursuant to Section 3.2;
(6) the right, if any, of the Issuer to redeem, purchase or
repay Securities of the series, in whole or in part, at its option and
the period or periods within which, the price or prices (or the method
by which such price or prices shall be determined or both) at which,
the form or method of payment therefor if other than in cash and any
terms and conditions upon which and the manner in which (if different
from the provisions of Article Twelve) Securities of the series may be
so redeemed, purchased or repaid, in whole or in part, pursuant to any
sinking fund or otherwise;
(7) the obligation, if any, of the Issuer to redeem, purchase
or repay Securities of the series in whole or in part pursuant to any
mandatory redemption, sinking fund or analogous provisions or at the
option of a Holder thereof and the period or periods within which the
price or prices (or the method by which such price or prices shall be
determined or both) at which, the form or method of payment therefor if
other than in cash and any terms and conditions upon which and the
manner in which (if different from the provisions of Article Twelve)
Securities of the series shall be redeemed, purchased or repaid, in
whole or in part, pursuant to such obligation;
<PAGE>
(8) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which Securities of the series
shall be issuable; (9) if other than the principal amount thereof, the
portion of the principal amount of Securities of the series which
shall be payable upon acceleration of the maturity thereof;
(10) whether Securities of the series will be issuable as Global
Securities;
(11) if the Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions,
the form and terms of such certificates, documents or conditions;
(12) any trustees, depositaries, authenticating or paying agents,
transfer agents or registrars or any other agents with respect to the
Securities of such series;
(13) any deleted, modified or additional events of default,
remedies or covenants with respect to the Securities of such series;
(14) whether the provisions of Section 10.1(C) will be applicable
to Securities of such series;
(15) any provision relating to the issuance of Securities of
such series at an original issue discount (including, without
limitation, the issue price thereof, the rate or rates at which such
original issue discount shall accrue, if any, and the date or dates
from or to which or period or periods during which such original issue
discount shall accrue at such rate or rates);
(16) if the amounts of payments of principal of and interest
on the Securities of such series are to be determined with reference to
an index, the manner in which such amounts shall be determined; and
(17) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical,
except as to denomination and except as may otherwise be provided by or pursuant
to the Board Resolution or Officers' Certificate referred to above or as set
forth in any such indenture supplemental hereto. All Securities of any one
series need not be issued at the same time and may be issued from time to time,
consistent with the terms of this Indenture, if so provided by or pursuant to
such Board Resolution, such Officers' Certificate or in any such indenture
supplemental hereto.
Any such Board Resolution or Officers' Certificate referred to above
with respect to Securities of any series filed with the Trustee on or before the
initial issuance of the Securities of such series shall be incorporated herein
by reference with respect to Securities of such series and shall thereafter be
<PAGE>
deemed to be a part of the Indenture for all purposes relating to Securities of
such series as fully as if such Board Resolution or Officers' Certificate were
set forth herein in full.
SECTION 2.4 Authentication and Delivery of Securities. The Issuer may
deliver Securities of any series executed by the Issuer to the Trustee for
authentication together with the applicable documents referred to below in this
Section 2.4, and the Trustee shall thereupon authenticate and deliver such
Securities to, or upon the order of, the Issuer (contained in the Issuer Order
referred to below in this Section 2.4) or pursuant to such procedures acceptable
to the Trustee and to such recipients as may be specified from time to time by
an Issuer Order. The maturity date, original issue date, interest rate, if any,
and any other terms of the Securities of such series shall be determined by or
pursuant to such Issuer Order and procedures. If provided for in such procedures
and agreed to by the Trustee, such Issuer Order may authorize authentication and
delivery pursuant to oral instructions from the Issuer or its duly authorized
agent, which instructions shall be promptly confirmed in writing. In
authenticating the Securities of such series and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive (in the case of subparagraphs (2), (3) and
(4) below only at or before the time of the first request of the Issuer to the
Trustee to authenticate Securities of such series) and (subject to Section 6.1)
shall be fully protected in relying upon, unless and until such documents have
been superseded or revoked:
(1) an Issuer Order requesting such authentication and setting
forth delivery instructions if the Securities of such series are not to
be delivered to the Issuer, provided that, with respect to Securities
of a series subject to a Periodic Offering, (a) such Issuer Order may
be delivered by the Issuer to the Trustee prior to the delivery to the
Trustee of such Securities for authentication and delivery, (b) the
Trustee shall authenticate and deliver Securities of such series for
original issue from time to time, in an aggregate principal amount not
exceeding the aggregate principal amount established for such series,
pursuant to an Issuer Order or pursuant to procedures acceptable to the
Trustee as may be specified from time to time by an Issuer Order, (c)
the maturity date or dates, original issue date or dates, interest rate
or rates, if any, and any other terms of Securities of such series
shall be determined by an Issuer Order or pursuant to such procedures,
(d) if provided for in such procedures, such Issuer Order may authorize
authentication and delivery pursuant to oral or electronic instructions
from the Issuer or its duly authorized agent or agents, which oral
instructions shall be promptly confirmed in writing and (e) after the
original issuance of the first Security of such series to be issued,
any separate request by the Issuer that the Trustee authenticate
Securities of such series for original issuance will be deemed to be a
certification by the Issuer that it is in compliance with all
conditions precedent provided for in this Indenture relating to the
authentication and delivery of such Securities;
(2) the Board Resolution, Officers' Certificate or executed
supplemental indenture referred to in Sections 2.1 and 2.3 by or
pursuant to which the forms and terms of the Securities of such series
were established;
<PAGE>
(3) an Officers' Certificate setting forth the form or forms
and terms of the Securities stating that the form or forms and terms of
the Securities have been established pursuant to Sections 2.1 and 2.3
and comply with this Indenture and covering such other matters as the
Trustee may reasonably request; and
(4) at the option of the Issuer, either an Opinion of Counsel,
or a letter from legal counsel addressed to the Trustee permitting it
to rely on an Opinion of Counsel, substantially to the effect that:
(a) the form or forms of the Securities of such series
have been duly authorized and established in conformity with
the provisions of this Indenture;
(b) in the case of an underwritten offering, the
terms of the Securities of such series have been duly
authorized and established in conformity with the provisions
of this Indenture, and, in the case of an offering that is not
underwritten, certain terms of the Securities of such series
have been established pursuant to a Board Resolution, an
Officers' Certificate or a supplemental indenture in
accordance with this Indenture, and when such other terms as
are to be established pursuant to procedures set forth in an
Issuer Order shall have been established, all such terms will
have been duly authorized by the Issuer and will have been
established in conformity with the provisions of this
Indenture;
(c) when the Securities of such series have been
executed by the Issuer and authenticated by the Trustee in
accordance with the provisions of this Indenture and delivered
to and duly paid for by the purchasers thereof, they will have
been duly issued under this Indenture and will be valid and
legally binding obligations of the Issuer, enforceable in
accordance with their respective terms, and will be entitled
to the benefits of this Indenture; and
(d) the execution and delivery by the Issuer of, and
the performance by the Issuer of its obligations under, the
Securities of such series will not contravene any provision of
applicable law or the articles of incorporation or bylaws of
the Issuer or any agreement or other instrument binding upon
the Issuer or any of its Subsidiaries that is material to the
Issuer and its Subsidiaries, considered as one enterprise, or,
to such counsel's knowledge after the inquiry indicated
therein, any judgment, order or decree of any governmental
agency or any court having jurisdiction over the Issuer or any
Subsidiary, and no consent, approval or authorization of any
governmental body or agency is required for the performance by
the Issuer of its obligations under the Securities, except
such as are specified and have been obtained and such as may
be required by the securities or blue sky laws of the various
states in connection with the offer and sale of the
Securities.
In rendering such opinions, such counsel may qualify any opinions as to
enforceability by stating that such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium and other similar laws
affecting the rights and remedies of creditors and is subject to general
<PAGE>
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). Such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the State of Texas and the
federal law of the United States, upon opinions of other counsel (copies of
which shall be delivered to the Trustee), who shall be counsel reasonably
satisfactory to the Trustee, in which case the opinion shall state that such
counsel believes that both such counsel and the Trustee are entitled so to rely.
Such counsel may also state that, insofar as such opinion involves factual
matters, such counsel has relied, to the extent such counsel deems proper, upon
certificates of officers of the Issuer and its Subsidiaries and certificates of
public officials.
The Trustee shall have the right to decline to authenticate and deliver
any Securities of any series under this Section 2.4 if the Trustee, being
advised by counsel, determines that such action may not lawfully be taken by the
Issuer or if the Trustee in good faith by its board of directors or board of
trustees, executive committee or a trust committee of directors or trustees or
Responsible Officers shall determine that such action would expose the Trustee
to personal liability to existing Holders or would adversely affect the
Trustee's own rights, duties or immunities under the Securities, this Indenture
or otherwise.
If the Issuer shall establish pursuant to Section 2.3 that the
Securities of a series are to be issued in the form of one or more Global
Securities, then the Issuer shall execute and the Trustee shall, in accordance
with this Section 2.4 and the Issuer Order with respect to such series,
authenticate and deliver one or more Global Securities that (i) shall represent
and shall be denominated in an amount equal to the aggregate principal amount of
all of the Securities of such series to be issued in the form of Global
Securities and not yet canceled, (ii) shall be registered in the name of the
Depositary for such Global Security or Securities or the nominee of such
Depositary, (iii) shall be delivered by the Trustee to such Depositary or
pursuant to such Depositary's instructions, and (iv) shall bear a legend
substantially to the following effect: "Unless and until it is exchanged in
whole or in part for Securities in definitive registered form, this Security may
not be transferred except as a whole by the Depositary to the nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary."
Each Depositary designated pursuant to Section 2.3 must, at the time of
its designation and at all times while it serves as Depositary, be a clearing
agency registered under the Securities Exchange Act of 1934, as amended, and any
other applicable statute or regulation.
SECTION 2.5 Execution of Securities. The Securities shall be signed on
behalf of the Issuer by the chairman of the Board of Directors, the president,
any vice president or the treasurer of the Issuer, under its corporate seal
which may, but need not, be attested by its secretary or one of its assistant
secretaries. Such signatures may be the manual or facsimile signatures of the
present or any future such officers. The seal of the Issuer may be in the form
of a facsimile thereof and may be impressed, affixed, imprinted or otherwise
<PAGE>
reproduced on the Securities. Typographical and other minor errors or defects in
any such reproduction of the seal or any such signature shall not affect the
validity or enforceability of any Security that has been duly authenticated and
delivered by the Trustee.
In case any officer of the Issuer who shall have signed any of the
Securities shall cease to be such officer before the Security so signed shall be
authenticated and delivered by the Trustee or disposed of by the Issuer, such
Security nevertheless may be authenticated and delivered or disposed of as
though the person who signed such Security had not ceased to be such officer of
the Issuer; and any Security may be signed on behalf of the Issuer by such
persons as, at the actual date of the execution of such Security, shall be the
proper officers of the Issuer, although at the date of the execution and
delivery of this Indenture any such person was not such an officer.
SECTION 2.6 Certificate of Authentication. Only such Securities as
shall bear thereon a certificate of authentication substantially in the form
hereinbefore recited, executed by the Trustee by the manual signature of one of
its authorized signatories, or its Authenticating Agent, shall be entitled to
the benefits of this Indenture or be valid or obligatory for any purpose. The
execution of such certificate by the Trustee or its Authenticating Agent upon
any Security executed by the Issuer shall be conclusive evidence that the
Security so authenticated has been duly authenticated and delivered hereunder
and that the Holder is entitled to the benefits of this Indenture. Each
reference in this Indenture to authentication by the Trustee includes
authentication by an agent appointed pursuant to Section 6.14.
SECTION 2.7 Denomination and Date of Securities; Payments of Interest.
The Securities of each series shall be issuable in registered form in
denominations established as contemplated by Section 2.3 or, with respect to the
Securities of any series, if not so established, in denominations of $1,000 and
any integral multiple thereof. The Securities of each series shall be numbered,
lettered or otherwise distinguished in such manner or in accordance with such
plan as the officers of the Issuer executing the same may determine with the
approval of the Trustee, as evidenced by the execution and authentication
thereof.
Each Security shall be dated the date of its authentication. The
Securities of each series shall bear interest, if any, from the date, and such
interest, if any, shall be payable on the dates, established as contemplated by
Section 2.3.
The Person in whose name any Security of any series is registered at
the close of business on any record date applicable to a particular series with
respect to any interest payment date for such series shall be entitled to
receive the interest, if any, payable on such interest payment date
notwithstanding any transfer or exchange of such Security subsequent to the
record date and prior to such interest payment date, except if and to the extent
the Issuer shall default in the payment of the interest due on such interest
payment date for such series, in which case such defaulted interest shall be
paid to the Persons in whose names Outstanding Securities for such series are
registered (a) at the close of business on a subsequent record date (which shall
be not less than five Business Days prior to the date of payment of such
defaulted interest) established by notice given by mail by or on behalf of the
Issuer to the Holders of Securities not less than 15 days preceding such
subsequent record date or (b) as determined by such other procedure as is
mutually acceptable to the Issuer and the Trustee. The term "record date" as
used with respect to any interest payment date (except a date for payment of
defaulted interest) for the Securities of any series shall mean the date
<PAGE>
specified as such in the terms of the Securities of such series established as
contemplated by Section 2.3, or, if no such date is so established, if such
interest payment date is the first day of a calendar month, the fifteenth day of
the next preceding calendar month or, if such interest payment date is the
fifteenth day of a calendar month, the first day of such calendar month, whether
or not such record date is a Business Day.
SECTION 2.8 Registration Transfer and Exchange. The Issuer will keep at
each office or agency to be maintained for the purpose as provided in Section
3.2 for each series of Securities a register or registers in which, subject to
such reasonable regulations as it may prescribe, it will provide for the
registration of Securities of each series and the registration of transfer of
Securities of such series. Each such register shall be in written form in the
English language or in any other form capable of being converted into such form
within a reasonable time. At all reasonable times such register or registers
shall be open for inspection and available for copying by the Trustee.
Upon due presentation for registration of transfer of any Security of
any series at any such office or agency to be maintained for the purpose as
provided in Section 3.2, the Issuer shall execute and the Trustee shall
authenticate and deliver in the name of the transferee or transferees a new
Security or Securities of the same series, maturity date, interest rate, if any,
and original issue date in authorized denominations for a like aggregate
principal amount.
All Securities presented for registration of transfer shall (if so
required by the Issuer or the Trustee) be duly endorsed by, or be accompanied by
a written instrument or instruments of transfer in form satisfactory to the
Issuer and the Trustee duly executed by, the Holder or his attorney duly
authorized in writing.
At the option of the Holder thereof, Securities of any series (other
than a Global Security, except as set forth below) may be exchanged for a
Security or Securities of such series having authorized denominations and an
equal aggregate principal amount, upon surrender of such Securities to be
exchanged at the agency of the Issuer that shall be maintained for such purpose
in accordance with Section 3.2. All Securities surrendered upon any exchange or
transfer provided for in this Indenture shall be promptly canceled and returned
to the Issuer.
The Issuer may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration of transfer of Securities. No service charge shall be made for any
such transaction or for any exchange of Securities of any series as contemplated
by the immediately preceding paragraph.
The Issuer shall not be required to exchange or register a transfer of
(a) any Securities of any series for a period of 15 days next preceding the
first mailing or publication of notice of redemption of Securities of such
series to be redeemed, (b) any Securities selected, called or being called for
redemption, in whole or in part, except, in the case of any Security to be
redeemed in part, the portion thereof not so to be redeemed or (c) any Security
if the Holder thereof has exercised his right, if any, to require the Issuer to
repurchase such Security in whole or in part, except the portion of such
Security not required to be repurchased.
<PAGE>
Notwithstanding any other provision of this Section 2.8, unless and
until it is exchanged in whole or in part for Securities in definitive
registered form, a Global Security representing all or a part of the Securities
of a series may not be transferred except as a whole by the Depositary for such
series to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by such Depositary or
any such nominee to a successor Depositary for such series or a nominee of such
successor Depositary.
If at any time the Depositary for any Securities of a series
represented by one or more Global Securities notifies the Issuer that it is
unwilling or unable to continue as Depositary for such Securities or if at any
time the Depositary for such Securities shall no longer be eligible under
Section 2.4, the Issuer shall appoint a successor Depositary with respect to
such Securities. If a successor Depositary for such Securities is not appointed
by the Issuer within 90 days after the Issuer receives such notice or becomes
aware of such ineligibility, the Issuer's election pursuant to Section 2.3 that
such Securities be represented by one or more Global Securities shall no longer
be effective and the Issuer shall execute, and the Trustee, upon receipt of an
Issuer Order for the authentication and delivery of definitive Securities of
such series, will authenticate and deliver Securities of such series in
definitive registered form, in any authorized denominations, in an aggregate
principal amount equal to the principal amount of the Global Security or
Securities representing such Securities in exchange for such Global Security or
Securities.
The Issuer may at any time and in its sole discretion determine that
the Securities of any series issued in the form of one or more Global Securities
shall no longer be represented by a Global Security or Securities. In such event
the Issuer shall execute, and the Trustee, upon receipt of an Issuer Order for
the authentication and delivery of definitive Securities of such series, shall
authenticate and deliver, Securities of such series in definitive registered
form, in any authorized denominations, in an aggregate principal amount equal to
the principal amount of the Global Security or Securities representing such
Securities, in exchange for such Global Security or Securities.
If specified by the Issuer pursuant to Section 2.3 with respect to
Securities represented by a Global Security, the Depositary for such Global
Security may surrender such Global Security in exchange in whole or in part for
Securities of the same series in definitive registered form on such terms as are
acceptable to the Issuer and such Depositary. Thereupon, the Issuer shall
execute, and the Trustee shall authenticate and deliver, without service charge,
(i) to the Person specified by such Depositary, a new Security
or Securities of the same series, of any authorized denominations as
requested by such Person, in an aggregate principal amount equal to and
in exchange for such Person's beneficial interest in the Global
Security; and
(ii) to such Depositary a new Global Security in a
denomination equal to the difference, if any, between the principal
amount of the surrendered Global Security and the aggregate principal
amount of Securities authenticated and delivered pursuant to clause (i)
above.
<PAGE>
Upon the exchange of a Global Security for Securities in definitive
registered form in authorized denominations, such Global Security shall be
canceled by the Trustee or an agent of the Issuer or the Trustee. Securities in
definitive registered form issued in exchange for a Global Security pursuant to
this Section 2.8 shall be registered in such names and in such authorized
denominations as the Depositary for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee or an agent of the Trustee or the Issuer or an agent of the
Issuer. The Trustee or such agent shall deliver at its office such Securities to
or as directed by the Persons in whose names such Securities are so registered.
All Securities issued upon any transfer or exchange of Securities shall
be valid and legally binding obligations of the Issuer, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such transfer or exchange.
SECTION 2.9 Mutilated, Defaced, Destroyed, Lost and Stolen Securities.
In case any temporary or definitive Security shall become mutilated, defaced or
be destroyed, lost or stolen, the Issuer in its discretion may execute, and upon
the written request of any officer of the Issuer, the Trustee shall authenticate
and deliver a new Security of the same series, maturity date, interest rate, if
any, and original issue date, bearing a number or other distinguishing symbol
not contemporaneously outstanding, in exchange and substitution for the
mutilated or defaced Security, or in lieu of and in substitution for the
Security so destroyed, lost or stolen. In every case the applicant for a
substitute Security shall furnish to the Issuer and to the Trustee and any agent
of the Issuer or the Trustee such security or indemnity as may be required by
the Trustee or the Issuer to indemnify and defend and to save each of the
Trustee and the Issuer harmless and, in every case of destruction, loss or
theft, evidence to their satisfaction of the destruction, loss or theft of such
Security and of the ownership thereof and in the case of mutilation or
defacement, shall surrender the Security to the Trustee or such agent.
Upon the issuance of any substitute Security, the Issuer may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee or its agent) connected therewith. In case any
Security which has matured or is about to mature or has been called for
redemption in full shall become mutilated or defaced or be destroyed, lost or
stolen, the Issuer may instead of issuing a substitute Security, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated or defaced Security), if the applicant for such payment shall
furnish to the Issuer and to the Trustee and any agent of the Issuer or the
Trustee such security or indemnity as any of them may require to hold each of
them harmless, and, in every case of destruction, loss or theft, the applicant
shall also furnish to the Issuer and the Trustee and any agent of the Issuer or
the Trustee evidence to the Trustee's satisfaction of the destruction, loss or
theft of such Security and of the ownership thereof.
Every substitute Security of any series issued pursuant to the
provisions of this Section by virtue of the fact that any such Security is
destroyed, lost or stolen shall constitute an additional contractual obligation
of the Issuer, whether or not the destroyed, lost or stolen Security shall be at
<PAGE>
any time enforceable by anyone and shall be entitled to all the benefits of (but
shall be subject to all the limitations of rights set forth in) this Indenture
equally and proportionately with any and all other Securities of such series
duly authenticated and delivered hereunder. All Securities shall be held and
owned upon the express condition that, to the extent permitted by law, the
foregoing provisions are exclusive with respect to the replacement or payment of
mutilated, defaced, destroyed, lost or stolen Securities and shall preclude any
and all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
SECTION 2.10 Cancellation of Securities; Disposition Thereof. All
Securities surrendered for payment, redemption, registration of transfer or
exchange, or for credit against any payment in respect of a sinking or analogous
fund, if surrendered to the Issuer or any agent of the Issuer or the Trustee or
any agent of the Trustee, shall be delivered to the Trustee or its agent for
cancellation or, if surrendered to the Trustee, shall be canceled by it; and no
Securities shall be issued in lieu thereof except as expressly permitted by any
of the provisions of this Indenture. The Trustee or its agent shall return
canceled Securities to the Issuer. If the Issuer or its agent shall acquire any
of the Securities, such acquisition shall not operate as a redemption or
satisfaction of the indebtedness represented by such Securities unless and until
the same are delivered to the Trustee or its agent for cancellation.
SECTION 2.11 Temporary Securities. Pending the preparation of
definitive Securities for any series, the Issuer may execute and the Trustee
shall authenticate and deliver temporary Securities for such series (printed,
lithographed, typewritten or otherwise reproduced, in each case in form
satisfactory to the Trustee). Temporary Securities of any series shall be
issuable in any authorized denomination, and substantially in the form of the
definitive Securities of such series but with such omissions, insertions and
variations as may be appropriate for temporary Securities, all as may be
determined by the Issuer with the concurrence of the Trustee as evidenced by the
execution and authentication thereof. Temporary Securities may contain such
references to any provisions of this Indenture as may be appropriate. Every
temporary Security shall be executed by the Issuer and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Securities. Without unreasonable delay the Issuer
shall execute and shall furnish definitive Securities of such series and
thereupon temporary Securities of such series may be surrendered in exchange
therefor without charge at each office or agency to be maintained by the Issuer
for that purpose pursuant to Section 3.2 and the Trustee shall authenticate and
deliver in exchange for such temporary Securities of such series an equal
aggregate principal amount of definitive Securities of the same series having
authorized denominations. Until so exchanged, the temporary Securities of any
series shall be entitled to the same benefits under this Indenture as definitive
Securities of such series, unless otherwise established pursuant to Section 2.3.
SECTION 2.12 CUSIP Numbers. The Issuer in issuing the Securities may
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Issuer shall
notify the Trustee of any change in the "CUSIP" numbers.
<PAGE>
ARTICLE THREE
COVENANTS OF THE ISSUER
SECTION 3.1 Payment of Principal and Interest. The Issuer covenants and
agrees that it will duly and punctually pay or cause to be paid the principal of
and interest, if any, on each of the Securities at the place, at the respective
times and in the manner provided in the Securities.
SECTION 3.2 Offices for Notices and Payments, etc. So long as any of
the Securities are Outstanding, the Issuer will maintain in each Place of
Payment, an office or agency where the Securities may be presented for payment,
an office or agency where the Securities may be presented for registration of
transfer and for exchange as in this Indenture provided, and an office or agency
where notices and demands to or upon the Issuer in respect of the Securities or
of this Indenture may be served. In case the Issuer shall at any time fail to
maintain any such office or agency, or shall fail to give notice to the Trustee
of any change in the location thereof, presentation may be made and notice and
demand may be served in respect of the Securities or of this Indenture at the
Corporate Trust Office. The Issuer hereby initially designates the Corporate
Trust Office for each such purpose and appoints the Trustee as registrar and
paying agent and as the agent upon whom notices and demands may be served with
respect to the Securities.
SECTION 3.3 No Interest Extension. In order to prevent any accumulation
of claims for interest after maturity thereof, the Issuer will not directly or
indirectly extend or consent to the extension of the time for the payment of any
claim for interest on any of the Securities and will not directly or indirectly
be a party to or approve any such arrangement by the purchase or funding of said
claims or in any other manner; provided, however, that this Section 3.3 shall
not apply in any case where an extension shall be made pursuant to a plan
proposed by the Issuer to the Holders of all Securities of any series then
Outstanding.
SECTION 3.4 Appointments to Fill Vacancies in Trustee's Office. The
Issuer, whenever necessary to avoid or fill a vacancy in the office of the
Trustee, will appoint, in the manner provided in Section 6.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 3.5 Provision as to Paying Agent. (a) If the Issuer shall
appoint a paying agent other than the Trustee, it will cause such paying agent
to execute and deliver to the Trustee an instrument in which such agent shall
agree with the Trustee, subject to the provisions of this Section 3.5,
<PAGE>
(1) that it will hold all sums held by it as such agent for
the payment of the principal of or interest, if any, on the Securities
(whether such sums have been paid to it by the Issuer or by any other
obligor on the Securities) in trust for the benefit of the Holders of
the Securities and the Trustee; and
(2) that it will give the Trustee notice of any failure by the
Issuer (or by any other obligor on the Securities) to make any payment
of the principal of or interest, if any, on the Securities when the
same shall be due and payable; and
(3) that it will, at any time during the continuance of any
such failure, upon the written request of the Trustee, forthwith pay to
the Trustee all sums so held in trust by such paying agent.
(b) If the Issuer shall act as its own paying agent, it will, on or
before each due date of the principal of or interest, if any, on the Securities,
set aside, segregate and hold in trust for the benefit of the Holders of the
Securities a sum sufficient to pay such principal or interest, if any, so
becoming due and will notify the Trustee of any failure to take such action and
of any failure by the Issuer (or by any other obligor under the Securities) to
make any payment of the principal of or interest, if any, on the Securities when
the same shall become due and payable.
(c) Anything in this Section 3.5 to the contrary notwithstanding, the
Issuer may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or any paying agent hereunder, as
required by this Section 3.5, such sums to be held by the Trustee upon the
trusts herein contained.
(d) Anything in this Section 3.5 to the contrary notwithstanding, any
agreement of the Trustee or any paying agent to hold sums in trust as provided
in this Section 3.5 is subject to Sections 10.3 and 10.4.
(e) Whenever the Issuer shall have one or more paying agents, it will,
on or before each due date of the principal of or interest, if any, on any
Securities, deposit with a paying agent a sum sufficient to pay the principal or
interest, if any, so becoming due, such sum to be held in trust for the benefit
of the Persons entitled to such principal or interest, if any, and (unless such
paying agent is the Trustee) the Issuer will promptly notify the Trustee of its
action or failure so to act.
SECTION 3.6 Restriction on Creation of Secured Debt. So long as any of
the Securities are outstanding, the Issuer shall not at any time create, incur,
assume or guarantee, and shall not cause, suffer or permit a Restricted
Subsidiary to create, incur, assume or guarantee, any Secured Debt without
making effective provision (and the Issuer covenants that in such case it will
make or cause to be made such effective provision) whereby the Securities then
Outstanding and any other indebtedness of or guaranteed by the Issuer or such
Restricted Subsidiary then entitled thereto, subject to applicable priorities of
payment, shall be secured by such mortgage, security interest, pledge, lien or
encumbrance equally and ratably with any and all other obligations and
indebtedness thereby secured, so long as any such other obligations and
<PAGE>
indebtedness shall be so secured; provided, that if any such mortgage, security
interest, pledge, lien or encumbrance securing such indebtedness ceases to
exist, such equal and ratable security for the benefit of the Holders of
Securities shall automatically cease to exist without any further action;
provided further that if such indebtedness is expressly subordinated to the
Securities, the mortgage, security interest, pledge, lien or encumbrance
securing such indebtedness shall be subordinate and junior to the mortgage,
security interest, pledge, lien or encumbrance securing the Securities with the
same relative priority as such indebtedness shall have with respect to the
Securities; provided further, that the foregoing covenants shall not be
applicable to the following:
(a)(i) Any mortgage, security interest, pledge, lien or encumbrance on
any property hereafter acquired (including acquisition through merger or
consolidation) or constructed by the Issuer or a Restricted Subsidiary and
created contemporaneously with, or within twelve months after, such acquisition
or the completion of construction to secure or provide for the payment of all or
any part of the purchase price of such property or the cost of construction
thereof, as the case may be; or (ii) any mortgage on property (including any
unimproved portion of partially improved property) of the Issuer or a Restricted
Subsidiary created within twelve months of completion of construction of a new
plant or plants on such property to secure all or part of the cost of such
construction if, in the opinion of the Board of Directors, such property or such
portion thereof was prior to such construction substantially unimproved for the
use intended by the Issuer; or (iii) the acquisition of property subject to any
mortgage, security interest, pledge, lien or encumbrance upon such property
existing at the time of acquisition thereof, whether or not assumed by the
Issuer or such Restricted Subsidiary; or (iv) any mortgage, security interest,
pledge, lien or encumbrance existing on the property or on the outstanding
shares or indebtedness of a corporation or other entity at the time such
corporation or other entity shall become a Restricted Subsidiary; or (v) any
mortgage, security interest, pledge, lien or encumbrance on property of a
corporation or other entity existing at the time such corporation or other
entity is merged into or consolidated with the Issuer or a Restricted Subsidiary
or at the time of a sale, lease or other disposition of the properties of a
corporation or other entity as an entirety or substantially as an entirety to
the Issuer or a Restricted Subsidiary; or
(b) Mortgages on property of the Issuer or a Restricted Subsidiary in
favor of the United States of America or any State thereof or any foreign
government, or any department, agency or instrumentality or political
subdivision of any thereof, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any indebtedness
incurred for the purpose of financing all or any part of the purchase price or
the cost of construction of the property subject to such mortgages; or
(c) Any mortgage, security interest, pledge, lien or encumbrance existing
on property owned by the Issuer or any of its Subsidiaries on the date of this
Indenture; or
(d) Any mortgage, security interest, pledge, lien or encumbrance
created pursuant to the creation of trusts or other arrangements funded solely
with cash, cash equivalents or other marketable investments or securities of the
type customarily subject to such arrangements in customary financial practice
with respect to long-term or medium-term indebtedness for money borrowed, the
sole purpose of which is to make provision for the retirement or defeasance,
without prepayment of indebtedness; or
<PAGE>
(e) Any mortgage, security interest, pledge, lien or encumbrance on the
assets or properties of ENSTAR Alaska; or
(f) Any mortgage, security interest, pledge, lien or encumbrance
securing (i) all or part of the cost of exploring, producing, gathering,
processing, marketing, drilling or developing any properties of the Company or
any of its Subsidiaries, or securing indebtedness incurred to provide funds
therefor, or (ii) indebtedness incurred to finance all or part of the cost of
acquiring, constructing, altering, improving or repairing any such property or
assets, or securing indebtedness incurred to provide funds therefor; or
(g) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any mortgage, security
interest, pledge, lien or encumbrance referred to in the foregoing subparagraphs
(a) through (f); provided, however, that the principal amount of Secured Debt
secured thereby shall not exceed the principal amount outstanding at the time of
such extension, renewal or replacement, and that such extension, renewal or
replacement shall be limited to the property which secured the mortgage,
security interest, pledge, lien or encumbrance so extended, renewed or replaced
and additions to such property.
Notwithstanding the foregoing provisions of this Section 3.6, the
Issuer and any one or more Restricted Subsidiaries may create, incur, assume or
guarantee Secured Debt which would otherwise be subject to the foregoing
restrictions in an aggregate amount that, without duplication, together with all
other Secured Debt of the Issuer and its Restricted Subsidiaries which would
otherwise be subject to the foregoing restrictions (not including Secured Debt
permitted to be secured under subparagraphs (a) through (g) above) and the
aggregate value of the Sale and Leaseback Transactions (as defined in Section
3.7) in existence at such time (not including Sale and Leaseback Transactions
the proceeds of which have been or will be applied in accordance with clause (b)
of Section 3.7) does not at the time exceed 10% of Consolidated Net Tangible
Assets (excluding ENSTAR Alaska). Solely for purposes of subparagraphs (a)
through (g) above, the term "mortgage" shall include any arrangements in
connection with a production payment or similar financing arrangement.
SECTION 3.7 Restriction on Sale and Leaseback Transactions. The Issuer
will not, and will not permit any Restricted Subsidiary to, sell or transfer
(except to the Issuer or to one or more Restricted Subsidiaries, or both) any
Principal Property owned by it and which has been in full operation for more
than 120 days prior to such sale or transfer with the intention (i) of taking
back a lease on such property (other than a lease for a period not exceeding 36
months) and (ii) that the use by the Issuer or such Restricted Subsidiary of
such property will be discontinued on or before the expiration of the term of
such lease (any such transaction being herein referred to as a "Sale and
Leaseback Transaction"), unless (a) the Issuer or such Restricted Subsidiary
would be entitled, pursuant to the provisions of Section 3.6, to incur Secured
Debt equal in amount to the amount realized or to be realized upon such sale or
transfer secured by a mortgage on the property to be leased without equally and
ratably securing the Securities, or (b) the Issuer or a Restricted Subsidiary
<PAGE>
shall apply an amount equal to the value of the property so leased to the
retirement (other than any mandatory retirement), within 120 days of the
effective date of any such arrangement, of indebtedness for money borrowed by
the Issuer or any Restricted Subsidiary (other than such indebtedness owned by
the Issuer or any Restricted Subsidiary) which was recorded as funded debt as of
the date of its creation and which, in the case of such indebtedness of the
Issuer, is not subordinate and junior in right of payment to the prior payment
of the Securities; provided, however, that the amount to be so applied to the
retirement of such indebtedness shall be reduced by (i) the aggregate principal
amount of any Securities delivered within 120 days of the effective date of any
such arrangement to the Trustee for retirement and cancellation, and (ii) the
aggregate principal amount of such indebtedness (other than the Securities)
retired by the Issuer or a Restricted Subsidiary within 120 days of the
effective date of any such arrangement.
The term "value" shall mean, with respect to a Sale and Leaseback
Transaction, as of any particular time, the amount equal to the greater of (i)
the net proceeds of the sale of the property leased pursuant to such Sale and
Leaseback Transaction, or (ii) the fair value of such property at the time of
entering into such Sale and Leaseback Transaction, as determined by the Board of
Directors, in either case divided first by the number of full years of the term
of the lease and then multiplied by the number of full years of such term
remaining at the time of determination, without regard to any renewal or
extension options contained in the lease.
ARTICLE FOUR
SECURITYHOLDERS LISTS AND REPORTS BY THE
ISSUER AND THE TRUSTEE
SECTION 4.1 Issuer to Furnish Trustee Information as to Names and
Addresses of Securityholders. The Issuer and any other obligor on the Securities
covenant and agree that they will furnish or cause to be furnished to the
Trustee a list in such form as the Trustee may reasonably require of the names
and addresses of the Holders of the Securities of each series:
(a) semiannually and not more than 15 days after each March 1 and September
1, and
(b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Issuer of any such request,
provided that if and so long as the Trustee shall be the registrar for such
series, such list shall not be required to be furnished.
SECTION 4.2 Preservation and Disclosure of Securityholders Lists. (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
all information as to the names and addresses of the Holders of each series of
Securities (i) contained in the most recent list furnished to it as provided in
Section 4.1, and (ii) received by it in the capacity of registrar or paying
agent for such series, if so acting. The Trustee may destroy any list furnished
to it as provided in Section 4.1 upon receipt of a new list so furnished.
<PAGE>
(b) In case three or more Holders of Securities (hereinafter referred
to as "applicants") apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders of
Securities of a particular series (in which case the applicants must all hold
Securities of such series) or with Holders of all Securities with respect to
their rights under this Indenture or under such Securities and such application
is accompanied by a copy of the form of proxy or other communication which such
applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, at its election, either
(i) afford to such applicants access to the information preserved
at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 4.2, or
(ii) inform such applicants as to the approximate number of
Holders of Securities of such series or of all Securities, as the case
may be, whose names and addresses appear in the information preserved
at the time by the Trustee, in accordance with the provisions of
subsection (a) of this Section 4.2, and as to the approximate cost of
mailing to such Securityholders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford to such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Securityholder of such series or all Holders of
Securities, as the case may be, whose name and address appears in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.2 a copy of the form of proxy or
other communication which is specified in such request, with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Commission, together with a copy of the material to
be mailed, a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of the Holders of
Securities of such series or of all Securities, as the case may be, or would be
in violation of applicable law. Such written statement shall specify the basis
of such opinion. If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met, and shall enter an order so declaring, the Trustee shall mail copies
of such material to all such Securityholders with reasonable promptness after
the entry of such order and the renewal of such tender; otherwise the Trustee
shall be relieved of any obligation or duty to such applicants respecting their
application.
(c) Each and every Holder of Securities, by receiving and holding the
same, agrees with the Issuer and the Trustee that neither the Issuer nor the
Trustee nor any agent of the Issuer or the Trustee shall be held accountable by
reason of the disclosure of any such information as to the names and addresses
of the Holders of Securities in accordance with the provisions of subsection (b)
<PAGE>
of this Section 4.2, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under such subsection (b).
SECTION 4.3 Reports by the Issuer. The Issuer covenants:
(a) to file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual reports and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Issuer may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended; or, if the Issuer is not required to file information,
documents or reports pursuant to either of such Sections, then to file with the
Trustee and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, in respect of a debt
security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(b) to file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by the
Issuer with the conditions and covenants provided for in this Indenture as may
be required from time to time by such rules and regulations;
(c) if there are any Original Issue Discount Securities Outstanding, to
file with the Trustee promptly after the end of each calendar year (i) a written
notice specifying the amount of original issue discount (including daily rates
and accrual periods) accrued on such Securities as of the end of such year and
(ii) such other specific information relating to such original issue discount as
may then be relevant under the Internal Revenue Code of 1986, as amended from
time to time;
(d) to transmit by mail to the Holders of Securities within 30 days
after the filing thereof with the Trustee, in the manner and to the extent
provided in Section 4.4(c), such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to subsections (a), (b) and
(c) of this Section 4.3 as may be required to be transmitted to such Holders by
rules and regulations prescribed from time to time by the Commission; and
(e) furnish to the Trustee, not less than annually, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his knowledge of the Issuer's compliance with all
conditions and covenants under this Indenture. For purposes of this subsection
(e), such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Indenture.
<PAGE>
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuer's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.4 Reports by the Trustee. (a) Within 60 days after January 1
of each year commencing with the year 1998, the Trustee shall transmit by mail
to the Holders of Securities, as provided in subsection (c) of this Section, a
brief report dated as of such January 1 with respect to any of the following
events which may have occurred within the last 12 months (but if no such event
has occurred within such period, no report need be transmitted):
(i) any change to its eligibility under Section 6.9 and its
qualification under Section 6.8;
(ii) the creation of, or any material change to, a relationship
specified in paragraph (i) through (x) of Section 6.8 (c);
(iii) the character and amount of any advances (and if the
Trustee elects so to state, the circumstances surrounding the making
thereof) made by the Trustee (as such) which remain unpaid on the date
of such report and for the reimbursement of which it claims or may
claim a lien or charge, prior to that of the Securities of any series,
on any property or funds held or collected by it as Trustee, except
that the Trustee shall not be required (but may elect) to report such
advances if such advances so remaining unpaid aggregate not more than
1/2 of 1% of the principal amount of all Securities Outstanding on the
date of such report;
(iv) the amount, interest rate, if any, and maturity date of all
other indebtedness owing by the Issuer (or by any other obligor on the
Securities) to the Trustee in its individual capacity on the date of
such report, with a brief description of any property held as
collateral security therefor, except any indebtedness based upon a
creditor relationship arising in any manner described in Section
6.13(b) (2), (3), (4) or (6);
(v) any change to the property and funds, if any, physically in
the possession of the Trustee (as such) on the date of such report;
(vi) any additional issue of Securities which the Trustee has not
previously reported; and
(vii) any action taken by the Trustee in the performance of its
duties under this Indenture which it has not previously reported and
which in its opinion materially affects the Securities, except action
in respect of a default, notice of which has been or is to be withheld
by it in accordance with the provisions of Section 5.8.
(b) The Trustee shall transmit to the Securityholders of each series,
as provided in subsection (c) of this Section 4.4, a brief report with respect
<PAGE>
to the character and amount of any advances (and if the Trustee elects so to
state, the circumstances surrounding the making thereof) made by the Trustee, as
such, since the date of the last report transmitted pursuant to the provisions
of subsection (a) of this Section 4.4 (or if no such report has yet been so
transmitted, since the date of this Indenture) for the reimbursement of which it
claims or may claim a lien or charge prior to that of the Securities of such
series on property or funds held or collected by it as Trustee and which it has
not previously reported pursuant to this subsection (b), except that the Trustee
shall not be required (but may elect) to report such advances if such advances
remaining unpaid at any time aggregate 10% or less of the principal amount of
all Securities Outstanding at such time, such report to be transmitted within 90
days after such time.
(c) Reports pursuant to this Section shall be transmitted by mail:
(i) to all Holders of Securities, as the names and addresses of
such Holders appear upon the registry books of the Issuer; and
(ii) to all other Persons to whom such reports are required to be
transmitted pursuant to Section 313(c) of the Trust Indenture Act of
1939.
(d) A copy of each such report shall, at the time of such transmission
to Securityholders, be furnished to the Issuer and be filed by the Trustee with
each stock exchange upon which the Securities of any applicable series are
listed and also with the Commission. The Issuer agrees to promptly notify the
Trustee with respect to any series when and as the Securities of such series
become admitted to trading on any national securities exchange or any delisting
from trading thereon.
ARTICLE FIVE
REMEDIES OF THE TRUSTEE AND SECURITY HOLDERS
ON EVENT OF DEFAULT
SECTION 5.1 Events of Default. "Event of Default", wherever used herein
with respect to Securities of any series, means any one or more of the following
events (whatever the reason for such Event of Default), unless it is either
inapplicable to a particular series or it is specifically deleted or modified in
or pursuant to the Board Resolution or supplemental indenture establishing such
series of Securities or in the form of Security, for such series:
(a) default in the payment of any installment of interest upon any of the
Securities of such series as and when the same shall become due and payable, and
continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of or premium, if any, of the
Securities of such series as and when the same shall become due and payable
either at maturity, upon redemption, by declaration or otherwise; or
(c) default in the payment or satisfaction of any sinking fund or other
purchase obligation with respect to Securities of such series, as and when such
obligation shall become due and payable as in this Indenture expressed; or
<PAGE>
(d) failure on the part of the Issuer duly to observe or perform any other
of the covenants or agreements on the part of the Issuer in the Securities of
such series or in this Indenture continued for a period of 60 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Issuer by the Trustee by certified or registered
mail, or to the Issuer and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Securities of such series then Outstanding; or
(e) without the consent of the Issuer a court having jurisdiction shall
enter an order for relief with respect to the Issuer under the Bankruptcy Code
or without the consent of the Issuer a court having jurisdiction shall enter a
judgment, order or decree adjudging the Issuer a bankrupt or insolvent, or enter
an order for relief for reorganization, arrangement, adjustment or composition
of or in respect of the Issuer under the Bankruptcy Code or applicable state
insolvency law and the continuance of any such judgment, order or decree is
unstayed and in effect for a period of 90 consecutive days; or
(f) the Issuer shall institute proceedings for entry of an order for relief
with respect to the Issuer under the Bankruptcy Code or for an adjudication of
insolvency, or shall consent to the institution of bankruptcy or insolvency
proceedings against it, or shall file a petition seeking, or seek or consent to
reorganization, arrangement, composition or relief under the Bankruptcy Code or
any applicable state law, or shall consent to the filing of such petition or to
the appointment of a receiver, custodian, liquidator, assignee, trustee,
sequestrator or similar official of the Issuer or of substantially all of its
property, or the Issuer shall make a general assignment for the benefit of
creditors as recognized under the Bankruptcy Code; or
(g) any other Event of Default provided with respect to the Securities of
such series.
If an Event of Default with respect to Securities of any series then
Outstanding occurs and is continuing, then and in each and every such case,
unless the principal of all of the Securities of such series shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Securities of such series then Outstanding,
by notice in writing to the Issuer (and to the Trustee if given by
Securityholders), may declare the principal (or, if the Securities of such
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of such series) of all the Securities of
such series and the interest, if any, accrued thereon to be due and payable
immediately, and upon any such declaration the same shall become and shall be
immediately due and payable, notwithstanding anything to the contrary contained
in this Indenture or in the Securities of such series. This provision, however,
is subject to the condition that, if at any time after the unpaid principal
amount (or such specified amount) of the Securities of such series shall have
been so declared due and payable and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the Issuer shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest, if any, upon all of the
Securities of such series and the principal of any and all Securities of such
<PAGE>
series which shall have become due otherwise than by acceleration (with interest
on overdue installments of interest, if any, to the extent that payment of such
interest is enforceable under applicable law and on such principal at the rate
borne by the Securities of such series to the date of such payment or deposit)
and the reasonable compensation, disbursements, expenses and advances of the
Trustee, and any and all defaults under this Indenture, other than the
nonpayment of such portion of the principal amount of and accrued interest, if
any, on Securities of such series which shall have become due by acceleration,
shall have been cured or shall have been waived in accordance with Section 5.7
or provision deemed by the Trustee to be adequate shall have been made therefor,
then and in every such case the Holders of a majority in aggregate principal
amount of the Securities of such series then Outstanding, by written notice to
the Issuer and to the Trustee, may rescind and annul such declaration and its
consequences; but no such rescission and annulment shall extend to or shall
affect any subsequent default, or shall impair any right consequent thereon. If
any Event of Default with respect to the Issuer specified in Section 5.1(e) or
5.1(f) occurs, all unpaid principal amount (or, if the Securities of any series
then Outstanding are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of each such series) and
accrued interest on all Securities of each series then Outstanding shall ipso
facto become and be immediately due and payable without any declaration or other
act by the Trustee or any Securityholder.
If the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Issuer, the
Trustee and the Securityholders shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Issuer, the Trustee and the Securityholders shall continue as though no such
proceeding had been taken.
Except with respect to an Event of Default pursuant to Section 5.1 (a),
(b) or (c), the Trustee shall not be charged with knowledge of any Event of
Default unless written notice thereof shall have been given to a Responsible
Officer by the Issuer, a paying agent or any Securityholder.
SECTION 5.2 Payment of Securities on Default; Suit Therefor. The Issuer
covenants that (a) if default shall be made in the payment of any installment of
interest upon any of the Securities of any series then Outstanding as and when
the same shall become due and payable, and such default shall have continued for
a period of 30 days, or (b) if default shall be made in the payment of the
principal of any of the Securities of such series as and when the same shall
have become due and payable, whether at maturity of the Securities of such
series or upon redemption or by declaration or otherwise, then, upon demand of
the Trustee, the Issuer will pay to the Trustee, for the benefit of the Holders
of the Securities, the whole amount that then shall have become due and payable
on all such Securities of such series for principal or interest, if any, or
both, as the case may be, with interest upon the overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) upon
the overdue installments of interest, if any, at the rate borne by the
Securities of such series; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any expenses or liabilities incurred by the Trustee hereunder other than through
its negligence or bad faith.
<PAGE>
If the Issuer shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Issuer or any other obligor on the
Securities of such series and collect in the manner provided by law out of the
property of the Issuer or any other obligor on the Securities of such series,
wherever situated, the moneys adjudged or decreed to be payable.
If there shall be pending proceedings for the bankruptcy or for the
reorganization of the Issuer or any other obligor on the Securities of any
series then Outstanding under any bankruptcy, insolvency or other similar law
now or hereafter in effect, or if a receiver or trustee or similar official
shall have been appointed for the property of the Issuer or such other obligor,
or in the case of any other similar judicial proceedings relative to the Issuer
or other obligor upon the Securities of such series, or to the creditors or
property of the Issuer or such other obligor, the Trustee, irrespective of
whether the principal of the Securities of such series shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section 5.2, shall be entitled and empowered by intervention in such
proceedings or otherwise to file and prove a claim or claims for the whole
amount of principal and interest, if any, owing and unpaid in respect of the
Securities of such series, and, in case of any judicial proceedings, to file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and of the Securityholders
allowed in such judicial proceedings relative to the Issuer or any other obligor
on the Securities of such series, its or their creditors, or its or their
property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses, and any receiver, assignee or trustee or similar
official in bankruptcy or reorganization is hereby authorized by each of the
Securityholders to make such payments to the Trustee, and, if the Trustee shall
consent to the making of such payments directly to the Securityholders, to pay
to the Trustee any amount due it for compensation and expenses, including
counsel fees and expenses incurred by it up to the date of such distribution. To
the extent that such payment of reasonable compensation, expenses and counsel
fees and expenses out of the estate in any such proceedings shall be denied for
any reason, payment of the same shall be secured by a lien on, and shall be paid
out of, any and all distributions, dividends, moneys, securities and other
property which the Holders of the Securities of such series may be entitled to
receive in such proceedings, whether in liquidation or under any plan of
reorganization or arrangement or otherwise.
All rights of action and of asserting claims under this Indenture, or under
any of the Securities, may be enforced by the Trustee without the possession of
any of the Securities, or the production thereof at any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the Holders of the
Securities of the series in respect of which such judgment has been recovered.
<PAGE>
SECTION 5.3 Application of Moneys Collected by Trustee. Any moneys
collected by the Trustee pursuant to Section 5.2 with respect to Securities of
any series then Outstanding shall be applied in the order following, at the date
or dates fixed by the Trustee for the distribution of such moneys, upon
presentation of the several Securities of such series, and stamping thereon the
payment, if only partially paid, and upon surrender thereof, if fully paid:
FIRST: To the payment of costs and expenses of collection and reasonable
compensation to the Trustee, its agents, attorneys and counsel, and of all other
expenses and liabilities incurred, and all advances made, by the Trustee
pursuant to Section 6.6 except as a result of its negligence or bad faith;
SECOND: If the principal of the Outstanding Securities of such series shall
not have become due and be unpaid, to the payment of interest, if any, on the
Securities of such series, in the order of the maturity of the installments of
such interest, if any, with interest (to the extent that such interest has been
collected by the Trustee) upon the overdue installments of interest, if any, at
the rate borne by the Securities of such series, such payment to be made ratably
to the Persons entitled thereto;
THIRD: If the principal of the Outstanding Securities of such series shall
have become due, by declaration or otherwise, to the payment of the whole amount
then owing and unpaid upon the Securities of such series for principal and
interest, if any, with interest on the overdue principal and (to the extent that
such interest has been collected by the Trustee) upon overdue installments of
interest, if any, at the rate borne by the Securities of such series; and in
case such moneys shall be insufficient to pay in full the whole amounts so due
and unpaid upon the Securities of such series, then to the payment of such
principal and interest, if any, without preference or priority of principal over
interest or of interest over principal, or of any installment of interest over
any other installment of interest, or of any Security over any other Security,
ratably to the aggregate of such principal and accrued and unpaid interest; and
FOURTH: To the payment of any surplus then remaining to the Issuer, its
successors or assigns, or to whomsoever may be lawfully entitled to receive the
same.
No claim for interest which in any manner at or after maturity shall have
been transferred or pledged separate or apart from the Securities to which it
relates, or which in any manner shall have been kept alive after maturity by an
extension (otherwise than pursuant to an extension made pursuant to a plan
proposed by the Issuer to the Holders of all Securities of any series then
Outstanding), purchase, funding or otherwise by or on behalf or with the consent
or approval of the Issuer shall be entitled, in case of a default hereunder, to
any benefit of this Indenture, except after prior payment in full of the
principal of all Securities of any series then Outstanding and of all claims for
interest not so transferred, pledged, kept alive, extended, purchased or funded.
SECTION 5.4 Proceedings by Securityholders. No Holder of any Securities of
any series then Outstanding shall have any right by virtue of or by availing of
any provision of this Indenture to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Indenture or for the
appointment of a receiver or trustee or similar official, or for any other
remedy hereunder, unless such Holder previously shall have given to the Trustee
written notice of default and of the continuance thereof, as hereinbefore
provided, and unless the Holders of not less than 25% in aggregate principal
amount of the Securities of such series then Outstanding shall have made written
request to the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding, it being understood and intended,
and being expressly covenanted by the Holder of every Security of such series
with every other taker and Holder and the Trustee, that no one or more Holders
of Securities of such series shall have any right in any manner whatever by
virtue of or by availing of any provision of this Indenture or of the Securities
to affect, disturb or prejudice the rights of any other Holder of such
Securities of such series, or to obtain or seek to obtain priority over or
preference as to any other such Holder, or to enforce any right under this
Indenture or the Securities, except in the manner herein provided and for the
equal, ratable and common benefit of all Holders of Securities of such series.
Notwithstanding any other provisions in this Indenture, however, the right
of any Holder of any Security to receive payment of the principal of and
interest, if any, on such Security, on or after the respective due dates
expressed in such Security, or to institute suit for the enforcement of any such
payment on or after such respective dates shall not be impaired or affected
without the consent of such Holder.
SECTION 5.5 Proceedings by Trustee. In case of an Event of Default
hereunder, the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceedings in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 5.6 Remedies Cumulative and Continuing. All powers and remedies
given by this Article Five to the Trustee or to the Securityholders shall, to
the extent permitted by law, be deemed cumulative and not exclusive of any
thereof or of any other powers and remedies available to the Trustee or the
Securityholders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any Securityholder to
exercise any right or power accruing upon any default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.4, every power and remedy given by this Article Five or
by law to the Trustee or to the Securityholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Securityholders.
<PAGE>
SECTION 5.7 Direction of Proceedings; Waiver of Defaults by Majority of
Securityholders. The Holders of a majority in aggregate principal amount of the
Securities of any series then Outstanding shall have the right to direct the
time, method, and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee with
respect to Securities of such series; provided, however, that (subject to the
provisions of Section 6.1) the Trustee shall have the right to decline to follow
any such direction if the Trustee shall determine upon advice of counsel that
the action or proceeding so directed may not lawfully be taken or if the Trustee
in good faith by its board of directors, its executive committee, or a trust
committee of directors or Responsible Officers or both shall determine that the
action or proceeding so directed would involve the Trustee in personal
liability. The Holders of a majority in aggregate principal amount of the
Securities of any series then Outstanding may on behalf of the Holders of all of
the Securities of such series waive any past default or Event of Default
hereunder and its consequences except a default in the payment of interest, if
any, on, or the principal of, the Securities of such series. Upon any such
waiver the Issuer, the Trustee and the Holders of the Securities of such series
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other default or Event of
Default or impair any right consequent thereon. Whenever any default or Event of
Default hereunder shall have been waived as permitted by this Section 5.7, said
default or Event of Default shall for all purposes of the Securities and this
Indenture be deemed to have been cured and to be not continuing.
SECTION 5.8 Notice of Defaults. The Trustee shall, within 90 days after the
occurrence of a default, with respect to Securities of any series then
Outstanding, mail to all Holders of Securities of such series, as the names and
the addresses of such Holders appear upon the Securities register, notice of all
defaults known to the Trustee with respect to such series, unless such defaults
shall have been cured before the giving of such notice (the term "defaults" for
the purpose of this Section 5.8 being hereby defined to be the events specified
in clauses (a), (b), (c), (d), (e), (f) and (g) of Section 5.1, not including
periods of grace, if any, provided for therein and irrespective of the giving of
the written notice specified in said clause (d) but in the case of any default
of the character specified in said clause (d) no such notice to Securityholders
shall be given until at least 60 days after the giving of written notice thereof
to the Issuer pursuant to said clause (d), as the case may be); provided,
however, that, except in the case of default in the payment of the principal of
or interest, if any, on any of the Securities, or in the payment or satisfaction
of any sinking fund or other purchase obligation, the Trustee shall be protected
in withholding such notice if and so long as the board of directors, the
executive committee, or a trust committee of directors or Responsible Officers
or both of the Trustee in good faith determines that the withholding of such
notice is in the best interests of the Securityholders.
SECTION 5.9 Undertaking to Pay Costs. All parties to this Indenture agree,
and each Holder of any Security by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the cost of such suit, and
that such court may in its discretion assess reasonable costs, including
<PAGE>
reasonable attorney's fees and expenses, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or defenses
made by such party litigant; but the provisions of this Section 5.9 shall not
apply to any suit instituted by the Trustee, to any suit instituted by any
Securityholder, or group of Securityholders, holding in the aggregate more than
10% in principal amount of the Securities of any series then Outstanding, or to
any suit instituted by any Securityholders for the enforcement of the payment of
the principal of or interest, if any, on any Security against the Issuer on or
after the due date expressed in such Security.
ARTICLE SIX
CONCERNING THE TRUSTEE
SECTION 6.1 Duties and Responsibilities of the Trustee; During Default;
Prior to Default. With respect to the Holders of any series of Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default with
respect to the Securities of a particular series and after the curing or waiving
of all Events of Default which may have occurred with respect to such series,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. In case an Event of Default with respect to the
Securities of a series has occurred (which has not been cured or waived) the
Trustee shall exercise with respect to such series of Securities such of the
rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own wilful misconduct, except that
(a) prior to the occurrence of an Event of Default with respect to the
Securities of any series and after the curing or waiving of all such Events of
Default with respect to such series which may have occurred:
(i) the duties and obligations of the Trustee with respect to the
Securities of any series shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
statements, certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case of
any such statements, certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Indenture (but need
not confirm or investigate the accuracy of mathematical calculations
or other facts stated therein);
<PAGE>
(b) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Responsible Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders pursuant to Section 5.7 relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there shall be reasonable ground for believing that the
repayment of such funds or adequate indemnity against such liability is not
reasonably assured to it.
SECTION 6.2 Certain Rights of the Trustee. Subject to Section 6.1:
(a) the Trustee may rely conclusively and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, note, coupon, security or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request, direction, order or demand of the Issuer mentioned herein
shall be sufficiently evidenced by an Officers' Certificate or Issuer Order
(unless other evidence in respect thereof be herein specifically prescribed);
and any resolution of the Board of Directors may be evidenced to the Trustee by
a copy thereof certified by the secretary or an assistant secretary of the
Issuer;
(c) the Trustee may consult with counsel of its selection and any advice of
such counsel promptly confirmed in writing shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
to be taken by it hereunder in good faith and in reliance thereon in accordance
with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the trusts
or powers vested in it by this Indenture at the request, order or direction of
any of the Securityholders pursuant to the provisions of this Indenture
(including, without limitation, pursuant to Section 5.1), unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred
therein or thereby;
(e) the Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture;
<PAGE>
(f) prior to the occurrence of an Event of Default hereunder and after the
curing or waiving of all Events of Default, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, appraisal, bond, debenture, note, coupon, security, or other
paper or document unless requested in writing so to do by the Holders of not
less than a majority in aggregate principal amount of the Securities of all
series affected then Outstanding; provided that, if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it by
the terms of this Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; the
reasonable expenses of every such investigation shall be paid by the Issuer or,
if paid by the Trustee or any predecessor Trustee, shall be repaid by the Issuer
upon demand;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys not regularly in its employ and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed with due care by it hereunder; and
(h) the Trustee shall not be deemed to have notice of any Default of Event
of Default unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture.
SECTION 6.3 Trustee Not Responsible for Recitals, Disposition of Securities
or Application of Proceeds SECTION 6.3 Trustee Not Responsible for Recitals,
Disposition of Securities or Application of Proceeds Thereof. The recitals
contained herein and in the Securities, except the Trustee's certificates of
authentication, shall be taken as the statements of the Issuer, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representation as to the validity or sufficiency of this Indenture, of the
Securities or of any prospectus used to sell the Securities. The Trustee shall
not be accountable for the use or application by the Issuer of any of the
Securities or of the proceeds thereof.
SECTION 6.4 Trustee and Agents May Hold Securities; Collections, etc. The
Trustee or any agent of the Issuer or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities with the same
rights it would have if it were not the Trustee or such agent and, subject to
Sections 6.8 and 6.13, may otherwise deal with the Issuer and receive, collect,
hold and retain collections from the Issuer with the same rights it would have
if it were not the Trustee or such agent.
SECTION 6.5 Moneys Held by Trustee. Subject to the provisions of Section
10.4 hereof, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required by
mandatory provisions of law. Neither the Trustee nor any agent of the Issuer or
the Trustee shall be under any liability for interest on any moneys received by
it hereunder.
<PAGE>
SECTION 6.6 Compensation and Indemnification of Trustee and Its Prior
Claim. The Issuer covenants and agrees to pay to the Trustee from time to time,
and the Trustee shall be entitled to, such compensation as shall be agreed to in
writing between the Issuer and the Trustee (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
and the Issuer covenants and agrees to pay or reimburse the Trustee and each
predecessor Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by or on behalf of it in accordance with any of
the provisions of this Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all agents and other persons
not regularly in its employ) except any such expense, disbursement or advance as
may arise from its negligence or bad faith. The Issuer also covenants to
indemnify the Trustee and each predecessor Trustee for, and to hold it harmless
against, any and all loss, liability, damage, claim or expense, including taxes
(other than taxes based on the income of the Trustee), incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of this Indenture or the trusts hereunder and its
duties hereunder, including the costs and expenses of defending itself against
or investigating any claim or liability in the premises. The obligations of the
Issuer under this Section 6.6 to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall constitute additional
indebtedness hereunder and shall survive the satisfaction and discharge of this
Indenture or the resignation or removal of the Trustee. Such additional
indebtedness shall be a senior claim to that of the Securities upon all property
and funds held or collected by the Trustee as such, except funds held in trust
for the benefit of the Holders of particular Securities, and the Securities are
hereby subordinated to such senior claim. When the Trustee incurs expenses or
renders services in connection with an Event of Default specified in Section 5.1
or in connection with Article Five hereof, the expenses (including the
reasonable fees and expenses of its counsel) and the compensation for the
service in connection therewith are intended to constitute expenses of
administration under any bankruptcy law.
SECTION 6.7 Right of Trustee to Rely on Officers' Certificate, etc. Subject
to Sections 6.1 and 6.2, whenever in the administration of the trusts of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under the
provisions of this Indenture upon the faith thereof.
SECTION 6.8 Qualification of Trustee; Conflicting Interests. (a) If the
Trustee has or shall acquire any conflicting interest (as defined in subsection
(c)), then within 90 days after ascertaining that it has such conflicting
interest, and if the default (as defined in subsection (c)) to which such
conflicting interest relates has not been cured or duly waived or otherwise
eliminated before the end of such 90-day period, the Trustee shall either
eliminate such conflicting interest or, except as otherwise provided below,
resign, and the Issuer shall take prompt steps to have a successor appointed in
the manner provided in Section 6.10.
<PAGE>
(b) If the Trustee shall fail to comply with the provisions of subsection
(a), the Trustee shall, within 10 days after the expiration of such 90-day
period, transmit notice of such failure to the Securityholders in the manner and
to the extent provided in Section 4.4 and, subject to the provisions of Section
5.9, unless the Trustee's duty to resign is stayed as provided below, any
Securityholder who has been a bona fide Holder of Securities for at least six
months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee, and the
appointment of a successor, if the Trustee fails, after written request thereof
by such Securityholder, to comply with the provisions of subsection (a).
Except in the case of a default in the payment of the principal of or
interest on any Security, or in the payment of any sinking or purchase fund
installment, the Trustee shall not be required to resign as provided by this
Section 6.8 if the Trustee shall have sustained the burden of proving, on
application to the Commission and after opportunity for hearing thereon, that
(i) the default under the Indenture may be cured or waived during
a reasonable period and under the procedures described in such
application, and
(ii) a stay of the Trustee's duty to resign will not be
inconsistent with the interests of Holders of the Securities.
The filing of such an application shall automatically stay the performance
of the duty to resign until the Commission orders otherwise. Any resignation of
the Trustee shall become effective only upon the appointment of a successor
trustee in accordance with the provisions of Section 6.10 and such successor's
acceptance of such an appointment.
(c) For the purposes of this Section 6.8, the Trustee shall be deemed to
have a conflicting interest with respect to Securities of any series if the
Securities of such series are in default (as determined in accordance with the
provisions of Section 5.1, but exclusive of any period of grace or requirement
of notice) and
(i) the Trustee is trustee under this Indenture with respect to
the Outstanding securities of any other series or is a trustee under
another indenture under which any other securities, or certificates of
interest or participation in any other securities, of the Issuer are
outstanding, unless such other indenture is a collateral trust
indenture under which the only collateral consists of Securities
issued under this Indenture; provided that there shall be excluded
from the operation of this paragraph (i), this Indenture with respect
to the Securities of any other series and there shall also be so
excluded any other indenture or indentures under which other
securities, or certificates of interest or participation in other
securities, of the Issuer are outstanding if (x) this Indenture is
and, if applicable, this Indenture and any series issued pursuant to
this Indenture and such other indenture or indentures are wholly
unsecured and rank equally and such other indenture or indentures are
hereafter qualified under the Trust Indenture Act of 1939, unless the
Commission shall have found and declared by order pursuant to Section
305(b) or Section 307(c) of the Trust Indenture Act of 1939 that
<PAGE>
differences exist between the provisions of this Indenture with
respect to Securities of such series and one or more other series, or
the provisions of this Indenture and the provisions of such other
indenture or indentures which are so likely to involve a material
conflict of interest as to make it necessary in the public interest or
for the protection of investors to disqualify the Trustee from acting
as such under this Indenture with respect to Securities of such series
and such other series, or under this Indenture or such other indenture
or indentures, or (y) the Issuer shall have sustained the burden of
proving, on application to the Commission and after opportunity for
hearing thereon, that trusteeship under this Indenture with respect to
Securities of such series and such other series, or under this
Indenture and such other indenture or indentures is not so likely to
involve a material conflict of interest as to make it necessary in the
public interest or for the protection of investors to disqualify the
Trustee from acting as such under this Indenture with respect to
Securities of such series and such other series, or under this
Indenture and such other indentures;
(ii) the Trustee or any of its directors or executive officers is
an underwriter for the Issuer;
(iii) the Trustee directly or indirectly controls or is directly
or indirectly controlled by or is under direct or indirect common
control with an underwriter for the Issuer;
(iv) the Trustee or any of its directors or executive officers is
a director, officer, partner, employee, appointee, or representative
of the Issuer, or of an underwriter (other than the Trustee itself)
for the Issuer who is currently engaged in the business of
underwriting, except that (x) one individual may be a director or an
executive officer, or both, of the Trustee and a director or an
executive officer, or both, of the Issuer, but may not be at the same
time an executive officer of both the Trustee and the Issuer; (y) if
and so long as the number of directors of the Trustee in office is
more than nine, one additional individual may be a director or an
executive officer, or both, of the Trustee and a director of the
Issuer; and (z) the Trustee may be designated by the Issuer or by any
underwriter for the Issuer to act in the capacity of transfer agent,
registrar, custodian, paying agent, fiscal agent, escrow agent, or
depositary, or in any other similar capacity, or, subject to the
provisions of subsection (c) (i) of this Section, to act as trustee,
whether under an indenture or otherwise;
(v) 10% or more of the voting securities of the Trustee is
beneficially owned either by the Issuer or by any director, partner or
executive officer thereof, or 20% or more of such voting securities is
beneficially owned, collectively, by any two or more of such persons;
or 10% or more of the voting securities of the Trustee is beneficially
owned either by an underwriter for the Issuer or by any director,
partner, or executive officer thereof, or is beneficially owned,
collectively, by any two or more such persons;
(vi) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, (x) 5% or
more of the voting securities or 10% or more of any other class of
<PAGE>
security of the Issuer, not including the Securities issued under this
Indenture and securities issued under any other indenture under which
the Trustee is also trustee, or (y) 10% or more of any class of
security of an underwriter for the Issuer;
(vii) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, 5% or more
of the voting securities of any person who, to the knowledge of the
Trustee, owns 10% or more of the voting securities of, or controls
directly or indirectly or is under direct or indirect common control
with, the Issuer;
(viii) the Trustee is the beneficial owner of, or holds as
collateral security for an obligation which is in default, 10% or more
of any class security of any person who, to the knowledge of the
Trustee, owns 50% or more of the voting securities of the Issuer;
(ix) the Trustee owns on the date of default (as determined in
accordance with the provisions of Section 5.1, but exclusive of any
period of grace or requirement of notice) or on any anniversary of
such default while such default remains outstanding, in the capacity
of executor, administrator, testamentary or inter vivos trustee,
guardian, committee or conservator, or in any other similar capacity,
an aggregate of 25% or more of the voting securities, or of any class
of security, of any Person, the beneficial ownership of a specified
percentage of which would have constituted a conflicting interest
under paragraphs (vi), (vii) or (viii) of this subsection. As to any
such securities of which the Trustee acquired ownership through
becoming executor, administrator, or testamentary trustee of an estate
which included them, the provisions of the preceding sentence shall
not apply, for a period of two years from the date of such
acquisition, to the extent that such securities included in such
estate do not exceed 25% of such voting securities or 25% of any such
class of security. Promptly after the dates of any such default and
annually in each succeeding year that the Securities remain in
default, the Trustee shall make a check of its holdings of such
securities in any of the above-mentioned capacities as of such dates.
If the Issuer fails to make payment in full of principal of or
interest on any of the Securities when and as the same becomes due and
payable, and such failure continues for 30 days thereafter, the
Trustee shall make a prompt check of its holdings of such Securities
in any of the above-mentioned capacities as of the date of the
expiration of such 30-day period, and after such date, notwithstanding
the foregoing provisions of this paragraph, all such Securities so
held by the Trustee, with sole or joint control over such Securities
vested in it, shall, but only so long as such failure shall continue,
be considered as though beneficially owned by the Trustee for the
purposes of paragraphs (vi), (vii) and (viii) of this subsection; or
(x) except under the circumstances described in paragraphs (1),
(3), (4), (5) or (6) of Section 6.13(b), the Trustee shall be or shall
become a creditor of the Issuer.
For purposes of subsection (c) (i), the term "series of securities" or
"series" means a series, class or group of securities issuable under an
indenture pursuant to the terms of which holders of one such series may vote to
direct the Trustee, or otherwise take action pursuant to a vote of such holders,
<PAGE>
separately from holders of another such series; provided that "series of
securities" or "series" shall not include any series of securities issuable
under an indenture if all such series rank equally and are wholly unsecured.
The specification of percentages in subsections (c) (v) to (ix) inclusive
of this Section 6.8 shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
subsections (c) (iii) or (vii) of this Section.
For the purposes of subsections (c) (vi), (vii), (viii) and (ix), of this
Section 6.8, only,
(A) the terms "security" and "securities" shall include only such
securities as are generally known as corporate securities, but shall
not include any note or other evidence of indebtedness issued to
evidence an obligation to repay moneys lent to a person by one or more
banks, trust companies, or banking firms, or any certificate of
interest or participation in any such note or evidence of
indebtedness;
(B) an obligation shall be deemed to be in default when a default
in payment of principal shall have continued for 30 days or more and
shall not have been cured; and
(C) the Trustee shall not be deemed to be the owner or holder of
(x) any security which it holds as collateral security, as trustee or
otherwise, for an obligation which is not in default as defined in
clause (B) above, or (y) any security which it holds as collateral
security under this Indenture, irrespective of any default hereunder,
or (z) any security which it holds as agent for collection, or as
custodian, escrow agent, or depositary, or in any similar
representative capacity.
Except as provided above, the word "security" or "securities" as used in
this Section 6.8 shall mean any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral trust certificate, preorganization
certificate or subscription, transferable share, investment contract, voting
trust certificate, certificate of deposit for a security, fractional undivided
interest in oil, gas or other mineral rights, or, in general, any interest or
instrument commonly known as a "security", or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of, or warrant or right to subscribe to or purchase, any of the foregoing.
(d) For purposes of this Section 6.8:
(i) the term "underwriter" when used with reference to the Issuer
shall mean every person who, within a one year period prior to the
time as of which the determination is made, was an underwriter of any
security of the Issuer outstanding at the time of the determination;
(ii) the term "director" shall mean any director of a corporation
or any individual performing similar functions with respect to any
organization whether incorporated or unincorporated;
<PAGE>
(iii) the term "person" shall mean an individual, a corporation,
a partnership, an association, a joint-stock company, a trust, an
unincorporated organization, or a government or political subdivision
thereof; as used in this paragraph, the term "trust" shall include
only a trust where the interest or interests of the beneficiary or
beneficiaries are evidenced by a security;
(iv) the term "voting security" shall mean any security presently
entitling the owner or holder thereof to vote in the direction or
management of the affairs of a person, or any security issued under or
pursuant to any trust, agreement or arrangement whereby a trustee or
trustees or agent or agents for the owner or holder of such security
are presently entitled to vote in the direction or management of the
affairs of a person;
(v) the term "Issuer" shall mean any obligor upon the Securities;
and
(vi) the term "executive officer" shall mean the president, every
vice president, every trust officer, the cashier, the secretary, and
the treasurer of a corporation, and any individual customarily
performing similar functions with respect to any organization whether
incorporated or unincorporated, but shall not include the chairman of
the board of directors.
(e) The percentages of voting securities and other securities specified in
this Section 6.8 shall be calculated in accordance with the following
provisions:
(i) a specified percentage of the voting securities of the
Trustee, the Issuer or any other person referred to in this Section
(each of whom is referred to as a "person" in this paragraph) means
such amount of the outstanding voting securities of such person as
entitles the holder or holders thereof to cast such specified
percentage of the aggregate votes which the holders of all the
outstanding voting securities of such person are entitled to cast in
the direction or management of the affairs of such person;
(ii) a specified percentage of a class of securities of a person
means such percentage of the aggregate amount of securities of the
class outstanding;
(iii) the term "amount", when used in regard to securities, means
the principal amount if relating to evidences of indebtedness, the
number of shares if relating to capital shares, and the number of
units if relating to any other kind of security;
(iv) the term "outstanding" means issued and not held by or for
the account of the issuer; the following securities shall not be
deemed outstanding within the meaning of this definition:
(A) securities of an issuer held in a sinking fund
relating to securities of the issuer of the same class;
<PAGE>
(B) securities of an issuer held in a sinking fund
relating to another class of securities of the issuer, if
the obligation evidenced by such other class of securities
is not in default as to principal or interest or otherwise;
(C) securities pledged by the issuer thereof as
security for an obligation of the issuer not in default as
to principal or interest or otherwise; and
(D) securities held in escrow if placed in escrow by
the issuer thereof;
provided, that any voting securities of an issuer shall be
deemed outstanding if any person other than the issuer is
entitled to exercise the voting rights thereof; and
(v) a security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges; provided, that, in the case
of secured evidences of indebtedness, all of which are issued under a
single indenture, differences in the interest rates or maturity dates of
various series thereof shall not be deemed sufficient to constitute such
series different classes and provided, further, that, in the case of
unsecured evidences of indebtedness, differences in the interest rates or
maturity dates thereof shall not be deemed sufficient to constitute them
securities of different classes, whether or not they are issued under a
single indenture.
SECTION 6.9 Persons Eligible for Appointment as Trustee. The Trustee for
each series of Securities hereunder shall at all times be a corporation
organized and doing business under the laws of the United States of America or
of any state or the District of Columbia having a combined capital and surplus
of at least $50,000,000, and which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal,
state or District of Columbia authority, or a corporation or other Person
permitted to act as trustee by the Commission. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. No obligor upon the Securities or any
Affiliate of such obligor shall serve as trustee upon the Securities. In case at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 6.9, the Trustee shall resign immediately in the
manner and with the effect specified in Section 6.10.
SECTION 6.10 Resignation and Removal; Appointment of Successor Trustee. (a)
The Trustee, or any trustee or trustees hereafter appointed, may at any time
resign with respect to one or more or all series of Securities by giving written
notice of resignation to the Issuer. Upon receiving such notice of resignation,
the Issuer shall promptly appoint a successor trustee or trustees with respect
to the applicable series by written instrument in duplicate, executed by
authority of the Board of Directors, one copy of which instrument shall be
<PAGE>
delivered to the resigning Trustee and one copy to the successor trustee or
trustees. If no successor trustee shall have been so appointed with respect to
any series and have accepted appointment within 30 days after the mailing of
such notice of resignation, the resigning trustee may, at the expense of the
Issuer, petition any court of competent jurisdiction for the appointment of a
successor trustee, or any Securityholder who has been a bona fide Holder of a
Security or Securities of the applicable series for at least six months may,
subject to the provisions of Section 5.9, on behalf of himself and all others
similarly situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of
Section 6.8 with respect to any series of Securities after written
request therefor by the Issuer or by any Securityholder who has been a
bona fide Holder of a Security or Securities of such series for at
least six months; or
(ii) the Trustee shall cease to be eligible in accordance with
the provisions of Section 6.9 and shall fail to resign after written
request therefor by the Issuer or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting with
respect to any series of Securities, or shall be adjudged a bankrupt or
insolvent, or a receiver or liquidator of the Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, the Issuer may remove the Trustee with respect
to the applicable series of Securities and appoint a successor trustee for such
series by written instrument, in duplicate, executed by order of the Board of
Directors one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee, or, subject to the provisions of
Section 5.9, any Securityholder who has been a bona fide Holder of a Security or
Securities of such series for at least six months may on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee with
respect to such series. Such court may thereupon, after such notice, if any, as
it may deem proper and prescribe, remove the Trustee and appoint a successor
trustee.
(c) The Holders of a majority in aggregate principal amount of the
Securities of each series then Outstanding may at any time remove the Trustee
with respect to Securities of such series and appoint a successor trustee with
respect to the Securities of such series by delivering to the Trustee so
removed, to the successor trustee so appointed and to the Issuer the evidence
provided for in Section 7.1 of the action in that regard taken by the
Securityholders. If no successor trustee shall have been so appointed with
respect to any series and have accepted appointment within 30 days after the
<PAGE>
delivery of such evidence of removal, the Trustee may, at the expense of the
Issuer, petition any court of competent jurisdiction for the appointment of a
successor trustee, or any Securityholder who has been a bona fide Holder of a
Security or Securities of the applicable series for at least six months may,
subject to the provisions of Section 5.9, on behalf of himself and all others
similarly situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor trustee.
(d) Any resignation or removal of the Trustee with respect to any series
and any appointment of a successor trustee with respect to such series pursuant
to any of the provisions of this Section 6.10 shall become effective upon
acceptance of appointment by the successor trustee as provided in Section 6.11.
SECTION 6.11 Acceptance of Appointment by Successor Trustee. Any successor
trustee appointed as provided in Section 6.10 shall execute and deliver to the
Issuer and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
with respect to all or any applicable series shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all rights, powers, duties and obligations with respect to such
series of its predecessor hereunder, with like effect as if originally named as
trustee for such series hereunder; but, nevertheless, on the written request of
the Issuer or of the successor trustee, upon payment of its charges then unpaid,
the trustee ceasing to act shall, subject to Section 10.4, pay over to the
successor trustee all moneys at the time held by it hereunder and shall execute
and deliver an instrument transferring to such successor trustee all such
rights, powers, duties and obligations. Upon request of any such successor
trustee, the Issuer shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers. Any trustee ceasing to act shall, nevertheless, retain a
prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 6.6.
If a successor trustee is appointed with respect to the Securities of one
or more (but not all) series, the Issuer, the predecessor Trustee and each
successor trustee with respect to the Securities of any applicable series shall
execute and deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor Trustee with respect to the
Securities of any series as to which the predecessor Trustee is not retiring
shall continue to be vested in the predecessor Trustee, and shall add to or
change any of the provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder by more than one
trustee, it being understood that nothing herein or in such supplemental
indenture shall constitute such trustees co-trustees of the same trust and that
each such trustee shall be trustee of a trust or trusts under separate
indentures.
No successor trustee with respect to any series of Securities shall
accept appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor trustee shall be qualified under the provisions of
Section 6.8 and eligible under the provisions of Section 6.9.
Upon acceptance of appointment by any successor trustee as provided in this
Section 6.11, the Issuer shall give notice thereof to the Holders of Securities
of each series affected, by mailing such notice to such Holders at their
addresses as they shall appear on the registry books. If the Issuer fails to
give such notice within ten days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be given at
the expense of the Issuer.
<PAGE>
SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business of
Trustee. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation shall be qualified under the provisions of
Section 6.8 and eligible under the provisions of Section 6.9, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities of any series shall have
been authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor Trustee and deliver
such Securities so authenticated; and, in case at that time any of the
Securities of any series shall not have been authenticated, any successor to the
Trustee may authenticate such Securities either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Securities of
such series or in this Indenture provided that the certificate of the Trustee
shall have; provided, that the right to adopt the certificate of authentication
of any predecessor Trustee or to authenticate Securities of any series in the
name of any predecessor Trustee shall apply only to its successor or successors
by merger, conversion or consolidation.
SECTION 6.13 Preferential Collection of Claims Against the Issuer. (a)
Subject to the provisions of this Section, if the Trustee shall be or shall
become a creditor, directly or indirectly, secured or unsecured, of the Issuer
within three months prior to a default, as defined in subsection (c) of this
Section 6.13, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Securities and the holders of other indenture securities (as defined in this
Section 6.13):
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such three month period and valid as
against the Issuer and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
subsection (a) (2) of this section, or from the exercise of any right of
set-off which the Trustee could have exercised if a petition in bankruptcy
had been filed by or against the Issuer upon the date of such default; and
(2) all property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such three month
period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Issuer and its
other creditors in such property or such proceeds. Nothing herein
contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account
of any such claim by any Person (other than the Issuer) who is liable
thereon, (ii) the proceeds of the bona fide sale of any such claim by
the Trustee to a third Person, and (iii) distributions made in cash,
securities or other property in respect of claims filed against the
Issuer in bankruptcy or receivership or in proceedings for
reorganization pursuant to the Bankruptcy Code or applicable state law;
(B) to realize, for its own account, upon any property held by
it as security for any such claim, if such property was so held prior
to the beginning of such three month period;
(C) to realize, for its own account, but only to the extent of
the claim hereinafter mentioned, upon any property held by it as
security for any such claim, if such claim was created after the
beginning of such three month period and such property was received as
security therefor simultaneously with the creation thereof, and if the
Trustee shall sustain the burden of proving that at the time such
property was so received the Trustee had no reasonable cause to believe
that a default as defined in subsection (c) of this Section would occur
within three months; or
(D) to receive payment on any claim referred to in paragraph
(B) or (C), against the release of any property held as security for
such claim as provided in such paragraph (B) or (C), as the case may
be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such three month period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any preexisting
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
If the Trustee shall be required to account, the funds and property held in
such special account and the proceeds thereof shall be apportioned between the
Trustee, the Securityholders and the holders of other indenture securities in
such manner that the Trustee, such Securityholders and the holders of other
indenture securities realize, as a result of payments from such special account
and payments of dividends on claims filed against the Issuer in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Bankruptcy
Code or applicable state law, the same percentage of their respective claims,
figured before crediting to the claim of the Trustee anything on account of the
receipt by it from the Issuer of the funds and property in such special account,
and before crediting to the respective claims of the Trustee, such
Securityholders and the holders of other indenture securities, dividends on
claims filed against the Issuer in bankruptcy or receivership or in proceedings
for reorganization pursuant to the Bankruptcy Code or applicable state law, but
after crediting thereon receipts on account of the indebtedness represented by
their respective claims from all sources other than from such dividends and from
the funds and property so held in such special account. As used in this
paragraph, with respect to any claim, the term "dividends" shall include any
<PAGE>
distribution with respect to such claim, in bankruptcy or receivership or in
proceedings for reorganization pursuant to the Bankruptcy Code or applicable
state law, whether such distribution is made in cash, securities or other
property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which such bankruptcy,
receivership or proceeding for reorganization is pending shall have jurisdiction
(i) to apportion between the Trustee, such Securityholders and the holders of
other indenture securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and the proceeds thereof, or
(ii) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the fairness of
the distributions to be made to the Trustee, such Securityholders and the
holders of other indenture securities with respect to their respective claims,
in which event it shall not be necessary to liquidate or to appraise the value
of any securities or other property held in such special account or as security
for any such claim, or to make a specific allocation of such distributions as
between the secured and unsecured portions of such claims, or otherwise to apply
the provisions of this paragraph as a mathematical formula.
Any Trustee who has resigned or been removed after the beginning of such
three month period shall be subject to the provisions of this subsection (a) as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such three month period, it shall be
subject to the provisions of this subsection (a) if and only if the following
conditions exist:
(i) the receipt of property or reduction of claim which would
have given rise to the obligation to account, if such Trustee had
continued as trustee, occurred after the beginning of such three month
period; and
(ii) such receipt of property or reduction of claim occurred
within three months after such resignation or removal.
(b) There shall be excluded from the operation of this Section 6.13 a
creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture or any security or securities having a maturity of one year
or more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture for the purpose of
preserving any property which shall at any time be subject to the lien
of this Indenture or of discharging tax liens or other prior liens or
encumbrances thereon, if notice of such advance and of the
circumstances surrounding the making thereof is given to the
Securityholders at the time and in the manner provided in this
Indenture;
<PAGE>
(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c)(2)
of this Section;
(5) the ownership of stock or of other securities of a
corporation organized under the provisions of Section 25 (a) of the
Federal Reserve Act, as amended, which is directly or indirectly a
creditor of the Issuer; or
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall
within the classification of self-liquidating paper as defined in
subsection (c) (3) of this Section.
(c) As used in this Section 6.13:
(1) the term "default" shall mean any failure to make payment in
full of the principal of or interest on any of the Securities when and
as such principal or interest becomes due and payable;
(2) the term "cash transaction" shall mean any transaction in
which full payment for goods or securities sold is made within seven
days after delivery of the goods or securities in currency or in
checks or other orders drawn upon banks or bankers and payable upon
demand;
(3) the term "self-liquidating paper" shall mean any draft, bill
of exchange, acceptance or obligation which is made, drawn, negotiated
or incurred by the Issuer for the purpose of financing the purchase,
processing, manufacture, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the
security is received by the Trustee simultaneously with the creation
of the creditor relationship with the Issuer arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange,
acceptance or obligation; and
(4) the term "Issuer" shall mean any obligor upon the Securities.
SECTION 6.14 Appointment of Authenticating Agent. As long as any
Securities of a series remain Outstanding, the Trustee may, by an instrument in
writing, appoint with the approval of the Issuer an authenticating agent (the
"Authenticating Agent") which shall be authorized to act on behalf of the
Trustee to authenticate Securities, including Securities issued upon exchange,
registration of transfer, partial redemption or pursuant to Section 2.9.
<PAGE>
Securities of each such series authenticated by such Authenticating Agent shall
be entitled to the benefits of this Indenture and shall be valid and obligatory
for all purposes as if authenticated by the Trustee. Whenever reference is made
in this Indenture to the authentication and delivery of Securities of any series
by the Trustee or to the Trustee's Certificate of Authentication, such reference
shall be deemed to include authentication and delivery on behalf of the Trustee
by an Authenticating Agent for such series and a Certificate of Authentication
executed on behalf of the Trustee by such Authenticating Agent. Such
Authenticating Agent shall at all times be a corporation organized and doing
business under the laws of the United States of America or of any state or the
District of Columbia, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000
(determined as provided in Section 6.9 with respect to the Trustee) and subject
to supervision or examination by federal or state authority.
Any corporation into which any Authenticating Agent may be merged or
converted, or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency business
of any Authenticating Agent, shall continue to be the Authenticating Agent with
respect to all series of Securities for which it served as Authenticating Agent
without the execution or filing of any paper or any further act on the part of
the Trustee or such Authenticating Agent. Any Authenticating Agent may at any
time, and if it shall cease to be eligible shall, resign by giving written
notice of resignation to the Trustee and to the Issuer. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Issuer.
Upon receiving such a notice of resignation or upon such a termination, or
in case at any time any Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 6.14 with respect to one or more
series of Securities, the Trustee may appoint a successor Authenticating Agent
which shall be acceptable to the Issuer and the Issuer shall provide notice of
such appointment to all Holders of Securities of such series in the manner and
to the extent provided in Section 11.4. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all rights,
powers, duties and responsibilities of its predecessor hereunder, with like
effect as if originally named as Authenticating Agent. The Issuer agrees to pay
to the Authenticating Agent for such series from time to time reasonable
compensation. The Authenticating Agent for the Securities of any series shall
have no responsibility or liability for any action taken by it as such at the
direction of the Trustee.
Sections 6.2, 6.3, 6.4 and 7.3 shall be applicable to any Authenticating
Agent.
ARTICLE SEVEN
CONCERNING THE SECURITYHOLDERS
SECTION 7.1 Evidence of Action Taken by Securityholders. Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by a specified percentage in
<PAGE>
principal amount of the Securityholders of any or all series may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such specified percentage of Securityholders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee. Proof of execution of any instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Indenture and
(subject to Sections 6.1 and 6.2) conclusive in favor of the Trustee and the
Issuer, if made in the manner provided in this Article Seven.
SECTION 7.2 Proof of Execution of Instruments and of Holding of Securities.
Subject to Sections 6.1 and 6.2, the execution of any instrument by a
Securityholder or his agent or proxy may be proved in the following manner:
(a) The fact and date of the execution by any Holder of any instrument may
be proved by the certificate of any notary public or other officer of any
jurisdiction authorized to take acknowledgments of deeds or administer oaths
that the person executing such instruments acknowledged to him the execution
thereof, or by an affidavit of a witness to such execution sworn to before any
such notary or other such officer. Where such execution is by or on behalf of
any legal entity other than an individual, such certificate or affidavit shall
also constitute sufficient proof of the authority of the person executing the
same.
(b) The ownership of Securities shall be proved by the Security register or
by a certificate of the Security registrar.
SECTION 7.3 Holders to be Treated as Owners. The Issuer, the Trustee and
any agent of the Issuer or the Trustee may deem and treat the Person in whose
name any Security shall be registered upon the Security register for such series
as the absolute owner of such Security (whether or not such Security shall be
overdue and notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving payment of or on account of the principal of and,
subject to the provisions of this Indenture, interest, if any, on such Security
and for all other purposes; and neither the Issuer nor the Trustee nor any agent
of the Issuer or the Trustee shall be affected by any notice to the contrary.
SECTION 7.4 Securities Owned by Issuer Deemed Not Outstanding. In
determining whether the Holders of the requisite aggregate principal amount of
Outstanding Securities of any or all series have concurred in any direction,
consent or waiver under this Indenture, Securities which are owned by the Issuer
or any other obligor on the Securities with respect to which such determination
is being made or by any Affiliate of the Issuer or any other obligor on the
Securities with respect to which such determination is being made shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver only
securities which a Responsible Officer of the Trustee actually knows are so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
<PAGE>
Securities and that the pledgee is not the Issuer or any other obligor upon the
Securities or any Affiliate of the Issuer or any other obligor on the
Securities. In case of a dispute as to such right, the advice of counsel shall
be full protection in respect of any decision made by the Trustee in accordance
with such advice. Upon request of the Trustee, the Issuer shall furnish to the
Trustee promptly an Officers' Certificate listing and identifying all
Securities, if any, known by the Issuer to be owned or held by or for the
account of any of the above-described Persons; and, subject to Sections 6.1 and
6.2, the Trustee shall be entitled to accept such Officers' Certificate as
conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed therein are Outstanding for the purpose of any such
determination.
SECTION 7.5 Right of Revocation of Action Taken. At any time prior to (but
not after) the evidencing to the Trustee, as provided in Section 7.1, of the
taking of any action by the Holders of the percentage in aggregate principal
amount of the Securities of any or all series, as the case may be, specified in
this Indenture in connection with such action, any Holder of a Security the
serial number of which is shown by the evidence to be included among the serial
numbers of the Securities the Holders of which have consented to such action
may, by filing written notice at the Corporate Trust Office and upon proof of
holding as provided in this Article Seven, revoke such action so far as concerns
such Security provided that such revocation shall not become effective until
three business days after such filing. Except as aforesaid any such action taken
by the Holder of any Security shall be conclusive and binding upon such Holder
and upon all future Holders and owners of such Security and of any Securities
issued in exchange or substitution therefor or on registration of transfer
thereof, irrespective of whether or not any notation in regard thereto is made
upon any such Security. Any action taken by the Holders of the percentage in
aggregate principal amount of the Securities of any or all series, as the case
may be, specified in this Indenture in connection with such action shall be
conclusively binding upon the Issuer, the Trustee and the Holders of all the
Securities affected by such action.
SECTION 7.6 Record Date for Consents and Waivers. The Issuer may, but shall
not be obligated to, direct the Trustee to establish a record date for the
purpose of determining the Persons entitled to (i) waive any past default with
respect to the Securities of such series in accordance with Section 5.7 of the
Indenture, (ii) consent to any supplemental indenture in accordance with Section
8.2 of the Indenture or (iii) waive compliance with any term, condition or
provision of any covenant hereunder. If a record date is fixed, the Holders on
such record date, or their duly designated proxies, and any such Persons, shall
be entitled to waive any such past default, consent to any such supplemental
indenture or waive compliance with any such term, condition or provision,
whether or not such Holder remains a Holder after such record date; provided,
however, that unless such waiver or consent is obtained from the Holders, or
duly designated proxies, of the requisite principal amount of Outstanding
Securities of such series prior to the date which is the 180th day after such
record date, any such waiver or consent previously given shall automatically and
without further action by any Holder be canceled and of no further effect.
<PAGE>
ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Securityholders. The
Issuer, when authorized by a resolution of its Board of Directors (which
resolution may provide general terms or parameters for such action and may
provide that the specific terms of such action may be determined in accordance
with or pursuant to an Issuer Order), and the Trustee may from time to time and
at any time enter into an indenture or indentures supplemental hereto (which
shall conform to the provisions of the Trust Indenture Act of 1939 as in force
at the date of the execution thereof) for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the Trustee as
security for the Securities of one or more series any property or assets;
(b) to evidence the succession of another corporation to the Issuer, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of the Issuer pursuant to Article Nine;
(c) to add to the covenants of the Issuer such further covenants,
restrictions, conditions or provisions as the Issuer and the Trustee shall
consider to be for the protection of the Holders of all or any series of
Securities (and if such covenants, restrictions, conditions or provisions are to
be for the protection of less than all series of Securities, stating that the
same are expressly being included solely for the protection of such series), and
to make the occurrence, or the occurrence and continuance, of a default in any
such additional covenants, restrictions, conditions or provisions an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
respect of any such additional covenant, restriction, condition or provision
such supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such an Event
of Default or may limit the remedies available to the Trustee upon such an Event
of Default or may limit the right of the Holders of a majority in aggregate
principal amount of the Securities of such series to waive such an Event of
Default;
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make any other provisions as the Issuer may deem necessary or
desirable, provided, however, that no such action shall adversely affect the
interests of the Holders of the Securities;
(e) to establish the form or terms of Securities of any series as permitted
by Sections 2.1 and 2.3; and
(f) to evidence and provide for the acceptance of appointment hereunder
by a successor trustee with respect to the Securities of one or more series and
to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of Section
6.11.
<PAGE>
The Trustee is hereby authorized to join with the Issuer in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section may
be executed without the consent of the Holders of any of the Securities then
Outstanding, notwithstanding any of the provisions of Section 8.2.
SECTION 8.2 Supplemental Indentures with Consent of Securityholders. With
the consent (evidenced as provided in Article Seven) of the Holders of not less
than a majority in aggregate principal amount of the Securities then Outstanding
of any series affected by such supplemental indenture, the Issuer, when
authorized by a resolution of its Board of Directors (which resolution may
provide general terms or parameters for such action and may provide that the
specific terms of such action may be determined in accordance with or pursuant
to an Issuer Order), and the Trustee may, from time to time and at any time,
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act of 1939 as in force at the date of
execution thereof) for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the Holders
of the Securities of such series; provided, that no such supplemental indenture
shall (a) extend the stated final maturity of the principal of any Security, or
reduce the principal amount thereof, or reduce the rate or extend the time of
payment of interest, if any, thereon (or, in the case of an Original Issue
Discount Security, reduce the rate of accrual of original issue discount
thereon), or reduce or alter the method of computation of any amount payable on
redemption, repayment or purchase by the Issuer thereof (or the time at which
any such redemption, repayment or purchase may be made), or make the principal
thereof (including any amount in respect of original issue discount), or
interest, if any, thereon payable in any coin or currency other than that
provided in the Securities or in accordance with the terms of the Securities, or
reduce the amount of the principal of an Original Issue Discount Security that
would be due and payable upon an acceleration of the maturity thereof pursuant
to Section 5.1 or the amount thereof provable in bankruptcy pursuant to Section
5.2, or impair or affect the right of any Securityholder to institute suit for
the payment thereof or, if the Securities provide therefor, any right of
repayment or purchase at the option of the Securityholder, in each case without
the consent of the Holder of each Security so affected, or (b) reduce the
aforesaid percentage of Securities of any series, the consent of the Holders of
which is required for any such supplemental indenture, without the consent of
the Holders of each Security so affected. No consent of any Holder of any
Security shall be necessary under this Section 8.2 to permit the Trustee and the
Issuer to execute supplemental indentures pursuant to Sections 8.1 and 9.2.
<PAGE>
A supplemental indenture which changes or eliminates any covenant, Event of
Default or other provision of this Indenture which has expressly been included
solely for the benefit of one or more particular series of Securities, or which
modifies the rights of Holders of Securities of such series, with respect to
such covenant or provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
Upon the request of the Issuer, accompanied by a copy of a resolution of
the Board of Directors (which resolution may provide general terms or parameters
for such action and may provide that the specific terms of such action may be
determined in accordance with or pursuant to an Issuer Order) certified by the
secretary or an assistant secretary of the Issuer authorizing the execution of
any such supplemental indenture, and upon the filing with the Trustee of
evidence of the consent of the Holders of the Securities as aforesaid and other
documents, if any, required by Section 7.1, the Trustee shall join with the
Issuer in the execution of such supplemental indenture unless such supplemental
indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this
Section 8.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 8.2, the
Trustee shall give notice thereof to the Holders of then Outstanding Securities
of each series affected thereby, as provided in Section 11.4. Any failure of the
Issuer to give such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 8.3 Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Issuer and the Holders of Securities of
each series affected thereby shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
shall be deemed to be part of the terms and conditions of this Indenture for any
and all purposes.
SECTION 8.4 Documents to Be Given to Trustee. The Trustee, subject to the
provisions of Sections 6.1 and 6.2, shall be entitled to receive an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article Eight complies with the
applicable provisions of this Indenture.
SECTION 8.5 Notation on Securities in Respect of Supplemental Indentures.
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article Eight may bear
a notation in form approved by the Trustee for such series as to any matter
provided for by such supplemental indenture or as to any action taken by
Securityholders. If the Issuer or the Trustee shall so determine, new Securities
of any series so modified as to conform, in the opinion of the Trustee and the
Issuer, to any modification of this Indenture contained in any such supplemental
indenture may be prepared by the Issuer, authenticated by the Trustee and
delivered in exchange for the Securities of such series then Outstanding.
<PAGE>
ARTICLE NINE
CONSOLIDATION, MERGER, SALE, LEASE, EXCHANGE OR DISPOSITION
SECTION 9.1 Issuer May Consolidate, etc., on Certain Terms. Subject to the
provisions of Section 9.3, nothing contained in this Indenture or in any of the
Securities shall prevent any consolidation or merger of the Issuer with or into
any other corporation or corporations (whether or not affiliated with the
Issuer), or successive consolidations or mergers in which the Issuer or its
successor or successors shall be a party or parties, or shall prevent any sale,
lease, exchange or other disposition of all or substantially all the property
and assets of the Issuer to any other corporation (whether or not affiliated
with the Issuer) authorized to acquire and operate the same; provided, however,
and the Issuer hereby covenants and agrees, that any such consolidation, merger,
sale, lease, exchange or other disposition shall be upon the conditions that (a)
immediately after such consolidation, merger, sale, lease, exchange or other
disposition of the corporation (whether the Issuer or such other corporation)
formed by or surviving any such consolidation or merger, or to which such sale,
lease, exchange or other disposition shall have been made, shall not be in
default in the performance or observance of any of the terms, covenants and
conditions of this Indenture to be kept or performed by the Issuer; (b) the
corporation (if other than the Issuer) formed by or surviving any such
consolidation or merger, or to which such sale, lease, exchange or other
disposition shall have been made, shall be a corporation organized under the
laws of the United States of America, any state thereof or the District of
Columbia; and (c) the due and punctual payment of the principal of and interest,
if any, on all the Securities, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by the Issuer, shall be expressly assumed, by
supplemental indenture satisfactory in form to the Trustee executed and
delivered to the Trustee, by the corporation (if other than the Issuer) formed
by such consolidation, or into which the Issuer shall have been merged, or by
the corporation which shall have acquired or leased such property.
SECTION 9.2 Securities to be Secured in Certain Events. If, upon any such
consolidation, merger, or upon any such sale, lease, exchange or other
disposition, or upon any acquisition by the Issuer by purchase or otherwise of
all or any part of the properties of any other corporation, any Principal
Property owned by the Issuer or a Restricted Subsidiary immediately prior
thereto would thereupon become subject to any mortgage, security interest,
pledge, lien or encumbrance, not permitted by Section 3.6 hereof, the Issuer,
prior to such consolidation, merger, sale, lease, exchange or other disposition
or acquisition, will by indenture supplemental hereto secure the due and
punctual payment of the principal of and interest, if any, on the Securities
then outstanding (equally and ratably, or with such other relative priority
specified in Section 3.6, with any other indebtedness of or guaranteed by the
Issuer then entitled thereto) by a direct lien on such Principal Property,
together with any other properties and assets of the Issuer or of any such
Restricted Subsidiary, whichever shall be the owner of any such Principal
Property, which would thereupon become subject to any such mortgage, security
interest, pledge, lien or encumbrance, prior to all liens other than any
theretofore existing thereon.
<PAGE>
SECTION 9.3 Successor Corporation to be Substituted. In case of any such
consolidation or merger or any sale, conveyance or lease of all or substantially
all of the property of the Issuer and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the due and punctual payment of the
principal of and interest, if any, on all of the Securities and the due and
punctual performance of all of the covenants and conditions of this Indenture to
be performed by the Issuer, such successor corporation shall succeed to and be
substituted for the Issuer, with the same effect as if it had been named herein
as the party of the first part, and the Issuer (including any intervening
successor to the Issuer which shall have become the obligor hereunder) shall be
relieved of any further obligation under this Indenture and the Securities;
provided, however, that in the case of a sale, lease, exchange or other
disposition of the property and assets of the Issuer (including any such
intervening successor), the Issuer (including any such intervening successor)
shall continue to be liable on its obligations under this Indenture and the
Securities to the extent, but only to the extent, of liability to pay the
principal of and interest, if any, on the Securities at the time, places and
rate prescribed in this Indenture and the Securities. Such successor corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of the Issuer, any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Issuer and delivered to the
Trustee; and, upon the order of such successor corporation instead of the Issuer
and subject to all the terms, conditions and limitations in this Indenture
prescribed, the Trustee shall authenticate and shall deliver any Securities
which previously shall have been signed and delivered by the officers of the
Issuer to the Trustee for authentication, and any Securities which such
successor corporation thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Securities had been issued at the date of the execution
hereof.
In case of any such consolidation or merger or any sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
Issuer, such changes in phraseology and form (but not in substance) may be made
in the Securities, thereafter to be issued, as may be appropriate.
SECTION 9.4 Opinion of Counsel to be Given Trustee. The Trustee, subject to
Sections 6.1 and 6.2, may receive an Officers' Certificate and Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale, lease,
exchange or other disposition and any such assumption complies with the
provisions of this Article Nine.
ARTICLE TEN
SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS
SECTION 10.1 Satisfaction and Discharge of Indenture.
<PAGE>
(A) If at any time (a) the Issuer shall have paid or caused to
be paid the principal of and interest, if any, on all the Securities
Outstanding (other than Securities which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 2.9)
as and when the same shall have become due and payable, or (b) the
Issuer shall have delivered to the Trustee for cancellation all
Securities theretofore authenticated (other than Securities which have
been destroyed, lost or stolen and which have been replaced or paid as
provided in Section 2.9); and if, in any such case, the Issuer shall
also pay or cause to be paid all other sums payable hereunder by the
Issuer, then this Indenture shall cease to be of further effect, and
the Trustee, on demand of the Issuer accompanied by an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent relating to the satisfaction and discharge contemplated by
this provision have been complied with, and at the cost and expense of
the Issuer, shall execute proper instruments acknowledging such
satisfaction and discharging this Indenture. The Issuer agrees to
reimburse the Trustee for any costs or expenses thereafter reasonably
and properly incurred, and to compensate the Trustee for any services
thereafter reasonably and properly rendered, by the Trustee in
connection with this Indenture or the Securities.
(B) If at any time (a) the Issuer shall have paid or caused to
be paid the principal of, premium, if any, and interest, if any, on all
the Securities of any series Outstanding (other than Securities of such
series which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.9) as and when the same shall
have become due and payable, or (b) the Issuer shall have delivered to
the Trustee for cancellation all Securities of any series theretofore
authenticated (other than any Securities of such series which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 2.9), or (c) in the case of any series of
Securities with respect to which the exact amount described in clause
(ii) below can be determined at the time of making the deposit referred
to in such clause (ii), (i) all the Securities of such series not
theretofore delivered to the Trustee for cancellation shall have become
due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption, and (ii) the Issuer shall have irrevocably deposited or
caused to be deposited with the Trustee as funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of Securities of such series, cash in an amount (other than
moneys repaid by the Trustee or any paying agent to the Issuer in
accordance with Section 10.4) or direct obligations of the United
States of America, backed by its full faith and credit ("U.S.
Government Obligations"), maturing as to principal and interest, if
any, at such times and in such amounts as will insure the availability
of cash, or a combination thereof, sufficient in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay (A)
the principal of, premium, if any, and interest, if any, on all
Securities of such series on each date that such principal of, premium,
if any, or interest, if any, is due and payable, and (B) any mandatory
<PAGE>
sinking fund payments on the dates on which such payments are due and
payable in accordance with the terms of the Indenture and the
Securities of such series; then the Issuer shall be deemed to have paid
and discharged the entire indebtedness on all the Securities of such
series on the date of the deposit referred to in clause (ii) above and
the provisions of this Indenture with respect to the Securities of such
series shall no longer be in effect (except, in the case of clause (c)
of this Section 10.1(B), as to (i) rights of registration of transfer
and exchange of Securities of such series, (ii) rights of substitution
of mutilated, defaced, destroyed, lost or stolen Securities of such
series, (iii) rights of Holders of Securities of such series to receive
payments of principal thereof and premium, if any, and interest, if
any, thereon upon the original stated due dates therefor (but not upon
acceleration), and remaining rights of the Holders of Securities of
such series to receive mandatory sinking fund payments thereon, if any,
when due, (iv) the rights, obligations, duties and immunities of the
Trustee hereunder, (v) the rights of the Holders of Securities of such
series as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them and (vi) the
obligations of the Issuer under Section 3.2 with respect to Securities
of such series) and the Trustee, on demand of the Issuer accompanied by
an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent contemplated by this provision have been
complied with, and at the cost and expense of the Issuer, shall execute
proper instruments acknowledging the same.
(C) The following provisions shall apply to the Securities of
each series unless specifically otherwise provided in a Board
Resolution, Officers' Certificate or indenture supplemental hereto
provided pursuant to Section 2.3. In addition to discharge of the
Indenture pursuant to the next preceding paragraph, in the case of any
series of Securities with respect to which the exact amount described
in subparagraph (a) below can be determined at the time of making the
deposit referred to in such subparagraph (a), the Issuer shall be
deemed to have paid and discharged the entire indebtedness on all the
Securities of such a series on the 91st day after the date of the
deposit referred to in subparagraph (a) below, and the provisions of
this Indenture with respect to the Securities of such series shall no
longer be in effect (except as to (i) rights of registration of
transfer and exchange of Securities of such series, (ii) substitution
of mutilated, defaced, destroyed, lost or stolen Securities of such
series, (iii) rights of Holders of Securities of such series to receive
payments of principal thereof, premium, if any, and interest, if any,
thereon upon the original stated due dates therefor (but not upon
acceleration), and remaining rights of the Holders of Securities of
such series to receive mandatory sinking fund payments, if any, (iv)
the rights, obligations, duties and immunities of the Trustee
hereunder, (v) the rights of the Holders of Securities of such series
as beneficiaries hereof with respect to the property so deposited with
the Trustee payable to all or any of them and (vi) the obligations of
the Issuer under Section 3.2 with respect to Securities of such series)
and the Trustee, on demand of the Issuer accompanied by an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent contemplated by this provision have been complied with, and
at the cost and expense of the Issuer, shall execute proper instruments
acknowledging the same, if
(a) with reference to this provision the Issuer has
irrevocably deposited or caused to be irrevocably deposited
with the Trustee as funds in trust, specifically pledged as
<PAGE>
security for, and dedicated solely to, the benefit of the Holders of
Securities of such series (i) cash in an amount, or (ii) U.S.
Government Obligations, maturing as to principal and interest, if any,
at such times and in such amounts as will insure the availability of
cash, or (iii) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay
(A) the principal of, premium, if any, and interest, if any, on all
Securities of such series on each date that such principal or
interest, if any, is due and payable, and (B) any mandatory sinking
fund payments on the dates on which such payments are due and payable
in accordance with the terms of the Indenture and the Securities of
such series;
(b) such deposit will not result in a breach or violation of, or
constitute a default under, any agreement or instrument to which the
Issuer is a party or by which it is bound; and
(c) the Issuer has delivered to the Trustee an Opinion of Counsel
based on the fact that (x) the Issuer has received from, or there has
been published by, the Internal Revenue Service a ruling or (y), since
the date hereof, there has been a change in the applicable United
States federal income tax law, in either case to the effect that, and
such opinion shall confirm that, the Holders of the Securities of such
series will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit, defeasance and discharge and
will be subject to Federal income tax on the same amount and in the
same manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred.
SECTION 10.2 Application by Trustee of Funds Deposited for Payment of
Securities. Subject to Section 10.4, all moneys and U.S. Government Obligations
deposited with the Trustee pursuant to Section 10.1 shall be held in trust, and
such moneys and all moneys from such U.S. Government Obligations shall be
applied by it to the payment, either directly or through any paying agent
(including the Issuer acting as its own paying agent), to the Holders of the
particular Securities of such series for the payment or redemption of which such
moneys and U.S. Government Obligations have been deposited with the Trustee, of
all sums due and to become due thereon for principal and interest, if any, but
such moneys and U.S. Government Obligations need not be segregated from other
funds except to the extent required by law.
SECTION 10.3 Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to Securities
of any series, all moneys then held by any paying agent under the provisions of
this Indenture with respect to such series of Securities shall, upon demand of
the Issuer, be repaid to it or paid to the Trustee and thereupon such paying
agent shall be released from all further liability with respect to such moneys.
SECTION 10.4 Return of Moneys Held by Trustee and Paying Agent
Unclaimed for Two Years. Any moneys deposited with or paid to the Trustee or any
paying agent for the payment of the principal of or interest, if any, on any
Security of any series and not applied but remaining unclaimed for two years
<PAGE>
after the date upon which such principal or interest, if any, shall have become
due and payable, shall, upon the written request of the Issuer and unless
otherwise required by mandatory provisions of applicable escheat or abandoned or
unclaimed property law, be repaid to the Issuer by the Trustee for such series
or such paying agent, and the Holder of the Securities of such series shall,
unless otherwise required by mandatory provisions of applicable escheat or
abandoned or unclaimed property laws, thereafter look only to the Issuer for any
payment which such Holder may be entitled to collect, and all liability of the
Trustee or any paying agent with respect to such moneys shall thereupon cease.
SECTION 10.5 Indemnity for U.S. Government Obligations. The Issuer
shall pay and indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against the U.S. Government Obligations deposited pursuant to
Section 10.1 or the principal or interest received in respect of such
obligations.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.1 Partners, Incorporators, Stockholders, Officers and
Directors of Issuer Exempt from IndividuaSECTION 11.1 Partners, Incorporators,
Stockholders, Officers and Directors of Issuer Exempt from Individual Liability.
No recourse under or upon any obligation, covenant or agreement contained in
this Indenture, or in any Security, or because of any indebtedness evidenced
thereby, shall be had against any incorporator, as such or against any past,
present or future stockholder, officer or director, as such, of the Issuer, or
any partner of the Issuer or of any successor, either directly or through the
Issuer or any successor, under any rule of law, statute or constitutional
provision or by the enforcement of any assessment or by any legal or equitable
proceeding or otherwise, all such liability being expressly waived and released
by the acceptance of the Securities by the Holders thereof and as part of the
consideration for the issue of the Securities.
SECTION 11.2 Provisions of Indenture for the Sole Benefit of Parties
and Holders of Securities. Nothing in this Indenture or in the Securities,
expressed or implied, shall give or be construed to give to any Person, other
than the parties hereto and their successors and the Holders of the Securities,
any legal or equitable right, remedy or claim under this Indenture or under any
covenant or provision herein contained, all such covenants and provisions being
for the sole benefit of the parties hereto and their successors and of the
Holders of the Securities.
SECTION 11.3 Successors and Assigns of Issuer Bound by Indenture. All
the covenants, stipulations, promises and agreements in this Indenture contained
by or on behalf of the Issuer shall bind its successors and assigns, whether so
expressed or not.
SECTION 11.4 Notices and Demands on Issuer, Trustee and Holders of
Securities. Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the Holders of
Securities to or on the Issuer, or as required pursuant to the Trust Indenture
Act of 1939, may be given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein) addressed
<PAGE>
(until another address of the Issuer is filed by the Issuer with the Trustee) to
Seagull Energy Corporation, 1001 Fannin, Suite 1700, Houston, Texas 77002,
Attention: Chairman of the Board. Any notice, direction, request or demand by
the Issuer or any Holder of Securities to or upon the Trustee shall be deemed to
have been sufficiently given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein) addressed
(until another address of the Trustee is filed by the Trustee with the Issuer)
to The Bank of New York, 101 Barclay Street, Floor 21 West, New York, New York
10286, Attention:
Corporate Trust Trustee Administration.
Where this Indenture provides for notice to Holders of Securities, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder entitled
thereto, at his last address as it appears in the Security register. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case, by reason of the suspension of or irregularities in regular
mail service, it shall be impracticable to mail notice to the Issuer when such
notice is required to be given pursuant to any provision of this Indenture, then
any manner of giving such notice as shall be reasonably satisfactory to the
Trustee shall be deemed to be sufficient notice.
SECTION 11.5 Officers' Certificates and Opinions of Counsel; Statements
to Be Contained Therein. Upon any application or demand by the Issuer to the
Trustee to take any action under any of the provisions of this Indenture, or as
required pursuant to the Trust Indenture Act of 1939, the Issuer shall furnish
to the Trustee an Officers' Certificate stating that all conditions precedent
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent have been complied with, except that in
the case of any such application or demand as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or demand, no additional certificate or opinion
need be furnished.
Each certificate or opinion provided for in this Indenture (other than
a certificate provided pursuant to Section 4.3(d)) and delivered to the Trustee
with respect to compliance with a condition or covenant provided for in this
Indenture shall include (a) a statement that the person making such certificate
or opinion has read such covenant or condition, (b) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are based, (c) a statement
that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an opinion as to whether
or not such covenant or condition has been complied with, and (d) a statement as
to whether or not, in the opinion of such person, such condition or covenant has
been complied with.
<PAGE>
Any certificate, statement or opinion of an officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of or representations by counsel, unless such officer knows that the certificate
or opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters, information with respect to which is in the possession of
the Issuer, upon the certificate, statement or opinion of or representations by
an officer or officers of the Issuer, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the Issuer or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Issuer, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public
accountants filed with and directed to the Trustee shall contain a statement
that such firm is independent.
SECTION 11.6 Payments Due on Saturdays, Sundays and Holidays. If the
date of maturity of principal of or interest, if any, on the Securities of any
series or the date fixed for redemption, purchase or repayment of any such
Security shall not be a Business Day, then payment of interest, if any, or
principal need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date of maturity
or the date fixed for redemption, purchase or repayment, and, in the case of
payment, no interest shall accrue for the period after such date.
SECTION 11.7 Conflict of Any Provision of Indenture with Trust
Indenture Act of 1939. If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with another provision included in this Indenture
which is required to be included herein by any of Sections 310 to 317,
inclusive, or is deemed applicable to this Indenture by virtue of the
provisions, of the Trust Indenture Act of 1939, such required provision shall
control.
SECTION 11.8 GOVERNING LAW. THIS INDENTURE AND EACH SECURITY SHALL BE
DEEMED TO BE A CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH
STATE.
SECTION 11.9 Counterparts. This Indenture may be executed in any number
of counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
<PAGE>
SECTION 11.10 Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
ARTICLE TWELVE
REDEMPTION OF SECURITIES AND SINKING FUNDS
SECTION 12.1 Applicability of Article. The provisions of this Article
shall be applicable to the Securities of any series which are redeemable before
their maturity or to any sinking fund for the retirement of Securities of a
series except as otherwise specified, as contemplated by Section 2.3 for
Securities of such series.
SECTION 12.2 Notice of Redemption; Partial Redemptions. Notice of
redemption to the Holders of Securities of any series to be redeemed as a whole
or in part at the option of the Issuer shall be given by mailing notice of such
redemption by first class mail, postage prepaid, at least 30 days and not more
than 60 days prior to the date fixed for redemption to such Holders of
Securities of such series at their last addresses as they shall appear in the
Security register. Any notice which is mailed in the manner herein provided
shall be conclusively presumed to have been duly given, whether or not the
Holder receives the notice. Failure to give notice by mail, or any defect in the
notice to the Holder of any Security of a series designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security of such series.
The notice of redemption to each such Holder shall specify the
principal amount of each Security of such series held by such Holder to be
redeemed, the date fixed for redemption, the redemption price, the place or
places of payment, the CUSIP number relating to such Securities, that payment
will be made upon presentation and surrender of such Securities, that such
redemption is pursuant to the mandatory or optional sinking fund, or both, if
such be the case, that interest, if any, (or, in the case of Original Issue
Discount Securities, original issue discount) accrued to the date fixed for
redemption will be paid as specified in such notice and that on and after said
date interest, if any, (or, in the case of Original Issue Discount Securities,
original issue discount) thereon or on the portions thereof to be redeemed will
cease to accrue. In case any Security of a series is to be redeemed in part
only, the notice of redemption shall state the portion of the principal amount
thereof to be redeemed and shall state that on and after the date fixed for
redemption, upon surrender of such Security, a new Security or Securities of
such series in principal amount equal to the unredeemed portion thereof will be
issued.
The notice of redemption of Securities of any series to be redeemed at
the option of the Issuer shall be given by the Issuer or, at the Issuer's
request, by the Trustee in the name and at the expense of the Issuer.
On or before the redemption date specified in the notice of redemption
given as provided in this Section 12.2, the Issuer will deposit with the Trustee
<PAGE>
or with one or more paying agents (or, if the Issuer is acting as its own paying
agent, set aside, segregate and hold in trust as provided in Section 3.5) an
amount of money sufficient to redeem on the redemption date all the Securities
of such series so called for redemption at the appropriate redemption price,
together with accrued interest, if any, to the date fixed for redemption. The
Issuer will deliver to the Trustee at least 45 days prior to the date fixed for
redemption (unless a shorter notice period shall be satisfactory to the Trustee)
an Officers' Certificate stating the aggregate principal amount of Securities to
be redeemed. In case of a redemption at the election of the Issuer prior to the
expiration of any restriction on such redemption, the Issuer shall deliver to
the Trustee, prior to the giving of any notice of redemption to Holders pursuant
to this Section, an Officers' Certificate stating that such restriction has been
complied with.
If less than all the Securities of a series are to be redeemed, the
Trustee shall select, in such manner as it shall deem appropriate and fair,
Securities of such series to be redeemed. Securities may be redeemed in part in
multiples equal to the minimum authorized denomination for Securities of such
series or any multiple thereof. The Trustee shall promptly notify the Issuer in
writing of the Securities of such series selected for redemption and, in the
case of any Securities of such series selected for partial redemption, the
principal amount thereof to be redeemed. For all purposes of this Indenture,
unless the context otherwise requires, all provisions relating to the redemption
of Securities of any series shall relate, in the case of any Security redeemed
or to be redeemed only in part, to the portion of the principal amount of such
Security which has been or is to be redeemed.
SECTION 12.3 Payment of Securities Called for Redemption. If notice of
redemption has been given as above provided, the Securities or portions of
Securities specified in such notice shall become due and payable on the date and
at the place or places stated in such notice at the applicable redemption price,
together with interest, if any, accrued to the date fixed for redemption, and on
and after said date (unless the Issuer shall default in the payment of such
Securities at the redemption price, together with interest, if any, accrued to
said date) interest (or, in the case of Original Issue Discount Securities,
original issue discount) on the Securities or portions of Securities so called
for redemption shall cease to accrue, and such Securities shall cease from and
after the date fixed for redemption (unless an earlier date shall be specified
in a Board Resolution, Officers' Certificate or executed supplemental indenture
referred to in Sections 2.1 and 2.3 by or pursuant to which the form and terms
of the Securities of such series were established) except as provided in
Sections 6.5 and 10.4, to be entitled to any benefit or security under this
Indenture, and the Holders thereof shall have no right in respect of such
Securities except the right to receive the redemption price thereof and unpaid
interest to the date fixed for redemption. On presentation and surrender of such
Securities at a place of payment specified in said notice, said Securities or
the specified portions thereof shall be paid and redeemed by the Issuer at the
applicable redemption price, together with interest, if any, accrued thereon to
the date fixed for redemption; provided that payment of interest, if any,
becoming due on or prior to the date fixed for redemption shall be payable to
the Holders of Securities registered as such on the relevant record date subject
to the terms and provisions of Sections 2.3 and 2.7 hereof.
If any Security called for redemption shall not be so paid upon
<PAGE>
surrender thereof for redemption, the redemption price shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the rate of
interest or Yield to Maturity (in the case of an Original Issue Discount
Security) borne by such Security.
Upon presentation of any Security redeemed in part only, the Issuer
shall execute and the Trustee shall authenticate and deliver to or on the order
of the Holder thereof, at the expense of the Issuer, a new Security or
Securities of such series, and of like tenor, of authorized denominations, in
principal amount equal to the unredeemed portion of the Security so presented.
SECTION 12.4 Exclusion of Certain Securities from Eligibility for
Selection for Redemption. Securities shall be excluded from eligibility for
selection for redemption if they are identified by registration and certificate
number in an Officers' Certificate delivered to the Trustee at least 45 days
prior to the last date on which notice of redemption may be given as being owned
of record and beneficially by, and not pledged or hypothecated by either (a) the
Issuer, or (b) a Person specifically identified in such written statement as an
Affiliate of the Issuer.
SECTION 12.5 Mandatory and Optional Sinking Funds. The minimum amount
of any sinking fund payment provided for by the terms of the Securities of any
series is herein referred to as a "mandatory sinking fund payment", and any
payment in excess of such minimum amount provided for by the terms of the
Securities of any series is herein referred to as an "optional sinking fund
payment". The date on which a sinking fund payment is to be made is herein
referred to as the "sinking fund payment date".
In lieu of making all or any part of any mandatory sinking fund payment
with respect to any series of Securities in cash, the Issuer may at its option
(a) deliver to the Trustee Securities of such series theretofore purchased or
otherwise acquired (except upon redemption pursuant to the mandatory sinking
fund) by the Issuer or receive credit for Securities of such series (not
previously so credited) theretofore purchased or otherwise acquired (except as
aforesaid) by the Issuer and delivered to the Trustee for cancellation pursuant
to Section 2.10, (b) receive credit for optional sinking fund payments (not
previously so credited) made pursuant to this Section 12.5, or (c) receive
credit for Securities of such series (not previously so credited) redeemed by
the Issuer through any optional redemption provision contained in the terms of
such series. Securities so delivered or credited shall be received or credited
by the Trustee at the sinking fund redemption price specified in such
Securities.
On or before the 60th day next preceding each sinking fund payment date
for any series, the Issuer will deliver to the Trustee an Officers' Certificate
(a) specifying the portion of the mandatory sinking fund payment to be satisfied
by payment of cash and the portion to be satisfied by credit of Securities of
such series and the basis for such credit, (b) stating that none of the
Securities of such series to be so credited has theretofore been so credited,
(c) stating that no defaults in the payment of interest or Events of Default
with respect to such series have occurred (which have not been waived or cured
or otherwise ceased to exist) and are continuing, and (d) stating whether or not
<PAGE>
the Issuer intends to exercise its right to make an optional sinking fund
payment with respect to such series and, if so, specifying the amount of such
optional sinking fund payment which the Issuer intends to pay on or before the
next succeeding sinking fund payment date. Any Securities of such series to be
credited and required to be delivered to the Trustee in order for the Issuer to
be entitled to credit therefor as aforesaid which have not theretofore been
delivered to the Trustee shall be delivered for cancellation pursuant to Section
2.10 to the Trustee with such Officers' Certificate (or reasonably promptly
thereafter if acceptable to the Trustee). Such Officers' Certificate shall be
irrevocable and upon its receipt by the Trustee the Issuer shall become
unconditionally obligated to make all the cash payments or payments therein
referred to, if any, on or before the next succeeding sinking fund payment date.
Failure of the Issuer, on or before any such 60th day, to deliver such Officers'
Certificate and Securities (subject to the parenthetical clause in the second
preceding sentence) specified in this paragraph, if any, shall not constitute a
default but shall constitute, on and as of such date, the irrevocable election
of the Issuer (i) that the mandatory sinking fund payment for such series due on
the next succeeding sinking fund payment date shall be paid entirely in cash
without the option to deliver or credit Securities of such series in respect
thereof, and (ii) that the Issuer will make no optional sinking fund payment
with respect to such series as provided in this Section 12.5.
If the sinking fund payment or payments (mandatory or optional or both)
to be made in cash on the next succeeding sinking fund payment date plus any
unused balance of any preceding sinking fund payments made in cash shall exceed
$50,000, or a lesser sum if the Issuer shall so request with respect to the
Securities of any particular series, such cash shall be applied on the next
succeeding sinking fund payment date to the redemption of Securities of such
series at the sinking fund redemption price together with accrued interest, if
any, to the date fixed for redemption. If such amount shall be $50,000 or less
and the Issuer makes no such request, then it shall be carried over until a sum
in excess of $50,000 is available. The Trustee shall select, in the manner
provided in Section 12.2, for redemption on such sinking fund payment date a
sufficient principal amount of Securities of such series to absorb said cash, as
nearly as may be, and shall (if requested in writing by the Issuer) inform the
Issuer of the serial numbers of the Securities of such series (or portions
thereof) so selected. The Trustee, in the name and at the expense of the Issuer
(or the Issuer, if it shall so request the Trustee in writing) shall cause
notice of redemption of the Securities of such series to be given in
substantially the manner provided in Section 12.2 (and with the effect provided
in Section 12.3) for the redemption of Securities of such series in part at the
option of the Issuer. The amount of any sinking fund payments not so applied or
allocated to the redemption of Securities of such series shall be added to the
next cash sinking fund payment for such series and, together with such payment,
shall be applied in accordance with the provisions of this Section 12.5. Any and
all sinking fund moneys held on the stated maturity date of the Securities of
any particular series (or earlier, if such maturity is accelerated), which are
not held for the payment or redemption of particular Securities of such series
shall be applied, together with other moneys, if necessary, sufficient for the
purpose, to the payment of the principal of, and interest, if any, on, the
Securities of such series at maturity.
On or before each sinking fund payment date, the Issuer shall pay to
the Trustee in cash or shall otherwise provide for the payment of all interest,
if any, accrued to the date fixed for redemption on Securities to be redeemed on
such sinking fund payment date.
<PAGE>
The Trustee shall not redeem or cause to be redeemed any Securities of
a series with sinking fund moneys or give any notice of redemption of Securities
for such series by operation of the sinking fund during the continuance of a
default in payment of interest on such Securities or of any Event of Default
with respect to such series except that, where the giving of notice of
redemption of any Securities shall theretofore have been made, the Trustee shall
redeem or cause to be redeemed such Securities, provided that it shall have
received from the Issuer a sum sufficient for such redemption. Except as
aforesaid, any moneys in the sinking fund for such series at the time when any
such default or Event of Default shall occur, and any moneys thereafter paid
into the sinking fund, shall, during the continuance of such default or Event of
Default, be deemed to have been collected under Article Five and held for the
payment of all such Securities. In case such Event of Default shall have been
waived as provided in Section 5.7 or the default cured on or before the 60th day
preceding the sinking fund payment date in any year, such moneys shall
thereafter be applied on the next succeeding sinking fund payment date in
accordance with this Section to the redemption of such Securities.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of September 1, 1997.
SEAGULL ENERGY CORPORATION
By:
Title:
THE BANK OF NEW YORK, as Trustee
By:
Title:
<PAGE>
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART
FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY
OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Company or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
<PAGE>
SEAGULL ENERGY CORPORATION
7 1/2% Senior Notes due September 15, 2027
No. BE-1 CUSIP No. 812007AE2
SEAGULL ENERGY CORPORATION, a corporation duly organized and existing
under the laws of the State of Texas (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to Cede & Co., or registered assigns, the
principal sum of ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) on September
15, 2027, and to pay interest thereon from September 30, 1997 or from the most
recent interest payment date to which interest has been paid or duly provided
for, semiannually in arrears on March 15 and September 15 in each year,
commencing March 15, 1998, at the rate of 7 1/2% per annum, until the principal
hereof is fully paid or made available for full payment. The interest so
payable, and punctually paid or duly provided for, on any interest payment date
will, as provided in such Indenture, be paid to the Person in whose name this
Security is registered at the close of business on the March 1 or September 1
(whether or not a Business Day), as the case may be, next preceding such
interest payment date (a "Regular Record Date"). Notwithstanding the foregoing,
if and to the extent the Company shall default in the payment of the interest
due on such interest payment date, any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and such defaulted interest shall instead be paid to the
Person in whose name this Security is registered (a) at the close of business on
a subsequent record date (which shall be not less than five Business Days prior
<PAGE>
to the date of payment of such defaulted interest) established by notice given
by mail by or on behalf of the Company to the Holders of Securities not less
than 15 days preceding such subsequent record date or (b) as determined by such
other procedure as is mutually acceptable to the Company and the Trustee, all as
more fully described in the Indenture.
Payment of the principal of (and premium, if any) and interest on this
Security shall be made at the Corporate Trust Office of the Trustee in New York,
New York, or at such other office or agency of the Company as it may designate
for such purpose pursuant to the Indenture hereinafter referred to, in such
immediately available funds of the United States of America as at the time of
payment are legal tender for payment of public and private debts.
Reference is hereby made to the further provisions of this Security set
forth below, which further provisions shall for all purposes have the same
effect as if set forth in this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to below by manual signature of an authorized officer, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: September 30, 1997
SEAGULL ENERGY CORPORATION
By:_______________________
Barry J. Galt
Chairman of the Board and
Chief Executive Officer
ATTEST:
- --------------------------------------
Stephen A. Thorington
Treasurer
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.
THE BANK OF NEW YORK
as Trustee
By:________________________________
Authorized Officer
<PAGE>
<PAGE>
REVERSE OF SECURITY
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under the Senior Indenture, dated as of September 1, 1997 (herein called
the "Indenture"), between the Company and The Bank of New York, as Trustee
(herein called the "Trustee," which term includes any additional successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitation of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. Capitalized terms
used but not defined herein are defined in the Indenture and used herein with
the same meanings ascribed to them therein. This Security is a Global Security
representing the entire principal amount of the series designated on the face
hereof, limited in aggregate principal amount to $150,000,000.
The Securities of this series are not redeemable prior to stated
maturity.
The Securities of this series shall not be subject to a sinking fund
requirement.
The Indenture contains provisions for defeasance of (a) the entire
indebtedness of this Security and (b) certain restrictive covenants upon
compliance by the Company with certain conditions set forth therein.
If an Event of Default with respect to the Securities of this series
shall occur and be continuing, the unpaid principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee with the consent of the Holders of not less than a majority in aggregate
principal amount of each series of Securities then Outstanding under the
Indenture and affected thereby, evidenced as provided in the Indenture, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the Holders of
the Securities of such series; provided, however, that no such supplemental
indenture shall (i) extend the stated final maturity of any Security, or reduce
the principal amount thereof, or reduce the rate or extend the time of payment
of interest hereon, or reduce or alter the method of computation of any amount
payable on redemption, repayment or purchase by the Company, or change the coin
or currency in which payments are to be made, or impair or affect the right of
any Holder to institute suit for enforcement of any payment hereof or (ii)
reduce the aforesaid percentage of any series of such Securities, without the
consent of the Holders of each Security of any series so affected. It is also
provided in the Indenture that the Holders of a majority in aggregate principal
amount of the Securities of any series then Outstanding may on behalf of the
Holders of all of the Securities of such series waive any past default or Event
of Default under the Indenture and its consequences except a default in the
payment of the principal of or interest on any of the Securities of such Series.
<PAGE>
Any such consent or waiver by the Holder of this Security (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such Holder and
upon all future Holders and owners of this Security and any Securities which may
be issued in exchange or substitution herefor, irrespective of whether or not
any notation thereof is made upon this Security or such other Securities.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this
Security at the place, at the respective times, and at the rates and in the coin
or currency herein provided.
As set forth in, and subject to, the provisions of the Indenture, no
Holder of any Security of this series shall have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder shall have previously given to the Trustee written notice of default
and the continuance thereof, as provided in the Indenture, and unless the
Holders of not less than 25% in principal amount of the Securities of this
series then Outstanding shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, and the
Trustee shall have failed to institute such proceeding within 60 days; provided,
however, that such limitations shall not impair the right of a Holder hereof to
institute suit for the enforcement of payment of the principal of or interest on
this Security on or after the respective due dates expressed herein without the
consent of such Holder.
This Security shall be exchangeable for Securities of this series
registered in the names of Persons other than the Depository with respect to
such series or its nominee only as provided in this paragraph. This Security
shall be so exchangeable if (i) such Depository notifies the Company that it is
unwilling, unable or ineligible to continue as Depository for this Security and
a successor Depository is not appointed by the Company within 90 days or (ii)
the Company executes and delivers to the Trustee a written order providing that
this Security shall be so exchangeable. Securities so issued in exchange for
this Security shall be of the same series and of like tenor, in authorized
denominations and in the aggregate having the same unpaid principal amount as
this Security and registered in such names as such Depository shall direct.
Individual Securities of this series so issued will be issued in registered form
and denominations, unless otherwise specified by the Company, of $1,000 and
integral multiples thereof.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the security register
maintained for that purpose, upon surrender of this Security for registration of
transfer at the office or agency of the Company in any place where the principal
of (and premium, if any) and interest on this Security are payable, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder hereof
or its attorney duly authorized in writing, and thereupon on or more new
Securities of this series, and of like tenor, of authorized denominations and
for the same aggregate unpaid principal amount, shall be issued to the
<PAGE>
designated transferee or transferees. At the date of the original issuance of
this Security, such office or agency of the Company is maintained by the Trustee
at its Corporate Trust Office, 101 Barclay Street, Floor 21 West, New York, New
York.
No service charge shall be made for any such exchange or registration
of transfer, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary. All
payments made to or upon the order of such registered Holder shall, to the
extent of the sum or sums so paid, satisfy and discharge the liability for
moneys payable on this Security.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused a CUSIP number to be
printed on this Security as a convenience to the Holder hereof. No
representation is made as to the accuracy of such number and reliance may be
placed only on the other identifying information printed hereon.
Interest on this Security shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Security shall be governed by and construed in
accordance with the laws of the State of New York.
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
(Print or type name, address and zip code of assignee or transferee)
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint agent to transfer this Security on the books of the
Company. The agent may substitute another to act for him.
Dated: _______ Signed:_______________________
(Sign exactly as name appears
above or on the other side of
this Security)
Signature Guarantee:________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
CONSENT AND AGREEMENT
CONSENT AND AGREEMENT, dated as of April 15, 1991, between the lender
whose name appears on the signature page hereof (the "Lender") and ALASKA
PIPELINE COMPANY, an Alaska corporation (the "Company").
WHEREAS, the Company has outstanding on the date hereof, (i) $144,000
aggregate principal amount of its 8 3/8% Series A Notes due January 1, 1993 (the
"Series A Notes"), (ii) $460,000 aggregate principal amount of its 10 1/4%
Series B Notes due January 1, 1995 (the "Series B Notes"), (iii) $2,100,000
aggregate principal amount of its 9.95% Series D Notes due April 1, 1997 (the
"Series D Notes"), (iv) $14,500,000 aggregate principal amount of its 12.70%
Series F Notes due July 1, 1995 (the "Series F Notes"), (v) $3,000,000 aggregate
principal amount of its 12.80% Series G Notes due July 1, 2000 (the "Series G
Notes"), and (vi) $8,000,000 aggregate principal amount of its 12.75% Series H
Notes due July 1, 2000 (the "Series H Notes" and, together with the Series A
Notes, the Series B Notes, the Series D Notes, the Series F Notes and the Series
G Notes, the "Notes");
WHEREAS, the Series A Notes and the Series B Notes were originally
issued pursuant to a Note Agreement dated as of August 15, 1972 (as heretofore
amended, the "1972 Note Agreement");
WHEREAS, the Series D Notes were originally issued pursuant to a Note
Agreement dated as of March 15, 1977 (as heretofore amended, the "1977 Note
Agreement");
WHEREAS, the Series F Notes, the Series G Notes and the Series H Notes
were originally issued pursuant to separate Note Agreements dated as of June 17,
1985 (as heretofore amended, the "1985 Agreement" and, together with the 1972
Note Agreement, the 1975 Note Agreement and the 1977 Note Agreement, the "Note
Agreements");
WHEREAS, the Lender is the owner and holder of certain of the Notes
(the "Lender Notes");
WHEREAS, the Company and the Lender desire to amend in certain respects
the Note Agreements pursuant to which the Lender Notes were originally issued
(the "Lender Notes");
WHEREAS, as of the date hereof, Seagull Energy Corporation ("Seagull")
has outstanding $66,951,512 aggregate principal amount of Intercompany Notes (as
defined in the Lender Note Agreements), such Intercompany Notes (the "Existing
Intercompany Notes") being more particularly described in Exhibit A attached
hereto;
WHEREAS, the Company and Seagull have requested the consent of the
Lender to the execution and delivery by Seagull of new Intercompany Notes, in
exchange for and in replacement of the Existing Intercompany Notes, such new
Intercompany Notes (the "Replacement Intercompany Notes") to be identical in
form and substance to the respective Existing Intercompany Notes being replaced
thereby except that each Replacement Intercompany Note shall include the
additional provision set forth in Exhibit B attached hereto; and <PAGE>
WHEREAS, the Company and Seagull have requested the consent of the
Lender to the execution and delivery by the Company and Seagull of a Ninth
Supplemental Mortgage in the form of Exhibit C attached hereto (the "Ninth
Supplemental Mortgage") for the purpose of supplementing and amending the
Intercompany Mortgage (as defined in the Lender Note Agreements) so as to (i)
permit the inclusion of the provision set forth in Exhibit B attached hereto in
all Intercompany Notes issued after the date hereof and (ii) cause Section 3.02
of the Intercompany Mortgage to be consistent with the provision set forth in
Exhibit B attached hereto;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Lender and the Company hereby consent and agree as follows:
1. The Company and the Lender hereby agree that clause (a) of the
definition of "Consolidated Adjusted Net Earnings" contained in Section 14 of
each Lender Note Agreement is amended to read in its entirely as follows:
"(a) there shall be deducted an amount equal to the excess, if any, of (i)
the sum of (x) the aggregate amount applied by the Company during such period to
the payment, redemption, retirement and purchase of Funded Debt of the Company
(other than any amount payable at the scheduled maturity of any such Funded Debt
or on account of any mandatory or required sinking, purchase or other analogous
fund with respect to any such Funded Debt) and (y) the aggregate amount applied
by the Company during such period to the repayment during such period of
advances to the Company by Seagull over (ii) the sum of (x) the aggregate amount
of depreciation and amortization deducted during such period in determining
Consolidated Net Income as Reported, (y) the aggregate principal amount of
Funded Debt incurred by the Company during such period for the purpose of
renewing, extending, refinancing, refunding, rearranging or replacing any Funded
Debt taken into account under subclause (i) (x) above and (z) the sinking fund
payments made by Seagull to the Company during such period in accordance with
indebtedness of the Division to the Company evidenced by the Intercompany
Notes;".
2. The Company and the Lender hereby agree that, except as hereinabove
amended and modified, each Lender Note Agreement shall continue in full force
and effect.
3. The Lender hereby consents to (a) the execution and delivery by
Seagull of the Replacement Intercompany Notes in exchange for and in replacement
of the Existing Intercompany Notes and (b) the execution and delivery by the
Company and Seagull of the Ninth Supplemental Mortgage.
<PAGE>
IN WITNESS WHEREOF, the Company and the Lender have caused this Consent
and Agreement to be executed as of the date first above written.
ALASKA PIPELINE COMPANY
By:____________________________________
THE TRAVELERS INSURANCE COMPANY
By:____________________________________
<PAGE>
Intercompany Notes Outstanding
as of April 15, 1991
<TABLE>
<CAPTION>
Original Outstanding
Principal Principal
Date Amount Amount
----------------- ---------------------- -----------------------
<S> <C> <C> <C>
01/01/85 $ 245,000 $ 35,000
01/01/85 320,000 80,000
12/31/84 900,000 300,000
01/01/85 760,000 304,000
01/01/85 165,000 66,000
01/01/85 1,620,000 810,000
04/01/85 300,000 150,000
04/01/85 660,000 330,000
06/01/85 2,332,650 2,332,650
01/01/85 2,150,000 2,150,000
07/01/85 24,300,000 18,900,000
12/31/85 3,000,000 2,350,000
12/31/86 10,650,000 8,290,000
12/31/88 8,000,000 6,220,000
12/31/89 8,300,000 7,263,000
12/31/90 12,300,000 12,300,000
12/31/84 5,070,862 5,070,862
====================== =======================
$ 81,073,512 $ 66,951,512
====================== =======================
</TABLE>
<PAGE>
Anything in this Note, the Mortgage or elsewhere to the contrary
notwithstanding, Seagull shall not be personally liable for the payment of the
principal of, premium (if any) or interest on this Note, it being expressly
understood and agreed that the sole recourse of the holder of this Note for the
payment hereof shall be against the Mortgaged Property and that no recourse
(whether under rule of law, statute or constitution or by the enforcement of any
assessment or penalty or otherwise) shall be had against Seagull or any other
Person for the payment of the principal of, premium (if any) or interest on this
Note or for any claim based hereon or otherwise in respect hereof; provided,
however, that nothing in this paragraph shall (i) affect the validity of the
indebtedness evidenced by this Note or the rights of any holder of this Note to
proceed against the Mortgaged Property in accordance with the Mortgage, (ii)
constitute a waiver of any indebtedness or obligation evidenced by this Note
(but the same shall continue until paid or discharged), (iii) limit or otherwise
prejudice in any way the right of any holder of this Note to name Seagull or any
owner, holder or transferee of any interest in the Mortgaged Property as a party
defendant in any action or suit for judicial foreclosure of, or in the exercise
of any other remedy available to such holder with respect to, the Mortgaged
Property so long as no judgment in the nature of a deficiency or seeking
personally liability shall be asked of or (if obtained) enforced against
Seagull.
<PAGE>
================================================================================
SEAGULL ENERGY CORPORATION
As Mortgagor
TO
ALASKA PIPELINE COMPANY
As Mortgagee
------------
NINTH SUPPLEMENTAL MORTGAGE
Dated as of ________________, 1991
------------
Further Supplementing and Amending the First Mortgage and Deed of Trust, dated
as of August 1, 1960, as heretofore supplemented, amended and restated by a
Supplemental Mortgage dated as of September 9, 1960, a Second Supplemental
Mortgage dated as of May 1, 1961, a Third Supplemental Mortgage dated as of
December 15, 1969, a Fifth Supplemental Mortgage dated as of November 15, 1975,
a Sixth Supplemental Mortgage dated as of December 30, 1977, a Seventh
Supplemental Mortgage dated as of January 1, 1984 and an Eight Supplemental
Mortgage dated as of June 17, 1985.
================================================================================
<PAGE>
NINTH SUPPLEMENTAL MORTGAGE, dated as of __________________, 1991, between
SEAGULL ENERGY CORPORATION (the "Company"), a Texas corporation, party of the
first part, and ALASKA PIPELINE COMPANY ("Alaska"), an Alaska corporation, party
of the second part.
RECITALS
WHEREAS, Alaska Public Service Corporation (formerly named Anchorage
Natural Gas Corporation and herein called "Service"), in order to secure loans
made to it form time to time by Alaska, executed and delivered to Alaska, as
Mortgagee, a First Mortgage and Deed of Trust dated as of August 1, 1960 (the
"Original Mortgage"), and three mortgages supplemental thereto consisting of a
Supplemental Mortgage dated as September 9, 1960 (the "First Supplemental
Mortgage"), a Second Supplemental Mortgage dated as of May 1, 1961 (the "Second
Supplemental Mortgage") and a Third Supplemental Mortgage dated as of December
15, 1969 (the "Third Supplemental Mortgage");
WHEREAS, effective February 18, 1972, Alaska Interstate Company, an
Alaska corporation ("Interstate"), acquired all of the assets and business as a
going concern of Service and in connection therewith entered into a Fourth
Supplemental Mortgage dated as of February 18, 1972 ( the "Fourth Supplemental
Mortgage") which, among other things, (a) provided for the assumption by
Interstate of all obligations, warranties and agreements of Service under the
Secured Notes and the Original Mortgage as supplemented and amended thereby and
by the First Supplemental Mortgage, the Second Supplemental Mortgage and the
Third Supplemental Mortgage, and (b) restated the terms and provisions of the
Original Mortgage, as supplemented and amended thereby and by the First
Supplemental Mortgage, the Second Supplemental Mortgage and the Third
Supplemental Mortgage;
WHEREAS, effective June 4, 1982, Interstate merged into ENSTAR
Corporation ("ENSTAR"), and ENSTAR, as the surviving corporation, succeeded to
all of Interstate's right, title and interest to the assets and business of
Service as a going concern, and assumed all of Interstate's obligations under
(a) the Original Mortgage as theretofore supplemented, amended and restated by
the First Supplemental Mortgage, the Second Supplemental Mortgage, the Third
Supplemental Mortgage, the Fourth Supplemental Mortgage, a Fifth Supplemental
Mortgage dated as of November 15, 1975, a Sixth Supplemental Mortgage dated as
of December 30, 1977 and a Seventh Supplemental Mortgage dated as of January 1,
1984 (the Original Mortgage, as so supplemented, amended and restated by such
seven supplemental mortgages, being herein called the "Amended Mortgage") and
(b) the notes of Interstate secured by the Amended Mortgage;
WHEREAS, following such merger, the name of Service was changed to
ENSTAR Natural Gas Company and its operations were thereafter conducted as a
division (the "Division") of ENSTAR;
WHEREAS, effective June 17, 1985, the Company purchased from ENSTAR all
of the outstanding common stock of Alaska and all of the assets and business as
a going concern of the Division pursuant to an Agreement of Purchase and Sale
dated as of October 30, 1984, as amended by a Supplemental Agreement dated may
3, 1985;
<PAGE>
WHEREAS, in connection with such purchase, the Company, and Alaska
entered into an Eighth Supplemental Mortgage, dated as of June 17, 1985 (the
"Eighth Supplemental Mortgage"), providing, among other things, for (i) the
amendment and restatement of the Amended Mortgage and (ii) the assumption by the
Company all the obligations, warranties and agreements of ENSTAR and the
Division under the Amended Mortgage;
WHEREAS, pursuant to the Amended Mortgage, as amended and restated by the
Eighth Supplemental Mortgage (the "Mortgage"), the Company issued to Alaska
certain promissory notes of the Company (the "Replacement Notes") in exchange
for and in cancellation and replacement of all promissory notes of ENSTAR
secured by the Mortgage (the "ENSTAR Notes");
WHEREAS, the Replacement Notes were issued in renewal, extension and
refunding of the ENSTAR Notes and the lien created by the Mortgage was carried
forward and continued in force and effect for the purpose of securing, among
other indebtedness, the indebtedness evidenced by the Replacement Notes;
WHEREAS, the Company and Alaska desire to amend certain terms and
conditions contained in the Mortgage, and the Company desires to convey and
mortgage, and confirm the conveyancing and mortgaging under the Mortgage and
hereunder, of certain properties heretofore acquired by the Company with respect
to the operations of the Division and not specifically described in the
Mortgage, and, to that end, the Company desires to make, execute and deliver to
Alaska a Ninth Supplemental Mortgage, supplemental to the Mortgage, in the form
hereof and for the purposes herein provided, which will secure all the Notes (as
defined in Section 1.01 of the Mortgage);
WHEREAS, all conditions and requirements necessary to authorize the
execution, acknowledgment and delivery of this Ninth Supplemental Mortgage and
duly and legally to effect the modifications of the Mortgage provided for in
this Ninth Supplemental Mortgage and to make the Mortgage, as supplemented and
amended hereby, a valid, binding and legal instrument for the security of the
Notes ( as defined in Section 1.01 of the Mortgage), have been compiled with or
have been done and performed;
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Alaska hereby act and agree as follows:
ARTICLE I
Confirmation of Mortgage, etc.
In order further to secure (and the Company hereby acknowledges and
agrees that the lien of the Mortgage is hereby carried forward and continued in
force and effect for the purpose of securing) the payment of the principal of
and the premium, if any, and interest on all Notes at any time issued and
outstanding under the Amended Mortgage, as supplemented and amended by this
Ninth Supplemental Mortgage and as further supplemented and amended, from time
to time, in accordance with their terms, and the performance and observance by
the
<PAGE>
Company of all of the obligations and agreements of the Company herein and
therein contained and the payment of all amounts payable and to become payable
by the Company under the Gas Sale Contract (as defined in Section 1.01 of the
Mortgage), the Company (i) has executed and delivered this Ninth Supplemental
Mortgage, (ii) does hereby ratify and confirm its mortgage and pledge to Alaska
of its property (other than Excepted Property, as defined in the Excepted
Property Clause of the Mortgage, and any property heretofore released from the
lien of the Mortgage pursuant thereto and other than easements, rights-of-way,
permits, leaseholds, contracts and agreements which have either expired or been
completed in accordance with their terms) described in the Mortgage as being
subjected to the lien of the Mortgage and has granted, bargained, sold,
released, conveyed, assigned, transferred, mortgaged, pledged, set over and
confirmed, and (iii) does hereby grant, bargain, sell, release, convey, assign,
transfer, mortgage, pledge, set over and confirm unto Alaska, as Mortgagee under
the Mortgage, and to its successors and assigns forever the real property and
interests in real property described in Schedule I attached hereto and made a
part hereof for all purposes.
ARTICLE II
Modifications of the Mortgage
SECTION 2.1. Section 2.02 Amended. Section 2.02 of the Mortgage is
hereby amended by adding the following new paragraph to the Form of Note
contained in such Section:
"Anything in this Note, the Mortgage or elsewhere to the contrary
notwithstanding, Seagull shall not be personally liable for the payment of the
principal of, premium (if any) or interest on this Note, it being expressly
understood and agreed that the sole recourse of the holder of this Note for the
payment hereof shall be against the Mortgaged Property and that no recourse
(whether under rule of law, statute or constitution or by the enforcement of any
assessment or penalty or otherwise) shall be had against Seagull or any other
Person for the payment of the principal of, premium (if any) or interest on this
Note or for any claim based hereon or otherwise in respect hereof; provided,
however, that nothing in this paragraph shall (i) affect the validity of the
indebtedness evidenced by this Note or the rights of any holder of this Note to
proceed against the Mortgaged Property in accordance with the Mortgage, (ii)
constitute a waiver of any indebtedness or obligation evidenced by this Note
(but the same shall continue until paid or discharged), (iii) limit or otherwise
prejudice in any way the right of any holder of this Note to name Seagull or any
owner, holder or transferee of any interest in the Mortgaged Property as a party
defendant in any action or suit for judicial foreclosure of, or in the exercise
of any other remedy available to such holder with respect to, the Mortgaged
Property so long as no judgment in the nature of a deficiency or seeking
personally liability shall be asked of or (if obtained) enforced against
Seagull."
SECTION 2.2. Section 3.02 Amended. Section 3.02 of the Mortgage is
hereby amended by replacing the second paragraph thereof with the following
paragraph:
"Anything in this Mortgage, the Notes or elsewhere to the contrary
notwithstanding, the Company shall not be personally liable for the payment of
the principal of, premium (if any) or interest on the Notes (whether Replacement
Notes or otherwise), it being expressly understood and agreed that the sole
recourse of the holders of the Notes for the
<PAGE>
payment thereof shall be against the Mortgaged Property and that no recourse
(whether under rule of law, statute or constitution or by the enforcement of any
assessment or penalty or otherwise) shall be had against the Company or any
other Person for the payment of the principal of, premium (if any) or interest
on the Notes or for any claim based hereon or otherwise in respect thereof;
provided, however, that nothing in this paragraph shall (i) affect the validity
of the indebtedness evidenced by the Notes or the rights of any holder of a Note
to proceed against the Mortgaged Property in accordance with this Mortgage, (ii)
constitute a waiver of any indebtedness or obligation evidenced by the Notes
(but the same shall continue until paid or discharged), (iii) limit or otherwise
prejudice in any way the right of any holder of a Note to name the Company or
any owner, holder or transferee of any interest in the Mortgaged Property as a
party defendant in any action or suit for judicial foreclosure of, or in the
exercise of any other remedy available to such holder with respect to, the
Mortgaged Property so long as no judgment in the nature of a deficiency or
seeking personally liability shall be asked of or (if obtained) enforced against
the Company."
ARTICLE III
Miscellaneous Provisions
SECTION 3.1. Titles, Headings, Etc. The titles and headings of the
Articles, Sections and subdivisions of this Ninth Supplemental Mortgage have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 3.2. Counterparts. This Ninth Supplemental Mortgage may be
executed in any number of counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Ninth Supplemental
Mortgage to be executed by their respective officers thereunto duly authorized,
all as of the day and year first above written.
SEAGULL ENERGY CORPORATION
By:_____________________________
[Corporate Seal] Title:__________________________
Attest:
By:___________________________
Secretary
<PAGE>
ALASKA PIPELINE COMPANY
By:__________________________
[Corporate Seal]
Title:_______________________
Attest:
By:___________________________
Secretary
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, on this day personally appeared
___________________________, known to me to be the person whose name is
subscribed to the foregoing instrument, and known to me to be the
___________________________________ of SEAGULL ENERGY CORPORATION, a Texas
corporation, and acknowledged to me that he executed said instrument for the
purposes and consideration therein expressed, and in the capacity therein
stated, as the free and voluntary act and deed of the said corporation for the
uses and purposes therein mentioned.
Given under my hand and seal of office this _____ day of ____________,
1991.
-----------------------------------
Notary Public in and for
the State of Texas
[Notarial Seal]
My Commission Expires:_______________
<PAGE>
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, on this day personally appeared
______________________________, known to me to be the person whose name is
subscribed to the foregoing instrument, and known to me to be the
________________________________ of ALASKA PIPELINE COMPANY, a Texas
corporation, and acknowledge to me that the executed said instrument for the
purposes and consideration therein expressed, and in the capacity therein
stated, as the free and voluntary act and deed of the said corporation for the
uses and purposes therein mentioned.
Given under my hand and seal of office this ______ day of ____________,
1991.
-----------------------------------
Notary Public in and for
the State of Texas
[Notarial Seal]
My Commission Expires:_______________
<PAGE>
SCHEDULE I
A. The right, title and interest of the Company in the following easements,
rights-of-way, permits, licenses, servitudes, leases, grants and rights (all
references hereafter made to books and pages being to the Conveyance and Deed
Records of the respective Recording Districts of the State of Alaska), to wit:
[ To Come]
B. The right, title and interest of the Company in the following
permits, licenses, franchises and grants over, in, on and across the lands
described and for the purposed stated therein:
[To Come]
C. The right, title and interest of the Company in the following real
property:
[To Come]
EXHIBIT 21
SUBSIDIARIES
The Company was incorporated in Texas in 1973. The following is a listing
of significant subsidiaries of the Company as of March 9, 1998:
<TABLE>
<CAPTION>
% Voting
Securities
Jurisdiction of or Beneficial
Incorporation Interest Owned
Name of Subsidiary or Organization by the Company
- ---------------------------------------------------------------------- ------------------------------ ---------------------------
<S> <C> <C>
Alaska Pipeline Company Alaska 100%
Global Natural Resources Corporation of Nevada Nevada 100%
Global Natural Resources Inc. New Jersey 100%
Seagull (Cote d'Ivoire) CI-104 Ltd. Cayman Islands 100%
Seagull (Cote d'Ivoire) CI-12 Ltd. Cayman Islands 100%
Seagull (Cote d'Ivoire) Ltd. Cayman Islands 100%
Seagull (Egypt) Darag, Ltd. Cayman Islands 100%
Seagull (Egypt) East Beni Suef, Ltd. Cayman Islands 100%
Seagull (Egypt) Ltd. Cayman Islands 100%
Seagull East Zeit Petroleum Ltd. Cayman Islands 100%
Seagull Energy E&P Inc. Delaware 100%
Seagull Energy International Inc. Delaware 100%
Seagull Field Services Company Texas 100%
Seagull International Holdings Ltd. Cayman Islands 100%
Seagull Marketing Services, Inc. Texas 100%
Seagull Midcon Inc. Delaware 100%
Seagull Mid-South Inc. Delaware 100%
Seagull Pipeline & Marketing Company Delaware 100%
Seagull Pipeline Company Delaware 100%
Seagull Power Services Inc. Delaware 100%
Seagull Products Pipeline Corporation Texas 100%
Seagull South Hurghada Petroleum Ltd. Cayman Islands 100%
Seagull WAG Petroleum Ltd. Cayman Islands 100%
Texneft Inc. Texas 100%
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Seagull Energy Corporation:
We consent to the incorporation by reference in the following Registration
Statements of Seagull Energy Corporation of our report dated January 28, 1998,
relating to the consolidated balance sheets of Seagull Energy Corporation and
Subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended December 31 1997, which report appears or
is incorporated by reference in the December 31, 1997 Annual Report on Form 10-K
of Seagull Energy Corporation.
a. Form S-8, Seagull Thrift Plan (2-72014).
b. Form S-8, Seagull Energy Corporation 1981 Non-Qualified and
Incentive Stock Option Plan (2-80834).
c. Form S-8, ENSTAR Natural Gas Company Thrift Plan (33-14463).
d. Forms S-8 and S-3, Seagull Energy Corporation 1983 Stock Option Plan
(2-93087).
e. Forms S-8 and S-3, Seagull Energy Corporation 1986 Stock Option Plan
(33-22475).
f. Form S-8, Seagull Energy Corporation 1990 Stock Option Plan (33-43483).
g. Form S-8, Seagull Energy Corporation 1993 Stock Option Plan (33-50643).
h. Form S-8, Seagull Energy Corporation 1993 Nonemployee Directors' Stock
Option Plan (33-50645).
i. Form S-3, $350,000,000 Debt Securities of Seagull Energy Corporation
(33-65118).
j. Form S-3, ENSTAR Alaska Group of Common Stock of Seagull Energy Corporation
(33-53729).
k. Form S-8, Seagull Energy Corporation 1995 Omnibus Stock Plan (33-64041).
l. Form S-3, $300,000,000 Debt Securities, Preferred Stock, Depositary Shares,
Common Stock or Securities Warrants of Seagull Energy Corporation (33-64051).
m. Form S-8, Global Natural Resources In. 1989 Key Employees Stock Option
Plan and 1992 Stock Option Plan (333-13393).
/s/ KPMG Peat Marwick LLP
Houston, Texas
March 17, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name in the Annual Report on Form 10-K
of Seagull Energy Corporation and Subsidiaries (the "Company") for the year
ended December 31, 1997, and the incorporation by reference thereof into the
Company's registration statements on Form S-8 (Nos. 2-72014, 2-80834, 33-14463,
33-43483, 33-50643, 33-50645, 33-64041 and 333-13393), Forms S-8 and S-3 (Nos.
2-93087 and 33-22475) and Form S-3 (Nos. 33-53729, 33-65118, 33-64051 and
333-34841).
\S\ Ryder Scott Company
Petroleum Engineers
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
March 16, 1998
EXHIBIT 23.3
CONSENT of INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name under the heading "Oil and Gas
Operations" of Item 1 in the Annual Report on Form 10-K (the Form 10-K) for the
year ended December 31, 1997, of Seagull Energy Corporation and Subsidiaries and
the incorporation by reference of the Form 10-K into the Company's registration
statements on Form S-8 (Nos. 2-72014, 2-80834, 33-14463, 33-43483, 33-50643,
33-50645, 33-64041 and 333-13393), Forms S-8 and S-3 (Nos. 2-93087 and 33-22475)
and Form S-3 (Nos. 33-53729, 33-65118, 33-64051 and 333-34841).
\S\ DeGolyer and MacNaughton
DeGOLYER AND MacNAUGHTON
Dallas, Texas
March 16, 1998
EXHIBIT 23.4
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
We hereby consent to the use of our name in the Annual Report on Form 10-K
of Seagull Energy Corporation and Subsidiaries (the "Company") for the year
ended December 31, 1997, and the incorporation by reference thereof into the
Company's registration statements on Form S-8 (Nos. 2-72014, 2-80834, 33-14463,
33-43483, 33-50643, 33-50645, 33-64041 and 333-13393), Forms S-8 and S-3 (Nos.
2-93087 and 33-22475) and Form S-3 (Nos. 33-53729, 33-65118, 33-64051 and
333-34841).
By:/s/ Clarence M. Netherland
Clarence M. Netherland, Chairman
NETHERLAND, SEWELL & ASSOCIATES, INC.
Houston, Texas
March 18, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 45,654
<SECURITIES> 0
<RECEIVABLES> 147,442
<ALLOWANCES> 0
<INVENTORY> 13,635
<CURRENT-ASSETS> 222,971
<PP&E> 2,053,683
<DEPRECIATION> 908,849
<TOTAL-ASSETS> 1,411,066
<CURRENT-LIABILITIES> 213,860
<BONDS> 469,017
0
0
<COMMON> 6,388
<OTHER-SE> 640,816
<TOTAL-LIABILITY-AND-EQUITY> 1,411,066
<SALES> 549,367
<TOTAL-REVENUES> 549,367
<CGS> 43,684
<TOTAL-COSTS> 438,891
<OTHER-EXPENSES> (14,257)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,533
<INCOME-PRETAX> 86,200
<INCOME-TAX> 37,070
<INCOME-CONTINUING> 49,130
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,130
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.77
</TABLE>
