<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________________ to _____________________
Commission File Number 1-3473
Tesoro Petroleum Corporation
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-0862768
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8700 Tesoro Drive, San Antonio, Texas 78217
(Address of Principal Executive Offices)
(Zip Code)
Telephone: 210-828-8484
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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
------- -------
There were 22,456,968 shares of the Registrant's common stock outstanding at
April 30, 1994.
<PAGE> 2
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Index to Form 10-Q
For the Quarterly Period Ended March 31, 1994
<TABLE>
<CAPTION>
Part I. Financial Information: Page
----
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
March 31, 1994 and December 31, 1993 . . . . . . . . . . . . . . . . . . . . . 3
Condensed Statements of Consolidated Operations
Three Months Ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . 5
Condensed Statements of Consolidated Cash Flows
Three Months Ended March 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . 13
Part II. Other Information:
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 28
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993*
--------- -----------
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents (includes
restricted cash of $26,550 and
$25,420, respectively, as collateral
for letters of credit). . . . . . . . . . . . . . . . . . $ 49,412 36,596
Short-term investments. . . . . . . . . . . . . . . . . . . - 5,952
Receivables, less allowance for
doubtful accounts of $2,419
($2,487 at December 31, 1993). . . . . . . . . . . . . . . 59,487 69,637
Inventories:
Crude oil, refined products and
merchandise . . . . . . . . . . . . . . . . . . . . . . 72,261 71,011
Materials and supplies. . . . . . . . . . . . . . . . . . 3,142 3,175
Prepaid expenses and other. . . . . . . . . . . . . . . . . 9,870 10,136
---------- -------
Total Current Assets. . . . . . . . . . . . . . . . . . . 194,172 196,507
Property, Plant and Equipment, Net of
Accumulated Depreciation, Depletion
and Amortization of $177,188
($172,312 at December 31, 1993) . . . . . . . . . . . . . . 222,418 213,151
Investment in Tesoro Bolivia Petroleum
Company . . . . . . . . . . . . . . . . . . . . . . . . . . 6,823 6,310
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . 18,696 18,554
---------- -------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . $ 442,109 434,522
========== =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
* The balance sheet at December 31, 1993 has been taken from the audited
consolidated financial statements at that date and condensed.
-3-
<PAGE> 4
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993*
--------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . $ 45,161 43,192
Accrued liabilities. . . . . . . . . . . . . . . . . . 32,623 24,017
Current portion of long-term debt
and other obligations. . . . . . . . . . . . . . . . 6,094 4,805
--------- ---------
Total Current Liabilities . . . . . . . . . . . . 83,878 72,014
--------- ---------
Other Liabilities. . . . . . . . . . . . . . . . . . . . 35,277 45,272
--------- --------
Long-Term Debt and Other Obligations,
Less Current Portion . . . . . . . . . . . . . . . . . 178,856 180,667
--------- ---------
Commitments and Contingencies (Note 5)
Redeemable Preferred Stock . . . . . . . . . . . . . . . - 78,051
--------- ---------
Common Stock and Other Stockholders'
Equity:
$2.20 Cumulative convertible
preferred stock. . . . . . . . . . . . . . . . . . . 57,500 -
$2.16 Cumulative convertible pre-
ferred stock . . . . . . . . . . . . . . . . . . . . - 1,320
Common Stock . . . . . . . . . . . . . . . . . . . . . 3,743 2,348
Additional paid-in capital . . . . . . . . . . . . . . 114,406 86,985
Retained earnings (deficit) . . . . . . . . . . . . . ( 31,337) ( 31,898)
--------- ---------
144,312 58,755
Less deferred compensation . . . . . . . . . . . . . . 214 237
--------- ---------
144,098 58,518
--------- ---------
Total Liabilities and Stockholders'
Equity . . . . . . . . . . . . . . . . . . . . . . . . $ 442,109 434,522
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
* The balance sheet at December 31, 1993 has been taken from the audited
consolidated financial statements at that date and condensed.
-4-
<PAGE> 5
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Condensed Statements of Consolidated Operations
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
1994 1993
---- ----
<S> <C> <C>
Revenues:
Gross operating revenues . . . . . . . . . . $189,087 224,494
Interest income . . . . . . . . . . . . . . . 523 451
Gain on sales of assets . . . . . . . . . . . 2,680 48
Other . . . . . . . . . . . . . . . . . . . . 450 1,488
-------- --------
Total Revenues . . . . . . . . . . . . . . 192,740 226,481
-------- --------
Costs and Expenses:
Costs of sales and operating
expenses . . . . . . . . . . . . . . . . . 167,605 213,737
General and administrative . . . . . . . . . 3,627 3,423
Depreciation, depletion and
amortization . . . . . . . . . . . . . . . 6,677 4,822
Interest expense . . . . . . . . . . . . . . 4,877 5,013
Other . . . . . . . . . . . . . . . . . . . . 1,191 1,663
-------- --------
Total Costs and Expenses . . . . . . . . . 183,977 228,658
-------- --------
Earnings (Loss) Before Income
Taxes and Extraordinary Loss
on Extinguishment of Debt . . . . . . . . . . 8,763 ( 2,177)
Income Tax Provision . . . . . . . . . . . . . 1,561 732
-------- --------
Earnings (Loss) Before Extraor-
dinary Loss on Extinguishment
of Debt . . . . . . . . . . . . . . . . . . . 7,202 ( 2,909)
Extraordinary Loss on Extinguish-
ment of Debt . . . . . . . . . . . . . . . . ( 4,752) -
-------- --------
Net Earnings (Loss) . . . . . . . . . . . . . . $ 2,450 ( 2,909)
======== ========
Net Earnings (Loss) Applicable to
Common Stock . . . . . . . . . . . . . . . . $ 561 ( 5,211)
======== =========
Earnings (Loss) Per Primary and
Fully Diluted* Share:
Earnings (Loss) Before Extra-
ordinary Loss on Extinguish-
ment of Debt . . . . . . . . . . . . . . . $ .27 ( .37)
Extraordinary Loss on
Extinguishment of Debt . . . . . . . . . . ( .24) -
-------- -------
Net Earnings (Loss) . . . . . . . . . . . . . $ .03 ( .37)
======== ========
Weighted Average Common and Common
Equivalent Shares (in thousands) . . . . . . 19,455 14,070
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
*Anti-dilutive.
-5-
<PAGE> 6
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Condensed Statements of Consolidated Cash Flows
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1994 1993
-------- --------
<S> <C> <C>
Cash Flows From (Used In) Operating Activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . $ 2,450 ( 2,909)
Adjustments to reconcile net earnings
(loss) to net cash from operating
activities:
Loss (gain) on extinguishment of debt . . . . . . . . . . . 4,752 ( 1,422)
Depreciation, depletion and
amortization . . . . . . . . . . . . . . . . . . . . . 6,677 4,822
Gain on sales of assets . . . . . . . . . . . . . . . . . . ( 2,680) ( 48)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 361 662
Changes in assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . . . 11,151 3,520
Inventories . . . . . . . . . . . . . . . . . . . . . . . ( 1,217) 13,372
Investment in Tesoro Bolivia
Petroleum Company . . . . . . . . . . . . . . . . . . . ( 513) 377
Other assets . . . . . . . . . . . . . . . . . . . . . . 1,834 1,011
Accounts payable and other current
liabilities . . . . . . . . . . . . . . . . . . . . . . 8,272 4,563
Obligation payments to State of
Alaska . . . . . . . . . . . . . . . . . . . . . . . . ( 710) (10,797)
Other liabilities and obligations . . . . . . . . . . . . ( 118) 1,262
---------- ---------
Net cash from operating activities . . . . . . . . . . 30,259 14,413
---------- ---------
Cash Flows From (Used In) Investing
Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . (18,475) ( 5,084)
Proceeds from sales of assets, net of
expenses . . . . . . . . . . . . . . . . . . . . . . . . . 2,014 107
Sales of short-term investments . . . . . . . . . . . . . . . 5,952 20,021
Purchases of short-term investments . . . . . . . . . . . . - ( 8,410)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 ( 206)
---------- ---------
Net cash from (used in) investing
activities . . . . . . . . . . . . . . . . . . . . . (10,158) 6,428
---------- ---------
Cash Flows From (Used In) Financing
Activities:
Payments of long-term debt . . . . . . . . . . . . . . . . . (10,222) ( 211)
Issuance of long-term debt . . . . . . . . . . . . . . . . . 5,000 -
Dividends on preferred stock . . . . . . . . . . . . . . . . ( 103) -
Repurchase of debentures . . . . . . . . . . . . . . . . . . - ( 9,675)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 1,960) ( 5)
---------- ---------
Net cash used in financing
activities . . . . . . . . . . . . . . . . . . . . . ( 7,285) ( 9,891)
---------- ---------
Increase in Cash and Cash Equivalents . . . . . . . . . . . . 12,816 10,950
Cash and Cash Equivalents at Beginning of
Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,596 46,869
---------- ---------
Cash and Cash Equivalents at End of
Period . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,412 57,819
========== =========
Supplemental Cash Flow Disclosures:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . $ 7,105 8,477
========== =========
Income taxes paid . . . . . . . . . . . . . . . . . . . . . $ 961 755
========== =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-6-
<PAGE> 7
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The interim condensed consolidated financial statements are unaudited
but, in the opinion of management, incorporate all adjustments
necessary for a fair presentation of results for such periods. Such
adjustments are of a normal recurring nature. For information
regarding the effects of the Recapitalization (as hereinafter
defined), see Note 2 below. The results of operations for any interim
period are not necessarily indicative of results for the full year.
The accompanying condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and
notes thereto contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
(2) Recapitalization
In February 1994, the Company consummated exchange offers and adopted
amendments to its Restated Certificate of Incorporation pursuant to
which the Company's outstanding debt and preferred stock were
restructured (the "Recapitalization"). The Recapitalization has
significantly improved the Company's capital structure.
Significant components of the Recapitalization, together with the
applicable accounting effects, were as follows:
(i) The Company has exchanged $44.1 million principal amount of new
13% Exchange Notes ("Exchange Notes") due December 1, 2000 for a
like principal amount of 12 3/4% Subordinated Debentures
("Subordinated Debentures") due March 15, 2001. This exchange
satisfied the 1994 sinking fund requirements and, except for $.9
million, will satisfy sinking fund requirements for the
Subordinated Debentures through 1997.
The exchange of the Subordinated Debentures has been accounted for
as an early extinguishment of debt in the first quarter of 1994,
resulting in a charge of $4.8 million as an extraordinary loss on
this transaction, which represented the excess of the estimated
market value of the Exchange Notes over the carrying value of the
Subordinated Debentures. The carrying value of the Subordinated
Debentures exchanged was reduced by applicable unamortized debt
issue costs. No tax benefit was available to offset the
extraordinary loss as the Company has provided a 100% valuation
allowance to the extent of its deferred tax assets.
(ii) The 1,319,563 outstanding shares of the Company's $2.16 Cumulative
Convertible Preferred Stock ("$2.16 Preferred Stock"), which had a
$25 per share liquidation preference, plus accrued and unpaid
dividends aggregating $9.5 million at February 9, 1994, were
reclassified into 6,465,859 shares of Common Stock. The Company
also agreed to issue up to 131,956 shares of Common Stock on
behalf of the holders of $2.16 Preferred Stock to pay certain of
their legal fees and expenses in connection with the settlement of
litigation related to the reclassification. Of such 131,956
shares of Common Stock, 73,913 shares were awarded in April 1994
by the Delaware Chancery Court for legal fees and expenses, with
the remaining shares to be issued to the
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<PAGE> 8
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
former holders of $2.16 Preferred Stock upon the court's order
becoming final and nonappealable.
The issuance of the Common Stock in connection with the
reclassification and settlement of litigation that was recorded in
1994 resulted in an increase in Common Stock of approximately $1
million, equal to the aggregate par value of the Common Stock
issued, and an increase in additional paid-in capital of
approximately $9 million.
(iii) The Company and MetLife Security Insurance Company of Louisiana
("MetLife Louisiana"), the holder of all of the Company's
outstanding $2.20 Redeemable Cumulative Convertible Preferred
Stock ("$2.20 Preferred Stock"), entered into an agreement (the
"Amended MetLife Memorandum") with regard to the $2.20 Preferred
Stock pursuant to which MetLife Louisiana agreed to waive all
existing mandatory redemption requirements, to consider all
accrued and unpaid dividends thereon (aggregating $21.2 million at
February 9, 1994) to have been paid, to allow the Company to pay
future dividends on the $2.20 Preferred Stock in Common Stock in
lieu of cash, to waive or refrain from exercising certain other
rights of the $2.20 Preferred Stock and to grant to the Company a
three-year option (the "MetLife Louisiana Option") to purchase all
of MetLife Louisiana's holdings of $2.20 Preferred Stock and
Common Stock for approximately $53 million prior to June 30, 1994
after giving effect to the scheduled dividend payment on May 15,
1994, all in consideration for, among other things, the issuance
by the Company to MetLife Louisiana of 1,900,075 shares of Common
Stock. Such additional shares are subject to the MetLife
Louisiana Option. The unexercised option price will be increased
by 3% on the last day of each calendar quarter until December 31,
1995, and by 3 1/2% on the last day of each quarter thereafter,
and will be reduced by cash dividends paid on the $2.20 Preferred
Stock after February 9, 1994. The Company will be required to pay
dividends (in either cash or Common Stock) when due on the $2.20
Preferred Stock in order for the MetLife Louisiana Option to
remain outstanding. In addition, the MetLife Louisiana Option is
subject to certain minimum exercise requirements to remain
outstanding beyond one year and two years.
These actions have resulted in the reclassification of the $2.20
Preferred Stock into equity capital at its aggregate liquidation
preference of $57.5 million and the recording of an increase in
additional paid-in capital of approximately $21 million in
February 1994.
If the Recapitalization had been completed at the beginning of the
year, the pro forma earnings per share before extraordinary loss
would have decreased from $.27 to $.24 for the three months ended
March 31, 1994 due to the additional shares of Common Stock issued
in the Recapitalization.
-8-
<PAGE> 9
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
(3) Property, Plant and Equipment
In January 1994, the Company sold its terminal facilities in Valdez,
Alaska for cash proceeds of $2.0 million and a note receivable of $3.0
million, which resulted in a pretax gain to the Company of
approximately $2.8 million during the three months ended March 31,
1994.
(4) Credit Arrangements
During April 1994, the Company entered into a new three-year $125
million corporate revolving credit facility ("Revolving Credit
Facility") with a consortium of ten banks. The Revolving Credit
Facility, which is subject to a borrowing base, provides for (i) the
issuance of letters of credit up to the full amount of the borrowing
base as calculated, but not to exceed $125 million, (ii) cash
borrowings up to the amount of the borrowing base attributable to
domestic oil and gas reserves and (iii) a 90-day option to convert up
to $15 million of the commitment under the Revolving Credit Facility
into a four-year term loan for the construction of a vacuum unit at
the Company's Kenai, Alaska refinery (the "Refinery"). Outstanding
obligations under the Revolving Credit Facility are secured by liens
on substantially all of the Company's trade accounts receivable and
product inventory and mortgages on the Refinery and the Company's
South Texas natural gas reserves.
Letters of credit available under the Revolving Credit Facility are
limited to a borrowing base calculation. The borrowing base, which is
comprised of eligible accounts receivable, inventory and domestic oil
and gas reserves, has initially been determined to be approximately
$97 million. As of April 28, 1994, the Company had outstanding
letters of credit under the new facility of $31 million, with a
remaining unused availability of $66 million. Cash borrowings (other
than under the term loan facility for the vacuum unit) are limited to
the amount of the oil and gas reserve component of the borrowing base,
which has initially been determined to be approximately $32 million.
Cash borrowings under the Revolving Credit Facility will reduce the
availability of letters of credit on a dollar-for-dollar basis;
however, letter of credit issuances will not reduce cash borrowing
availability unless the aggregate dollar amount of outstanding letters
of credit exceeds the sum of the accounts receivable and inventory
components of the borrowing base.
Under the terms of the Revolving Credit Facility, the Company is
required to maintain specified levels of working capital, tangible net
worth and cash flow. Among other matters, the Revolving Credit
Facility has certain restrictions with respect to (i) capital
expenditures, (ii) incurrence of additional indebtedness, and (iii)
dividends on its capital stock. The Revolving Credit Facility
contains other covenants customary in credit arrangements of this
kind.
The Revolving Credit Facility replaced certain interim financing
arrangements that the Company had been using since the termination of
its prior letter of credit facility in October 1993. The interim
financing arrangements that were cancelled in conjunction with the
completion of
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<PAGE> 10
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
the new Revolving Credit Facility included a $30 million reducing
revolving credit facility and a waiver and substitution of collateral
agreement with the State of Alaska (the "State"). In addition, the
completion of the Revolving Credit Facility provides the Company
significant flexibility in the investment of excess cash balances, as
the Company is no longer required to maintain minimum cash balances or
to cash secure letters of credit.
(5) Commitments and Contingencies
Tennessee Gas Contract. The Company is selling a portion of the gas
from its Bob West Field to Tennessee Gas Pipeline Company ("Tennessee
Gas") under a Gas Purchase and Sales Agreement (the "Tennessee Gas
Contract") which provides that the price of gas shall be the maximum
price as calculated in accordance with Section 102(b)(2) (the
"Contract Price") of the Natural Gas Policy Act of 1978 (the "NGPA").
Tennessee Gas filed suit against the Company alleging that the
Tennessee Gas Contract is not applicable to the Company's properties
and that the gas sales price should be the price calculated under the
provisions of Section 101 of the NGPA rather than the Contract Price.
During March 1994, the Contract Price was $7.84 per Mcf, the Section
101 price was $4.58 per Mcf and the average spot market price was
$2.09 per Mcf. Tennessee Gas also claimed that the contract should be
considered an "output contract" under Section 2.306 of the Texas
Business and Commerce Code and that the increases in volumes tendered
under the contract exceeded those allowable for an output contract.
The Company continues to receive payment from Tennessee Gas based on
the Contract Price for all volumes that are subject to the contract
under the Company's interpretation.
The District Court trial judge returned a verdict in favor of the
Company on all issues. On appeal by Tennessee Gas, the Court of
Appeals affirmed the validity of the Tennessee Gas Contract as to the
Company's properties and held that the price payable by Tennessee Gas
for the gas was the Contract Price. The Court of Appeals remanded the
case to the trial court based on its determination (i) that the
Tennessee Gas Contract was an output contract and (ii) that a fact
issue existed as to whether the increases in the volumes of gas
tendered to Tennessee Gas under the contract were made in bad faith or
were unreasonably disproportionate to prior tenders. The Company is
seeking review of the appellate court ruling on the output contract
issue in the Supreme Court of Texas. Tennessee Gas is seeking review
of the appellate court ruling denying the remaining Tennessee Gas
claims in the Supreme Court of Texas.
Although the outcome of any litigation is uncertain, management, based
upon advice from outside legal counsel, is confident that the decision
of the trial and appellate courts will ultimately be upheld as to the
validity of the Tennessee Gas Contract and the Contract Price.
Therefore, if the Supreme Court of Texas does not grant the Company's
petition for writ of error and affirms the appellate court ruling, the
Company believes that the only issue for trial should be whether the
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<PAGE> 11
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
increases in the volumes of gas tendered to Tennessee Gas from the
Company's properties were made in bad faith or were unreasonably
disproportionate. The appellate court decision was the first reported
decision in Texas holding that a take-or-pay contract was an output
contract. As a result, it is not clear what standard the trial court
would be required to apply in determining whether the increases were
in bad faith or unreasonably disproportionate. The appellate court
acknowledged in its opinion that the standards used in evaluating
other kinds of output contracts would not be appropriate in this
context. The Company believes that the appropriate standard would be
whether the development of the field was undertaken in a manner that a
prudent operator would have undertaken in the absence of an
above-market sales price. Under that standard, the Company believes
that, if this issue is tried, the development of its gas properties
and the resulting increases in volumes tendered to Tennessee Gas will
be found to have been reasonable and in good faith. Accordingly, the
Company has recognized revenues, net of production taxes and marketing
charges, for natural gas sales through March 31, 1994, under the
Tennessee Gas Contract based on the Contract Price, which net revenues
aggregated $21.1 million more than the Section 101 prices and $38.9
million in excess of the spot market prices. If Tennessee Gas
ultimately prevails in this litigation, the Company could be required
to return to Tennessee Gas the difference between the spot market
price for gas and the Contract Price, plus interest, if awarded by the
court. An adverse judgment in this case could have a material adverse
effect on the Company. For further information regarding the
Tennessee Gas Contract, see Management's Discussion and Analysis of
Financial Condition and Results of Operations in Part I, Item 2.
Other. In March 1992, the Company received a Compliance Order and
Notice of Violation from the U. S. Environmental Protection Agency
("EPA") alleging possible violations by the Company of the New Source
Performance Standards under the Clean Air Act at the Refinery. The
Company is continuing in its efforts to resolve these issues with the
EPA; however, no final resolution has been reached. The Company
believes that the ultimate resolution of this matter will not have a
material adverse effect upon the Company's business or financial
condition.
The Company is subject to extensive federal, state and local
environmental laws and regulations. These laws, which are constantly
changing, regulate the discharge of materials into the environment and
may require the Company to remove or mitigate the environmental
effects of the disposal or release of petroleum or chemical substances
at various sites. The Company is currently involved with two waste
disposal sites in Louisiana at which it has been named a potentially
responsible party under the Federal Superfund law. Although this law
might impose joint and several liability upon each party at any site,
the extent of the Company's allocated financial contribution to the
cleanup of these sites is expected to be limited based on the number
of companies and the volumes of waste involved. At each site, a
number of large companies have also been named as potentially
responsible parties and are expected to cooperate in the cleanup. The
Company is also involved in remedial response and has incurred cleanup
expenditures associated with
-11-
<PAGE> 12
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
environmental matters at a number of other sites including certain of
its own properties.
At March 31, 1994, the Company had accrued $6.0 million for
environmental costs. Based on currently available information,
including the participation of other parties or former owners in
remediation actions, the Company believes these accruals are adequate.
Conditions which require additional expenditures may exist for various
Company sites, including, but not limited to, the Refinery, service
stations (current and closed locations) and petroleum product
terminals, and for compliance with the Clean Air Act. The amount of
such future expenditures cannot presently be determined by the
Company.
The Company transports its crude oil and a substantial portion of its
refined products utilizing Kenai Pipe Line Company's ("KPL") pipeline
and marine terminal facilities in Kenai, Alaska. In March 1994, KPL
filed a revised tariff with the Federal Energy Regulatory Commission
("FERC") for dock loading services, which would have increased the
Company's annual cost of transporting products through KPL's
facilities from $1.2 million to $11.2 million, or an increase of $10
million per year. Following the FERC's rejection of KPL's tariff and
the commencement of negotiations for the purchase by the Company of
the dock facilities, KPL filed a temporary tariff that would increase
the Company's annual cost by approximately $1.5 million. The
negotiations between the Company and KPL are continuing. The Company
believes that the ultimate resolution of this matter will not have a
material adverse effect upon the financial condition or results of
operations of the Company.
-12-
<PAGE> 13
Item 2. TESORO PETROLEUM CORPORATION AND
SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1994 COMPARED WITH THE
THREE MONTHS ENDED MARCH 31, 1993
A summary of the Company's consolidated results of operations for the three
months ended March 31, 1994 and 1993 is presented below:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
---- ----
<S> <C> <C>
Consolidated Results of Operations Data
(in millions, except per share amounts):
Gross Operating Revenues . . . . . . . . . . . . . . . . . . . . . . . $189.1 224.5
Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 .5
Gain on Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . 2.7 -
Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 1.5
------- -------
Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . 192.7 226.5
Costs of Sales and Operating Expenses. . . . . . . . . . . . . . . . . 167.6 213.8
General and Administrative . . . . . . . . . . . . . . . . . . . . . . 3.6 3.4
Depreciation, Depletion and Amortization . . . . . . . . . . . . . . . 6.6 4.8
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 5.0
Other Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 1.7
Income Tax Provision . . . . . . . . . . . . . . . . . . . . . . . . . 1.6 .7
------- -------
Earnings (Loss) Before Extraordinary Loss . . . . . . . . . . . . . . 7.2 ( 2.9)
Extraordinary Loss on Extinguishment of Debt . . . . . . . . . . . . . ( 4.8) --
------- --------
Net Earnings (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.4 ( 2.9)
======= =======
Earnings (Loss) per Primary and Fully Diluted*
Share:
Earnings (Loss) Before Extraordinary Loss . . . . . . . . . . . . . . $ .27 ( .37)
Extraordinary Loss on Extinguishment of Debt . . . . . . . . . . . . . ( .24) --
------- --------
Net Earnings (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ .03 ( .37)
======= =======
</TABLE>
*Anti-dilutive
Net earnings of $2.4 million, or $.03 per share, for the three months ended
March 31, 1994 ("1994 quarter") compare to a net loss of $2.9 million, or $.37
per share, for the three months ended March 31, 1993 ("1993 quarter"). The
comparability between these two periods was impacted by certain transactions.
The 1994 quarter included a noncash extraordinary loss of $4.8 million on the
extinguishment of debt in connection with the Recapitalization. Earnings
before the extraordinary loss were $7.2 million, or $.27 per share, for the
1994 quarter. Also included in the 1994 quarter was a $2.8 million gain on the
sale of the Company's Valdez, Alaska terminal. The 1993 quarter included a
gain of $1.4 million on the repurchase and retirement of $11.25 million
principal amount of Subordinated Debentures at market value. Excluding these
transactions from both periods, the improvement in the 1994 quarter as compared
to the 1993 quarter was primarily attributable to higher natural gas prices on
increased natural gas production from the Bob West Field and improved gross
margins in the refining and marketing operations.
-13-
<PAGE> 14
Item 2. TESORO PETROLEUM CORPORATION AND
SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Refining and Marketing
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
-------- --------
(Dollars in millions,
except per unit amounts)
<S> <C> <C>
Gross Operating Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 150.3 194.6
Costs of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124.2 173.1
--------- ---------
Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.1 21.5
Operating Expenses and Other, Including
Gain on Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . 17.1 17.8
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . 2.6 2.5
--------- ---------
Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6.4 1.2
========= =========
Refinery Throughput (average daily barrels) . . . . . . . . . . . . . . 45,320 52,911
========= =========
Sales of Refinery Production:
Sales ($ per barrel) . . . . . . . . . . . . . . . . . . . . . . . . $ 18.46 20.98
Margin ($ per barrel) . . . . . . . . . . . . . . . . . . . . . . . $ 4.24 2.94
Volume (average daily barrels) . . . . . . . . . . . . . . . . . . . 46,236 57,332
Sales of Products Purchased for Resale:
Sales ($ per barrel) . . . . . . . . . . . . . . . . . . . . . . . . $ 24.12 26.43
Margin ($ per barrel) . . . . . . . . . . . . . . . . . . . . . . . $ 2.62 .88
Volume (average daily barrels) . . . . . . . . . . . . . . . . . . . 19,582 22,643
Sales Volumes (average daily barrels):
Gasoline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,570 25,907
Jet fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,678 12,618
Diesel fuel and other distillates . . . . . . . . . . . . . . . . . 16,124 20,584
Residual fuel oil . . . . . . . . . . . . . . . . . . . . . . . . . 16,446 20,866
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,818 79,975
========= =========
Sales Prices ($ per barrel):
Gasoline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23.92 25.51
Jet fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25.43 28.70
Diesel fuel and other distillates . . . . . . . . . . . . . . . . . $ 23.53 26.19
Residual fuel oil . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.22 11.46
</TABLE>
Revenues decreased in the 1994 quarter as compared to the 1993 quarter,
primarily due to an 18% reduction in sales volumes of refined products. The
reduction in volumes resulted from the Company's market-driven operating
strategy implemented in 1993, which more closely aligns Refinery production
with market demand in Alaska while minimizing the output of lower value
residual fuel oil. Costs of sales were lower in the 1994 quarter, due to the
reduced throughput level together with a decrease in crude oil prices.
Included in operating expenses and other above for the 1994 quarter was the
$2.8 million gain from the sale of the Company's Valdez, Alaska terminal. The
overall improvement in gross margin and the gain on sales of assets were
partially offset by a $2.1 million increase in operating expenses which
included higher environmental and transportation costs.
-14-
<PAGE> 15
Item 2. TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Exploration and Production
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
---- ----
(Dollars in millions,
except per unit amounts)
<S> <C> <C>
United States:
Gross operating revenues* . . . . . . . . . . . . . . . . . . . . . $ 17.4 7.7
Lifting cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 1.2
Depreciation, depletion and amortization . . . . . . . . . . . . . . 3.8 2.0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 .3
------- ------
Operating Profit - United States . . . . . . . . . . . . . . . . . 11.2 4.2
------- ------
Bolivia:
Gross operating revenues . . . . . . . . . . . . . . . . . . . . . . 2.8 2.8
Lifting cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 .4
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 1.0
------- ------
Operating Profit - Bolivia . . . . . . . . . . . . . . . . . . . . 1.9 1.4
------- ------
Total Operating Profit . . . . . . . . . . . . . . . . . . . . . . . . $ 13.1 5.6
======= ======
Natural Gas - United States:
Production (average daily Mcf) -
Tennessee Gas Contract* . . . . . . . . . . . . . . . . . . . . . . 16,181 6,356
Spot market and other . . . . . . . . . . . . . . . . . . . . . . . 32,817 20,653
------- ------
Total Production . . . . . . . . . . . . . . . . . . . . . . . . 48,998 27,009
======= ======
Average sales price per Mcf -
Tennessee Gas Contract* . . . . . . . . . . . . . . . . . . . . . . $ 7.80 7.36
Spot market . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.01 1.75
Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.92 3.07
Average lifting cost per Mcf . . . . . . . . . . . . . . . . . . . . $ .53 .49
Depletion per Mcf . . . . . . . . . . . . . . . . . . . . . . . . . . $ .85 .82
Natural Gas - Bolivia:
Production (average daily Mcf) . . . . . . . . . . . . . . . . . . . 19,137 17,747
Average sales prices per Mcf . . . . . . . . . . . . . . . . . . . . $ 1.23 1.19
Average lifting cost per net equivalent Mcf . . . . . . . . . . . . . $ .11 .23
- -----------------------
</TABLE>
* The Company is involved in litigation with Tennessee Gas relating to a
natural gas sales contract. See "Capital Resources and
Liquidity--Litigation" and Note 5 of Notes to Condensed Consolidated
Financial Statements.
-15-
<PAGE> 16
Item 2. TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
The number of producing wells in South Texas in which the Company has an
interest increased to 33 at the end of the 1994 quarter compared to 11 at the
end of the 1993 quarter. The resulting increase in the Company's production
levels in South Texas, together with higher average sales prices, contributed
to the higher revenues. Total lifting costs and depreciation, depletion and
amortization also increased in the 1994 quarter due to the higher production
levels.
The 1994 quarter production level, which was higher than the 1993 quarter's,
was lower than the 58 MMcf per day produced during the three months ended
December 31, 1993. In February 1994, the common carrier pipeline facilities
transporting gas from the Bob West Field were at capacity and the Company's
production from the field was curtailed. The curtailment affects only
production subject to spot market prices, and the Company continues to produce
and transport all of its gas in the Bob West Field that is subject to the
Tennessee Gas Contract. Accordingly, the average realized selling price for the
Company's domestic natural gas was $3.92 per Mcf during the 1994 quarter, which
compares to $3.07 per Mcf in the 1993 quarter. A new common carrier pipeline,
which will provide transportation for the increased gas production from the Bob
West Field, is being constructed by Coastal States Gas Transmission Company.
The Company expects that further curtailments will occur until June 1, 1994,
the anticipated completion date of the new pipeline.
Results from the Company's Bolivian operations improved by $.5 million when
comparing the 1994 quarter to the 1993 quarter. Under a sales contract with
Yacimientos Petroliferos Fiscales Bolivianos ("YPFB"), the Company's Bolivian
natural gas production is sold to YPFB, which in turn sells the natural gas to
the Republic of Argentina. The contract between YPFB and the Republic of
Argentina has recently been extended for an additional three-year period ending
March 31, 1997. The contract extension will maintain approximately the same
volumes, but with a small decrease in price. The Company's contract with YPFB,
including the pricing provision, is subject to renegotiation in May 1994 for up
to a three-year period. As a result of the terms of the contract extension
between YPFB and the Republic of Argentina, the Company expects the
renegotiation to result in the same production volume but with a corresponding
small decrease in the contract price.
-16-
<PAGE> 17
Item 2. TESORO PETROLEUM CORPORATION AND
SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
<TABLE>
<CAPTION>
Oil Field Supply and Distribution
- ---------------------------------
Three Months Ended
March 31,
1994 1993
---- ----
(Dollars in millions)
<S> <C> <C>
Gross Operating Revenues . . . . . . . . . . . . . . . . . . . . . . . $ 18.6 19.4
Costs of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9 16.6
------- -------
Gross Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7 2.8
Operating Expenses and Other . . . . . . . . . . . . . . . . . . . . . 3.8 3.5
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . .1 .1
------- -------
Operating Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ( 1.2) ( .8)
======= =======
Refined Product Sales (average daily barrels) . . . . . . . . . . . . . 7,424 6,897
======= =======
</TABLE>
Operating expenses and other for the 1994 quarter included a charge of
approximately $.9 million for winding up the Company's environmental products
marketing operations. The Company is continuing its wholesale marketing of
fuels and lubricants.
Interest and Other Income
Other income in the 1993 quarter included a $1.4 million gain from the purchase
and retirement of $11.25 million principal amount of Subordinated Debentures in
January 1993. Since this retirement satisfied the sinking fund requirement due
in March 1993, the gain was not reported as an extraordinary item.
Income Taxes
The increase of $.8 million in the income tax provision during the 1994 quarter
as compared to the 1993 quarter was due to federal and state income taxes on
the Company's increased taxable earnings.
CAPITAL RESOURCES AND LIQUIDITY
During the first quarter of 1994, the Company continued to achieve significant
improvement in profitability, resulting primarily from (i) strong gross margins
on the sales of refined products, (ii) the Company's recently implemented
market-driven operating strategy to better align Refinery production with
refined product demand in the Alaskan market and minimize the output of lower
value residual fuel oil and (iii) higher natural gas production resulting from
continuing success in developing the Bob West Field. The Company's liquidity
and capital resources have been significantly enhanced as a result of the
Company's improvement in profitability, together with the completion of the
Recapitalization in February 1994 and the finalization of the Company's
Revolving Credit Facility during April 1994.
Significant components of the Recapitalization were as follows:
(i) Subordinated Debentures in the principal amount of $44.1
million were tendered in exchange for a like principal amount
of new Exchange Notes, which satisfied the 1994 sinking fund
requirements and, except for $.9 million, will satisfy sinking
fund requirements for the Subordinated
-17-
<PAGE> 18
Item 2. TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Debentures through 1997. The Exchange Notes bear interest at
13% per annum, are scheduled to mature on December 1, 2000 and
have no sinking fund requirements.
(ii) The 1,319,563 outstanding shares of $2.16 Preferred Stock,
together with accrued and unpaid dividends of $9.5 million at
February 9, 1994, were reclassified into 6,465,859 shares of
Common Stock. The Company also agreed to issue up to 131,956
shares of Common Stock on behalf of the holders of $2.16
Preferred Stock to pay certain of their legal fees and
expenses in connection with the settlement of litigation
related to the reclassification. Of such 131,956 shares of
Common Stock, 73,913 shares were awarded by the court for
legal fees and expenses, with the remaining shares to be
issued to the former holders of $2.16 Preferred Stock upon the
court's order becoming final and nonappealable.
(iii) The Company and MetLife Louisiana, the holder of all the
Company's outstanding $2.20 Preferred Stock, entered into the
Amended MetLife Memorandum, pursuant to which MetLife
Louisiana agreed to waive all existing mandatory redemption
requirements, to consider all accrued and unpaid dividends
thereon through February 9, 1994 (aggregating approximately
$21.2 million) to have been paid, to allow the Company to pay
future dividends in Common Stock in lieu of cash, to waive or
refrain from exercising certain other rights of the $2.20
Preferred Stock and to grant to the Company the MetLife
Louisiana Option (pursuant to which the Company has the option
to purchase, until February 9, 1997, all shares of the $2.20
Preferred Stock and Common Stock held by MetLife Louisiana),
all in consideration for, among other things, the issuance by
the Company to MetLife Louisiana of 1,900,075 shares of Common
Stock. Such additional shares are also subject to the MetLife
Louisiana Option. Until June 30, 1994, the option price is
approximately $53.0 million, after giving effect to a
reduction in the option price for the scheduled cash dividend
payment on the $2.20 Preferred Stock on May 15, 1994. The
unexercised option price will be increased by 3% on the last
day of each calendar quarter until December 31, 1995, and by 3
1/2% on the last day of each quarter thereafter, and will be
reduced by cash dividends paid on the $2.20 Preferred Stock
after February 9, 1994. The Company will be required to pay
dividends (in either cash or Common Stock) when due on the
$2.20 Preferred Stock in order for the MetLife Louisiana
Option to remain outstanding. In addition, the MetLife
Louisiana Option is subject to certain minimum exercise
requirements to remain outstanding beyond one year and two
years.
For further information regarding the Recapitalization, refer to Note 2 of
Notes to Condensed Consolidated Financial Statements.
The Company is currently pursuing a registered public offering of its Common
Stock (the "Offering") for the purpose of raising funds to exercise the MetLife
Louisiana Option. Any net proceeds in excess of the amount required to
exercise the MetLife Louisiana Option in full will be used for general
corporate purposes. If the MetLife Louisiana Option is exercised in full prior
to June 30, 1994, the Company will acquire 2,875,000 shares of $2.20 Preferred
Stock having a liquidation value of $57.5 million and 4,084,160 shares of
Common Stock having an aggregate market value of $47.0 million (based on a
closing price of
-18-
<PAGE> 19
Item 2. TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
$11 1/2 per share on May 4, 1994) in consideration for approximately $53.0
million. Upon the exercise in full of the MetLife Louisiana Option, dividend
requirements of $6.3 million per year on the $2.20 Preferred Stock would be
eliminated. Such offering and the exercise in full of the MetLife Louisiana
Option will result in a net increase of only 915,840 outstanding shares of
Common Stock. If the net proceeds from the Offering are less than the full
exercise price, the Metlife Louisiana Option will be exercised in part to the
extent of the net proceeds. The MetLife Louisiana Option provides that any
partial exercise will result in the purchase of a pro rata portion of each of
the shares of Common Stock and the shares of $2.20 Preferred Stock held by
MetLife Louisiana. The Company is currently prohibited under the terms of the
indenture governing the Subordinated Debentures from repurchasing its capital
stock, except from the proceeds of a substantially concurrent sale of other
shares of capital stock. Accordingly, if the proceeds to the Company from the
Offering are not sufficient to exercise the MetLife Louisiana Option in full,
the Company would be able to exercise the MetLife Louisiana Option only to the
extent of the net proceeds of the Offering. There can be no assurance that the
Offering will be consummated.
The Company transports its crude oil and a substantial portion of its refined
products utilizing KPL's pipeline and marine terminal facilities in Kenai,
Alaska. In March 1994, KPL filed a revised tariff with the FERC for dock
loading services, which would have increased the Company's annual cost of
transporting products through KPL's facilities from $1.2 million to $11.2
million, or an increase of $10 million per year. Following the FERC's
rejection of KPL's tariff and the commencement of negotiations for the purchase
by the Company of the dock facilities, KPL filed a temporary tariff that would
increase the Company's annual cost by approximately $1.5 million. The
negotiations between the Company and KPL are continuing. The Company believes
that the ultimate resolution of this matter will not have a material adverse
effect upon the financial condition or results of operations of the Company.
Credit Arrangements
During April 1994, the Company entered into a new three-year $125 million
Revolving Credit Facility with a consortium of ten banks. The Revolving Credit
Facility, which is subject to a borrowing base, provides for (i) the issuance
of letters of credit up to the full amount of the borrowing base as calculated,
but not to exceed $125 million, (ii) cash borrowings up to the amount of the
borrowing base attributable to domestic oil and gas reserves and (iii) a 90-day
option to convert up to $15 million of the commitment under the Revolving
Credit Facility into a four-year term loan for the construction of the vacuum
unit at the Refinery. Outstanding obligations under the Revolving Credit
Facility are secured by liens on substantially all of the Company's trade
accounts receivable and product inventory and mortgages on the Refinery and the
Company's South Texas natural gas reserves.
Letters of credit available under the Revolving Credit Facility are limited to
a borrowing base calculation. The borrowing base, which is comprised of
eligible accounts receivable, inventory and domestic oil and gas reserves, has
initially been determined to be approximately $97 million. As of April 28,
1994, the Company had outstanding letters of credit under the new facility of
$31 million, with a remaining unused availability of $66 million. Cash
-19-
<PAGE> 20
Item 2. TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
borrowings (other than under the term loan facility for the vacuum unit) are
limited to the amount of the oil and gas reserve component of the borrowing
base, which has initially been determined to be approximately $32 million.
Cash borrowings under the Revolving Credit Facility will reduce the
availability of letters of credit on a dollar-for-dollar basis; however, letter
of credit issuances will not reduce cash borrowing availability unless the
aggregate dollar amount of outstanding letters of credit exceeds the sum of the
accounts receivable and inventory components of the borrowing base. The terms
of the Revolving Credit Facility include standard and customary restrictions
and covenants. For information concerning such restrictions and covenants, see
Note 4 of Notes to Condensed Consolidated Financial Statements.
The Revolving Credit Facility replaced certain interim financing arrangements
that the Company had been using since the termination of its prior letter of
credit facility in October 1993. The interim financing arrangements that were
cancelled in conjunction with the completion of the new Revolving Credit
Facility included a $30 million reducing revolving credit facility and a waiver
and substitution of collateral agreement with the State. In addition, the
completion of the Revolving Credit Facility provides the Company significant
flexibility in the investment of excess cash balances, as the Company is no
longer required to maintain minimum cash balances or to cash secure letters of
credit.
Debt and Other Obligations
The Company's funded debt obligations as of December 31, 1993 included
approximately $108.8 million principal amount of Subordinated Debentures, which
bear interest at 12 3/4% per annum and require sinking fund payments sufficient
to annually retire $11.25 million principal amount of Subordinated Debentures.
As part of the Recapitalization, $44.1 million principal amount of Subordinated
Debentures was tendered in exchange for a like principal amount of Exchange
Notes. Such exchange satisfied the 1994 sinking fund requirements and, except
for $.9 million, will satisfy sinking fund requirements for the Subordinated
Debentures through 1997. The indenture governing the Subordinated Debentures
contains certain covenants, including a restriction which prevents the current
payment of cash dividends on Common Stock and currently limits the Company's
ability to purchase or redeem any shares of its capital stock. The Exchange
Notes bear interest at 13% per annum, mature on December 1, 2000 and have no
sinking fund requirements. The limitation on dividend payments included in the
indenture governing the Exchange Notes is less restrictive than the limitation
imposed by the Subordinated Debentures. The Subordinated Debentures and
Exchange Notes are redeemable at the option of the Company at 100% of principal
amount, plus accrued interest.
The Company is monitoring the feasibility of a debt offering that would reduce
fixed charges by refinancing all or a substantial portion of such indebtedness
at lower interest rates. The Company is not undertaking such a debt offering
at this time because it considers the current interest rate environment
unattractive; however, if interest rate levels decline, the Company may decide
to proceed with such an offering. There can be no assurance whether or when
such an offering would occur. If the Subordinated Debentures and Exchange
Notes are redeemed prior to their respective maturities, the Company will be
required to recognize a noncash extraordinary charge to earnings equal to the
portion of
-20-
<PAGE> 21
Item 2. TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
the original issue discount on the Subordinated Debentures and the debt
issuance costs of both the Subordinated Debentures and the Exchange Notes that
remain unamortized at the date of redemption (aggregating approximately $8.5
million at March 31, 1994).
Capital Expenditures
The Company has under consideration total capital expenditures ranging from
approximately $65 million to $80 million in 1994. Proposed capital
expenditures for 1994 include approximately $29 million for the continued
development of the Bob West Field, which could be increased by $10 million to
$15 million based on additional development drilling proposed by the operators.
In addition, the proposed capital expenditures for 1994 include $32 million for
the refining and marketing operations, of which $24 million is associated with
the installation of a vacuum unit at the Refinery to allow the Company to
further upgrade residual fuel oil production into higher-valued products. The
Revolving Credit Facility, along with other available funds, is expected to
provide sufficient capital to meet the Company's capital expenditure
requirements during 1994.
Cash Flows From Operating, Investing and Financing Activities
During the 1994 quarter, cash and cash equivalents increased by $12.8 million
and short-term investments decreased by $6.0 million. At March 31, 1994, the
Company's cash totaled $49.4 million, which included $26.6 million as
collateral for outstanding letters of credit. Subsequent to March 31, 1994,
these interim cash-backed letter of credit arrangements were replaced by the
Revolving Credit Facility (see Note 4 of Notes to Condensed Consolidated
Financial Statements). Working capital amounted to $110.3 million at March 31,
1994. Net cash from operating activities of $30.3 million during the 1994
quarter, compared to $14.4 million for the 1993 quarter, was primarily due to
net earnings adjusted for certain noncash charges and reduced working capital
requirements. The 1993 quarter included a payment of $10.8 million to the
State in connection with the settlement of a contractual dispute. Net cash
used in investing activities of $10.2 million during the 1994 quarter included
capital expenditures of $18.5 million, partially offset by cash proceeds of
$2.0 million from the sale of the Company's Valdez, Alaska terminal and the
sale of $6.0 million in short-term investments. Capital expenditures for the
1994 quarter included $11.7 million for exploration and production activities
in the Bob West Field, where an additional six natural gas development wells
were completed during this period. The refining and marketing segment's
capital expenditures totaled $6.1 million for the 1994 quarter, primarily for
initial installation costs for the vacuum unit and completion of the
deisobutanizer unit. Net cash used in financing activities of $7.3 million
during the 1994 quarter included the repayment of net borrowings of $5.0
million under the reducing revolving credit facility, which was replaced by the
Revolving Credit Facility (see Note 4 of Notes to Condensed Consolidated
Financial Statements).
Litigation
The Company is subject to certain commitments and contingencies, including a
contingency relating to a natural gas sales contract dispute with Tennessee
Gas.
-21-
<PAGE> 22
Item 2. TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
The Company is selling a portion of the gas from its Bob West Field to
Tennessee Gas under a Gas Purchase and Sales Agreement which provides that the
price of gas shall be the maximum price as calculated in accordance with
Section 102(b)(2) (the "Contract Price") of the NGPA.
Tennessee Gas filed suit against the Company alleging that the gas contract is
not applicable to the Company's properties and that the gas sales price should
be the price calculated under the provisions of Section 101 of the NGPA rather
than the Contract Price. During March 1994, the Contract Price was $7.84 per
Mcf, the Section 101 price was $4.58 per Mcf and the average spot market price
was $2.09 per Mcf. Tennessee Gas also claimed that the contract should be
considered an "output contract" under Section 2.306 of the Texas Business and
Commerce Code and that the increases in volumes tendered under the contract
exceeded those allowable for an output contract. The Company continues to
receive payment from Tennessee Gas based on the Contract Price for all volumes
that are subject to the contract under the Company's interpretation.
The District Court trial judge returned a verdict in favor of the Company on
all issues. On appeal by Tennessee Gas, the Court of Appeals affirmed the
validity of the Tennessee Gas Contract as to the Company's properties and held
that the price payable by Tennessee Gas for the gas was the Contract Price.
The Court of Appeals remanded the case to the trial court based on its
determination (i) that the Tennessee Gas Contract was an output contract and
(ii) that a fact issue existed as to whether the increases in the volumes of
gas tendered to Tennessee Gas under the contract were made in bad faith or were
unreasonably disproportionate to prior tenders. The Company is seeking review
of the appellate court ruling on the output contract issue in the Supreme Court
of Texas. Tennessee Gas is seeking review of the appellate court ruling
denying the remaining Tennessee Gas claims in the Supreme Court of Texas.
Although the outcome of any litigation is uncertain, management, based upon
advice from outside legal counsel, is confident that the decision of the trial
and appellate courts will ultimately be upheld as to the validity of the
Tennessee Gas Contract and the Contract Price. Therefore, if the Supreme Court
of Texas does not grant the Company's petition for writ of error and affirms
the appellate court ruling, the Company believes that the only issue for trial
should be whether the increases in the volumes of gas tendered to Tennessee Gas
from the Company's properties were made in bad faith or were unreasonably
disproportionate. The appellate court decision was the first reported decision
in Texas holding that a take-or-pay contract was an output contract. As a
result, it is not clear what standard the trial court would be required to
apply in determining whether the increases were in bad faith or unreasonably
disproportionate. The appellate court acknowledged in its opinion that the
standards used in evaluating other kinds of output contracts would not be
appropriate in this context. The Company believes that the appropriate
standard would be whether the development of the field was undertaken in a
manner that a prudent operator would have undertaken in the absence of an
above-market sales price. Under that standard, the Company believes that, if
this issue is tried, the development of its gas properties and the resulting
increases in volumes tendered to Tennessee Gas will be found to have been
reasonable and in good faith. Accordingly, the Company has recognized
revenues, net of production taxes and marketing charges, for natural gas sales
through March 31, 1994, under the Tennessee Gas Contract based on the Contract
Price, which net revenues
-22-
<PAGE> 23
Item 2. TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
aggregated $21.1 million more than the Section 101 prices and $38.9 million in
excess of the spot market prices. If Tennessee Gas ultimately prevails in this
litigation, the Company could be required to return to Tennessee Gas the
difference between the spot market price for gas and the Contract Price, plus
interest, if awarded by the court. In addition, the present value of estimated
future net revenues on a pre-tax basis from the Company's proved domestic
reserves has been calculated based in part on the price being paid by Tennessee
Gas at the date of determination. At March 31, 1994, such present value was
$171.0 million. If calculated using March 31, 1994 spot market prices instead
of the Contract Price, such present value would have been $92.0 million. An
adverse judgment in this case could have a material adverse effect on the
Company.
Environmental
The Company is subject to extensive federal, state and local environmental laws
and regulations. These laws, which are constantly changing, regulate the
discharge of materials into the environment and may require the Company to
remove or mitigate the environmental effects of the disposal or release of
petroleum or chemical substances at various sites or install additional
controls or other modifications or changes in use for certain emission sources.
The Company is currently involved in remedial responses and has incurred
clean-up expenditures associated with environmental matters at a number of
sites, including certain of its own properties. Although the level of future
expenditures for environmental purposes, including cleanup obligations, is
impossible to determine with any degree of probability, it is management's
opinion that, based on current knowledge and the extent of such expenditures to
date, the ultimate aggregate cost of environmental remediation will not have a
material adverse effect on the Company's financial condition. At March 31,
1994, the Company's accrual for environmental liabilities was $6.0 million.
Impact of Changing Prices
The Company's operating results and cash flows are sensitive to the volatile
changes in energy prices. Major shifts in the cost of crude oil and the price
of refined products can result in a change in gross margin from the refining
and marketing operations, as prices received for refined products may or may
not keep pace with changes in crude costs. These energy prices, together with
volume levels, also determine the carrying value of crude oil and refined
product inventory.
Likewise, major changes in natural gas prices impact revenues and the present
value of estimated future net revenues from the Company's exploration and
production operations. The carrying value of oil and gas assets may also be
subject to noncash write-downs based on changes in natural gas prices and
other determining factors.
-23-
<PAGE> 24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Tennessee Gas Contract. The Company is selling a portion of the gas
from its Bob West Field to Tennessee Gas under a Gas Purchase and Sales
Agreement which provides that the price of gas shall be the Contract Price.
Tennessee Gas filed suit against the Company alleging that the gas
contract is not applicable to the Company's properties and that the gas
sales price should be the price calculated under the provisions of Section
101 of the NGPA rather than the Contract Price. During March 1994, the
Contract Price was $7.84 per Mcf, the Section 101 price was $4.58 per Mcf
and the average spot market price was $2.09 per Mcf. Tennessee Gas also
claimed that the contract should be considered an "output contract" under
Section 2.306 of the Texas Business and Commerce Code and that the
increases in volumes tendered under the contract exceeded those allowable
for an output contract. The Company continues to receive payment from
Tennessee Gas based on the Contract Price for all volumes that are subject
to the contract under the Company's interpretation.
The District Court trial judge returned a verdict in favor of the
Company on all issues. On appeal by Tennessee Gas, the Court of Appeals
affirmed the validity of the Tennessee Gas Contract as to the Company's
properties and held that the price payable by Tennessee Gas for the gas was
the Contract Price. The Court of Appeals remanded the case to the trial
court based on its determination (i) that the Tennessee Gas Contract was an
output contract and (ii) that a fact issue existed as to whether the
increases in the volumes of gas tendered to Tennessee Gas under the
contract were made in bad faith or were unreasonably disproportionate to
prior tenders. The Company is seeking review of the appellate court ruling
on the output contract issue in the Supreme Court of Texas. Tennessee Gas
is seeking review of the appellate court ruling denying the remaining
Tennessee Gas claims in the Supreme Court of Texas.
Although the outcome of any litigation is uncertain, management,
based upon advice from outside legal counsel, is confident that the
decision of the trial and appellate courts will ultimately be upheld as to
the validity of the Tennessee Gas Contract and the Contract Price.
Therefore, if the Supreme Court of Texas does not grant the Company's
petition for writ of error and affirms the appellate court ruling, the
Company believes that the only issue for trial should be whether the
increases in the volumes of gas tendered to Tennessee Gas from the
Company's properties were made in bad faith or were unreasonably
disproportionate. The appellate court decision was the first reported
decision in Texas holding that a take-or-pay contract was an output
contract. As a result, it is not clear what standard the trial court would
be required to apply in determining whether the increases were in bad faith
or unreasonably disproportionate. The appellate court acknowledged in its
opinion that the standards used in evaluating other kinds of output
contracts would not be appropriate in this context. The Company believes
that the appropriate standard would be whether the development of the field
was undertaken in a manner that a prudent operator would have undertaken in
the absence of an above-market sales price. Under that standard, the
Company believes that, if this issue is tried, the development of its gas
properties and the resulting increases in volumes tendered to Tennessee Gas
will be found to have been reasonable and in good faith. Accordingly, the
Company has recognized revenues, net of production taxes and marketing
charges, for natural gas sales through
-24-
<PAGE> 25
March 31, 1994, under the Tennessee Gas Contract based on the Contract
Price, which net revenues aggregated $21.1 million more than the Section
101 prices and $38.9 million in excess of the spot market prices. If
Tennessee Gas ultimately prevails in this litigation, the Company could be
required to return to Tennessee Gas the difference between the spot market
price for gas and the Contract Price, plus interest, if awarded by the
court. In addition, the present value of estimated future net revenues on
a pre-tax basis from the Company's proved domestic reserves has been
calculated based in part on the price being paid by Tennessee Gas at the
date of determination. At March 31, 1994, such present value was $171.0
million. If calculated using March 31, 1994 spot market prices instead of
the Contract Price, such present value would have been $92.0 million. An
adverse judgment in this case could have a material adverse effect on the
Company.
Recapitalization Matters. In October 1993, Croyden Associates, a
holder of shares of the Company's $2.16 Preferred Stock, filed a class
action suit in Delaware Chancery Court on behalf of itself and all other
holders of the $2.16 Preferred Stock. The suit alleged that the Company
and its directors breached their fiduciary duties to the holders of the
$2.16 Preferred Stock in formulating the originally proposed terms of the
Recapitalization, which provided for the reclassification of each share of
$2.16 Preferred Stock into 3.5 shares of Common Stock or, at the holder's
option, 2.75 shares of Common Stock and .25 share of a new issue of
preferred stock. The suit sought, among other things, monetary damages and
to enjoin the Recapitalization. In April 1994, the court approved a
settlement agreement which provided for (i) the exchange of each share of
$2.16 Preferred Stock into 4.9 shares of Common Stock and (ii) the issuance
of up to 131,956 shares of Common Stock and an additional $500,000 in cash
from the Company to pay attorneys' fees awarded by the Delaware Chancery
Court. Of such 131,956 shares of Common Stock, 73,913 shares were awarded by
the court for legal fees and expenses, with the remaining shares to be
issued to the former holders of $2.16 Preferred Stock upon the court's
order becoming final and nonappealable.
Item 2. Changes in Securities
In April 1994, the Company entered into the Revolving Credit Facility,
under which the Company is required to maintain specified levels of
working capital, tangible net worth and cash flow. The Revolving Credit
Facility has certain restrictions with respect to dividends on its capital
stock. For further information on the Revolving Credit Facility, see Note 4
of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.
-25-
<PAGE> 26
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1993 annual meeting of stockholders of the Company was
held on February 9, 1994.
(b) The names of the directors elected at the meeting and a
tabulation of the number of votes cast for, against or
withheld with respect to each such director is set forth
below:
Votes
<TABLE>
<CAPTION>
Name For Against Withheld
---- --- ------- --------
<S> <C> <C> <C>
Charles F. Luce 16,568,999 0 230,695
John J. McKetta, Jr. 16,199,887 0 599,807
Stewart G. Nagler 16,568,768 0 230,926
Arthur Spitzer 16,586,952 0 212,742
</TABLE>
The name of each other director whose term of office as a director
continued after the meeting is set forth below:
Robert J. Caverly
Steven H. Grapstein
Raymond K. Mason, Sr.
Murray L. Weidenbaum
Ray C. Adam
Michael D. Burke
Peter M. Detwiler
M. Richard Stewart
Charles Wohlstetter
(c) A brief description of each matter, other than the election of
directors, voted upon at the meeting and the number of votes
cast for, against or withheld, as well as the number of
abstentions and broker non-votes as to each matter, is set
forth below:
-26-
<PAGE> 27
<TABLE>
<CAPTION>
Broker
Description For Against Withheld Abstentions Non-Votes
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proposal to amend the
Company's Certificate of
Incorporation to (i)
reclassify the $2.16 Preferred
Stock into Common Stock, (ii)
remove the provisions relating
to the division of directors
into three classes, and (iii)
require, under certain
circumstances, in the absence
of the approval of 66-2/3% of
the stockholders to amend, in
a manner adverse to the
Company, certain agreements
with MetLife Louisiana
All shares entitled to vote 14,661,289 251,743 88,841 0 1,797,821
Holders of $2.16 Preferred
Stock voting separately as
a class 911,114 38,207 11,346 0 234,370
Proposal to amend the
Company's Certificate of
Incorporation to eliminate,
upon the occurrence of certain
conditions, the requirement
for the affirmative vote of
not less than 80% of the
outstanding shares of capital
stock of the Company to
approve certain transactions by
the Company
14,624,055 277,621 98,431 0 1,799,587
</TABLE>
-27-
<PAGE> 28
<TABLE>
<CAPTION>
Broker
Description For Against Withheld Abstentions Non-Votes
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proposal to approve the
Company's Executive Long-Term
Incentive Plan 14,028,892 858,746 114,235 0 1,797,821
Proposal to appoint Deloitte &
Touche as independent auditors
for the Company for 1993 16,665,918 66,091 67,685 0 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See the Exhibit Index immediately preceding the exhibits filed
herewith.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
-28-
<PAGE> 29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TESORO PETROLEUM CORPORATION
Registrant
Date: May 9, 1994 /s/ MICHAEL D. BURKE
Michael D. Burke
President and
Chief Executive Officer
Date: May 9, 1994 /s/ BRUCE A. SMITH
Bruce A. Smith
Executive Vice President and
Chief Financial Officer
-29-
<PAGE> 30
EXHIBIT INDEX
Exhibit
Number
- -------
10.1 Credit Agreement (the "Credit Agreement") dated as of April 20, 1994
among the Company and Texas Commerce Bank National Association
("TCB"), as Issuing Bank and as Agent, and certain other banks named
therein.
10.2 Guaranty Agreement dated as of April 20, 1994 among various
subsidiaries of the Company and TCB, as Issuing Bank and as Agent,
and certain other banks named therein.
10.3 Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement dated as of April 20, 1994 from
Tesoro Exploration and Production Company, entered into in
connection with the Credit Agreement.
10.4 Deed of Trust, Security Agreement and Financing Statement dated as
of April 20, 1994 among Tesoro Alaska Petroleum Company, TransAlaska
Title Insurance Agency, Inc., as Trustee, and TCB, as Agent, entered
into in connection with the Credit Agreement.
10.5 Pledge Agreement dated as of April 20, 1994 by the Company in favor
of TCB, entered into in connection with the Credit Agreement.
10.6 Security Agreement (Accounts and Inventory) dated as of April 20,
1994 between the Company and TCB, entered into in connection with
the Credit Agreement.
10.7 Security Agreement (Accounts and Inventory) dated as of April 20,
1994 between Tesoro Alaska Petroleum Company and TCB, entered into
in connection with the Credit Agreement.
10.8 Security Agreement (Accounts) dated as of April 20, 1994 between
Tesoro Petroleum Distributing Company and TCB, entered into in
connection with the Credit Agreement.
10.9 Security Agreement (Accounts and Inventory) dated as of April 20,
1994 between Tesoro Exploration and Production Company and TCB,
entered into in connection with the Credit Agreement.
10.10 Security Agreement (Accounts and Inventory) dated as of April 20,
1994 between Tesoro Refining, Marketing & Supply Company and TCB,
entered into in connection with the Credit Agreement.
11 Information Supporting Earnings (Loss) Per Share Computations.
-30-
<PAGE> 1
EXHIBIT 10.1
CREDIT AGREEMENT
Among
TESORO PETROLEUM CORPORATION
as the Company
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Individually, as an Issuing Bank and as Agent,
BANQUE PARIBAS
Individually, as an Issuing Bank, and as Co-Agent
and
FINANCIAL INSTITUTIONS
NOW OR HEREAFTER PARTIES HERETO
$125,000,000 Revolving Credit Facility
$15,000,000 Optional Advancing Term Loan
April 20, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS; CONSTRUCTION
<S> <C> <C>
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 1.03 Other Definitional Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE II
AMOUNT AND TERMS OF LOANS
Section 2.01 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.02 Borrowing Requests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.03 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.05 Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.06 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.07 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.08 Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.09 Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 2.10 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.11 Continuation and Conversion Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 2.12 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.13 Payments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 2.14 Interest Rate Not Ascertainable, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.15 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.16 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 2.17 Change of Lending Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 2.18 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 2.19 Sharing of Payments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 2.20 E&P Loan Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 2.21 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 2.22 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 2.23 Disposition of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 2.24 Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE III
CONDITIONS TO BORROWINGS AND TO
PURCHASE, RENEWAL AND REARRANGEMENT
Section 3.01 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 3.02 Conditions Precedent to Initial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 3.03 Conditions Precedent to Each Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 3.04 Recordings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 3.05 Activation of Term Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.02 Corporate Power and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.03 Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.04 No Legal Bar or Resultant Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.05 No Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.06 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.07 Investments and Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.08 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.09 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.10 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.11 Taxes; Governmental Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.12 Titles, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.13 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 4.14 Casualties; Taking of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.15 Compliance with the Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.16 No Material Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.17 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.18 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.19 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.21 Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.22 Gas Imbalances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.23 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.24 Recapitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE V
COVENANTS
Section 5.01 Certain Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(a) Maintenance and Compliance, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(b) Payment of Taxes and Claims, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(c) Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(d) Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
(e) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
(f) Accounts and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(g) Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
(h) Operation and Maintenance of Mortgaged Property and Compliance with Leases . . . . . . . . 56
(i) Stock of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(j) Certain Additional Assurances Regarding Maintenance and Operation of Properties . . . . . 57
(k) Designation of Subsidiaries as Additional Guarantors. . . . . . . . . . . . . . . . . . . 57
(l) Minimum Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(m) Payment of Charters and Tariffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(n) Title Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 5.02 Reporting Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(a) Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(b) Quarterly Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(c) No Default/Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(d) Auditors' No Default Certificate; Management Letters . . . . . . . . . . . . . . . . . . . 59
(e) Engineering Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(f) Title Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(g) Events or Circumstances with respect to Mortgaged Property . . . . . . . . . . . . . . . . 59
(h) Bi-Weekly Borrowing Base Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(i) Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(j) Shareholder Communications, Filings, etc . . . . . . . . . . . . . . . . . . . . . . . . . 60
(k) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(l) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(m) Borrowing Base Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(n) Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 5.03 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(a) Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(b) Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(c) Company's Cash Flow Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(d) Tesoro Alaska EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 5.04 Certain Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(a) Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(b) Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
(c) Mergers, Sales, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
(d) Dividends, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
(e) Investments, Loans, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
(f) Lease Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
(g) Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(h) Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(i) ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(j) Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
(k) Negative Pledge Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
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<TABLE>
<S> <C> <C>
(l) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
(m) Unconditional Purchase Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
(n) Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
(o) Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 6.02 Covenants Without Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 6.03 Other Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 6.04 Other Financing Document Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 6.05 Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 6.06 Non-Payments of Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 6.07 Defaults Under Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 6.08 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 6.09 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.10 Money Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.11 Discontinuance of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.12 Security Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.13 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.14 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.15 Material Adverse Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE VII
THE AGENT
Section 7.01 Appointment of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 7.02 Nature of Duties of Agent and Co-Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 7.03 Lack of Reliance on the Agent and the Co-Agent . . . . . . . . . . . . . . . . . . . . . . 75
Section 7.04 Certain Rights of the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 7.05 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 7.06 INDEMNIFICATION OF AGENT AND THE CO-AGENT . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 7.07 The Agent and Co-Agent in their Individual Capacity . . . . . . . . . . . . . . . . . . . 76
Section 7.08 May Treat Lender as Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 7.09 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
</TABLE>
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<TABLE>
ARTICLE VIII
MISCELLANEOUS
<S> <C> <C>
Section 8.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 8.02 Amendments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 8.03 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 8.04 Payment of Expenses, Indemnities, etc . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 8.05 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 8.06 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 8.07 Assignments and Participations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 8.08 Governing Law; Submission to Jurisdiction; Etc . . . . . . . . . . . . . . . . . . . . . . 83
Section 8.09 Independent Nature of Lenders' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 8.10 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 8.11 Survival of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 8.12 Renewal, Extension or Rearrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 8.13 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 8.14 Taxes, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 8.15 Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 8.16 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.17 Attachments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.18 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.19 Survival of Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.20 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.21 Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.22 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.23 Conflict with E&P Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.24 EXCULPATION PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 8.25 Proposed Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
</TABLE>
ANNEXES
Annex I - Commitments
Annex II - Eligible Inventory Valuation
SCHEDULES
Schedule 4.05 - Consents
Schedule 4.07 - Investment and Guaranties
Schedule 4.08 - Litigation
Schedule 4.10 - ERISA
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Schedule 4.12 - Titles
Schedule 4.13 - Defaults
Schedule 4.20 - Insurance
Schedule 4.22 - Gas Imbalances
Schedule 5.04(a) - Existing Indebtedness
Schedule 5.04(b) - Liens
Schedule 5.04(k) - Negative Pledge Agreements
EXHIBITS
Exhibit A - Form of Revolving Note
Exhibit B - Form of Term Note
Exhibit C - Subsidiaries/Guarantors
Exhibit D - Form of Borrowing Request
Exhibit E-1 - Form of Opinion of Fulbright & Jaworski, L.L.P.
Exhibit E-2 - Form of Opinion of James C. Reed, Jr.
Exhibit E-3 - Form of Opinion of Groh, Eggers & Price
Exhibit F - Form of Assignment and Acceptance
Exhibit G - Form of Borrowing Base Report
Exhibit H - Form of Activation of Term Loan Commitment
Exhibit I - Form of Letter to Hydrocarbon Purchasers
Exhibit J - Description of E&P Restructuring
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<PAGE> 8
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into as of this 20th day of
April, 1994, among TESORO PETROLEUM CORPORATION, a Delaware corporation (the
"Company"); TEXAS COMMERCE BANK NATIONAL ASSOCIATION, individually, as an
Issuing Bank and as Agent, BANQUE PARIBAS, individually, as an Issuing Bank and
as Co-Agent, and each of the lenders that is a signatory hereto or which
becomes a party hereto as provided in Section 8.07 (individually, a "Lender"
and, collectively, the "Lenders").
RECITALS
A. The Company has previously entered into a Continuing Letter of Credit
Agreement, dated as of January 27, 1994, between the Company and the Banque
Paribas (the "BP Letter of Credit Agreement") pursuant to which Banque Paribas
issued certain Outstanding Letters of Credit (as hereinafter defined).
B. The Lenders have agreed to assume, upon the terms and subject to the
conditions stated herein, the obligations existing under the Outstanding
Letters of Credit.
In consideration of the mutual covenants and agreements herein contained,
the Company, the Agent, the Issuing Banks and the Lenders agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
Section 1.01 Definitions. As used herein, the following terms shall have
the meanings herein specified (to be equally applicable to both the singular and
plural forms of the terms defined):
"$2.16 Preferred Stock" shall mean the $2.16 Cumulative Convertible
Preferred Stock of the Company.
"$2.20 Preferred Stock" shall mean the $2.20 Cumulative Convertible
Preferred Stock of the Company.
"Account Borrowing Base Parties" shall mean Tesoro Alaska, PEDCO and
Tesoro R&M, and "Account Borrowing Base Party" shall mean any one of them.
"Advance Notice" shall mean written or telecopy notice (or telephonic
notice promptly confirmed in writing), which in each case shall be
irrevocable, from the Company to be received by the Agent before 11:00
a.m. (Houston time), by the number of Business Days in advance of any
borrowing, conversion, continuation or prepayment of any Loan pursuant to
this Agreement as respectively indicated below:
<PAGE> 9
(i) Eurodollar Loans - 3 Business Days; and
(ii) Base Rate Loans - 1 Business Day.
For the purpose of determining the respectively applicable Loan in the
case of the conversion from one type of Loan into another, the Loan into
which there is to be a conversion shall control. The Agent, each Issuing
Bank and each Lender are entitled to rely upon and act upon telecopy
notice made or purportedly made by the Company, and the Company hereby
waives the right to dispute the authenticity and validity of any such
transaction once the Agent or any Lender has advanced funds or any
Issuing Bank has issued Letters of Credit, absent manifest error.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by, or under common control with, such
Person, whether through the ownership of voting securities, by contract
or otherwise.
"Agent" shall mean Texas Commerce Bank National Association, acting
in the manner and to the extent described in Article VII.
"Aggregate Revolving Credit Exposure" shall mean the sum of each
Lender's Revolving Credit Exposure.
"Agreement" shall mean this Credit Agreement, as amended,
supplemented or modified from time to time.
"Alaska Deed of Trust" shall mean the Deed of Trust and Security
Agreement covering the Kenai Refinery executed by Tesoro Alaska in favor
of TransAlaska Title Insurance Agency, Inc., as trustee, as security for
the Lender Indebtedness, as the same may be amended, modified or
supplemented from time to time.
"Applicable Margin" shall mean, on any day and with respect to any
Loan, the applicable per annum percentage set forth at the appropriate
intersection in the table shown below, based on the ratio of EBITDA to
Fixed Charges for the Rolling Period ending on the most recent Quarterly
Date with respect to which the Agent shall have received the financial
statements and other information (the "Current Information") required to
be delivered to the Agent pursuant to Section 5.02 hereof (said
calculation to be made by the Agent as soon as practicable after receipt
by the Agent of all required current information):
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<PAGE> 10
<TABLE>
<CAPTION>
Ratio of EBITDA Base Rate Loan Eurodollar Loan
to Fixed Charges Margin Percentage Margin Percentage
----------------------------------------------------------------------------------
<S> <C> <C>
Greater than 4:1 0.25% 1.25%
Less than or equal to
4.:1 but greater than 3.5:1 0.50% 1.50%
Less than or equal to
3.5:1 but greater than 3:1 0.75% 1.75%
Less than or equal to
3:1 but greater than 2.5:1 1.00% 2.00%
Less than or equal to 2.5:1 1.25% 2.25%
</TABLE>
Each change in the Applicable Margin based on a change in the Current
Information shall be effective as of the first day of the third month
of each applicable calendar quarter (but based upon Current
Information for the immediately preceding calendar quarter), or if
such day is not a Business Day, then the first Business Day
thereafter. Notwithstanding the foregoing, during the period
beginning on the Closing Date and ending on December 1, 1994, the
Applicable Margin shall be (a) .75% for Base Rate Loans and (b) 1.75%
for Eurodollar Loans. The Applicable Margin beginning on December 1,
1994 until redetermination thereof in accordance with the above terms
shall be based on the ratio of EBITDA to Fixed Charges for the
nine-month period ending on September 30, 1994.
"Application" shall mean an "Application and Agreement for
Letters of Credit," or similar instruments or agreements, entered into
between the Company and an Issuing Bank in connection with any Letter
of Credit.
"Assignment and Acceptance" shall have the meaning assigned
such term in Section 8.07(b).
"BB Properties" shall mean at any time the Oil and Gas
Properties and other assets of the Company or a Subsidiary of the
Company evaluated by the Lenders and to which the Lenders gave loan
value in determining the most recent E&P Loan Value.
"Bankruptcy Code" shall have the meaning provided in Section
6.08.
"Base Rate" shall have the meaning provided in Section 2.06(a).
"Base Rate Loan" shall mean a Revolving Credit Loan or a Term
Loan bearing interest at the rate provided in Section 2.06(a).
"Borrowing" shall mean a borrowing pursuant to a Borrowing
Request or a continuation or a conversion pursuant to Section 2.11
consisting, in each case, of the same Type of Loans
-3-
<PAGE> 11
having, in the case of Eurodollar Loans, the same Interest Period
(except as otherwise provided in Sections 2.16 and 2.18) and made
previously or being made concurrently by all of the Lenders.
"Borrowing Base" shall mean at any time the amount equal to
the sum of (i) eighty percent (80%) of Eligible Accounts plus (ii)
sixty percent (60%) of the Loan Value of Eligible Inventory; plus
(iii) one hundred percent (100%) of the E&P Loan Value.
"Borrowing Base Report" shall mean the report of the Company
concerning the amount of the Borrowing Base, to be delivered pursuant
to Section 5.02(h), substantially in the form attached as Exhibit G.
"Borrowing Request" shall mean a request for a Borrowing
pursuant to Section 2.02, substantially in the form attached as
Exhibit D.
"BP" shall mean Banque Paribas, in its individual capacity or
as an Issuing Bank, as the case may be and not as Co-Agent.
"BP Letter of Credit Agreement" shall have the meaning
assigned to such term in the Recitals of this Agreement.
"Business Day" shall mean any day excluding Saturday, Sunday
and any other day on which banks are required or authorized to close
in New York, New York or Houston, Texas and, if the applicable
Business Day relates to Eurodollar Loans, on which trading is carried
on by and between banks in Dollar deposits in the applicable interbank
Eurodollar market.
"Capital Expenditures" shall mean capital expenditures for
capital or fixed assets, whether by way of acquisition or otherwise.
"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 liability for a capital lease on a balance sheet of
such Person and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof.
"Cash Flow" shall mean, as to any Person, the sum of the net
income of such Person after taxes for any period plus, to the extent
deducted from net income, all non-cash items, including, but not
limited to, depreciation, depletion and impairment, amortization of
leasehold and intangibles, deferred taxes and write-offs of
exploration costs and producing lease abandonments and write-offs of
original issue discount and deferred financing costs on existing
Indebtedness that has been replaced by Indebtedness permitted by
Section 5.04(a)(ii), in each case for such period and determined as to
such Person.
"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 thereof (in each case
also constituting Unrelated Persons) shall at any time Beneficially
Own more than 40% of the aggregate voting power of all classes of
Voting Stock of the Company. As used
-4-
<PAGE> 12
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; and (d) "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.
"Closing Date" shall mean the as of date of this Agreement set
forth in the first paragraph hereof.
"Co-Agent" shall mean Banque Paribas.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statute.
"Commitment" shall mean, with respect to each Lender, the
obligation of such Lender to make loans to the Company under Section
2.01, up to the maximum amount set forth opposite such Lender's name
on Annex I under the caption "Total Commitment." Each Lender's
Commitment is the sum of its Revolving Credit Commitment, its
Unavailable Commitment and, if activated pursuant to Section 2.01(e),
its Term Loan Commitment.
"Common Stock" shall mean the Common Stock, $.16 2/3 par value
of the Company issued pursuant to the Recapitalization.
"Company" shall mean Tesoro Petroleum Corporation, a Delaware
corporation.
"Consolidated Tangible Net Worth" shall mean, at any time and
from time to time, the sum of preferred or common stock not subject to
a mandatory redemption obligation (other than a mandatory redemption
obligation that can be satisfied by the tendering of common stock of
the Company) as of the date of determination, par value of common
stock, additional paid-in capital of common stock, and retained
earnings less treasury stock (if any), less good will, cost in excess
of net assets acquired and all other assets as are properly classified
as intangible assets, all as determined as to the Company and its
Subsidiaries on a consolidated basis.
"Consolidated Working Capital Ratio" shall mean, at any time
and from time to time, the ratio of (i) the sum of accounts receivable
plus inventory to (ii) the sum of accounts payable plus current
accrued liabilities, in each case as of the date of determination and
for the Company and its Subsidiaries determined on a consolidated
basis.
"Consolidating Statement Entities" shall mean, for the purpose
of identifying the Persons or groups of Persons for whom consolidating
financial statements shall be prepared, (a) the
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<PAGE> 13
Company; the Account Borrowing Base Parties; Tesoro E&P; Tesoro Alaska
Pipeline Company, a Delaware corporation; Tesoro Bolivia; Tesoro
Northstore Company, an Alaskan corporation; Tesoro Natural Gas
Company, a Delaware corporation; and any other Subsidiary of the
Company designated from time to time by the Agent and (b) all of the
consolidated Subsidiaries of the Company other than those specifically
referred to in clause (a) above reported as a single consolidated
group.
"Cover" for Letter of Credit Liabilities shall be effected by
paying to the Agent in immediately available funds, to be held by the
Agent in a collateral account maintained by the Agent at its Payment
Office and collaterally assigned as security pursuant to the Cash
Collateral Account Agreement dated as of the Closing Date between the
Company and the Agent, an amount equal to the maximum amount of each
applicable Letter of Credit available for drawing at any time. Such
amount shall be retained by the Agent in such collateral account until
such time as the applicable Letter of Credit shall have expired and
Reimbursement Obligations, if any, with respect thereto shall have
been fully satisfied.
"Current Information" shall have the meaning provided in the
definition of "Applicable Margin."
"Default" shall mean an Event of Default or any condition or
event which, with notice or lapse of time or both, would constitute an
Event of Default.
"Developed" shall mean Proved Hydrocarbon reserves recoverable
through existing wells.
"Documentary Letter of Credit" shall mean a letter of credit
denominated in Dollars issued pursuant to this Credit Agreement (i)
the terms of which are in the reasonable judgment of the Issuing Bank
for such letter of credit, standard in the petroleum industry, and
(ii) which supports payment or performance for a single identified
purchase or exchange of crude oil, condensate and/or other petroleum
products.
"Dollar" and the sign "$" shall mean lawful money of the
United States of America.
"E&P Loan Value" shall mean the amount of Revolving Credit
Loans that the Lenders shall determine, pursuant to Section 2.20, can
be supported by the BB Properties.
"E&P Mortgage" shall mean the Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statement
dated as of the Closing Date granted by the Tesoro E&P, to Stephen H.
Field, as trustee, granting a Lien on the Oil and Gas Properties of
Tesoro E&P, as security for the indebtedness defined therein as
"Indebtedness".
"E&P Restructuring" shall mean the restructuring of certain
Subsidiaries of the Company and their assets in accordance with the
transactions described on Exhibit J.
"EBITDA" shall mean, as to the Company and its Subsidiaries on
a consolidated basis and, for each Rolling Period, the amount equal to
net income of the Company and its Subsidiaries less any non-cash
income included in net income, plus, to the extent deducted from net
income, interest expense, depreciation, depletion and impairment,
amortization of leasehold and
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<PAGE> 14
intangibles, other non-cash expenses (including, but not limited to,
write-offs of original issue discount and deferred financing costs on
existing Indebtedness that has been replaced by Indebtedness permitted
by Section 5.04(a)(ii) hereof), and taxes (excluding Bolivian taxes
paid in kind), provided, that, gains or losses on the disposition of
assets shall not be included in EBITDA.
"Effective Date" shall mean the date on which (i) each of the
conditions precedent set forth in Article III have been satisfied or
waived by each of the Lenders, (ii) the conditions to effectiveness
set forth in Section 8.22 have been satisfied and (iii) the initial
Loans have been made, the Outstanding Letters of Credit have been
assumed, or the initial Letter of Credit has been issued. Subject to
Section 3.01, the Effective Date and Closing Date may be the same
date.
"Eligible Account" shall mean at any time the net invoice or
ledger amount owing on each account (which shall mean any "account" as
such term is defined in Section 9-106 of the UCC and any "chattel
paper" as such term is defined in Section 9-105(b) of the UCC) of any
Account Borrowing Base Party (net of any credit balance, returns,
trade discounts, or unbilled amounts or retention) for which each of
the following statements is accurate and complete (and the Company by
including such account in any computation of the Borrowing Base shall
be deemed to represent and warrant to the Agent, the Issuing Banks and
the Lenders the accuracy and completeness of such statements):
(a) Said account is a binding and valid
obligation of the obligor thereon in full force and effect;
(b) Said account is genuine as appearing on its
face or as represented in the books and records of the
applicable Account Borrowing Base Party;
(c) Said account is free from claims regarding
rescission, cancellation or avoidance, whether by operation of
law or otherwise;
(d) Payment of said account is not more than 90
days past the invoice date thereof and is less than 60 days
past due;
(e) Said account is net of concessions, offset
(excluding any accounts payable offset supported by a Letter
of Credit) or understandings with the obligor thereon of any
kind;
(f) Said account is, and at all times will be,
free and clear of all Liens, except in favor of the Agent, and
the Agent has a first priority, perfected security interest in
such account;
(g) Said account is derived from goods sold or
leased or services rendered to the obligor in the ordinary
course of the applicable Account Borrowing Base Party's
business (other than the sale of minerals or the like,
including oil and gas, at the wellhead or minehead);
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<PAGE> 15
(h) Said account is not (i) carried on the books
of such Account Borrowing Base Party as an "exchange account
receivable" or (ii) subject to an exchange agreement with
another Person;
(i) Said account is not payable by an obligor who
is more than 60 days past due with regard to 20% or more of
the total accounts owed by such obligor;
(j) The account debtor has sent an invoice within
10 days after said account has been entered on the financial
records of the appropriate Account Borrowing Base Party;
(k) All consents, licenses, approvals or
authorizations of, or registrations or declarations with, any
Governmental Authority required to be obtained, effected or
given in connection with the execution, delivery and
performance of said account by each party obligated thereunder
have been duly obtained, effected or given and are in full
force and effect;
(l) The obligor on said account (i) is not the
subject of any bankruptcy or insolvency proceeding, has not
had a trustee or receiver appointed for all or a substantial
part of its property, has not made an assignment for the
benefit of creditors, admitted its inability to pay its debts
as they mature or suspended its business; and (ii) is not
affiliated, directly or indirectly, with the Company, as a
Subsidiary or other Affiliate, employee or otherwise;
(m) The obligor on said account may be the United
States of America or any branch or agency thereof; provided
that no Default has occurred and is continuing and the Agent,
in its sole discretion, has determined that said account has
been properly assigned to the Agent pursuant to the Federal
Assignment of Claims Act;
(n) The goods sold or leased or services rendered
resulting in the right to payment in connection with said
account were sold, leased or rendered in a state or territory
of the United States of America (excluding however, such goods
which are sold or leased for export outside of the United
States of America), which is payable in the United States of
America, and the obligor of which is subject to the
jurisdiction of federal or state courts in the United States
of America, unless said account is backed by a letter of
credit in form and substance, and issued by an issuer,
acceptable to the Agent;
(o) If said account, when added to all other
accounts that are obligations of the same obligor, results in
a total sum that exceeds 10% of the total balance then due on
all of the applicable Account Borrowing Base Party's accounts,
the amount of said account in excess of 10% of such total
balance then due shall be excluded from Eligible Accounts;
provided, however, if the obligor of said account is Texaco
Inc., Exxon Corporation, Chevron U.S.A. Inc. or any wholly
owned Subsidiary of any one of them, or other obligors
approved for such purpose by the Agent in writing (with such
approval being reported to the Lenders), then said account
shall be included as an Eligible Account to the extent that
the total sum due to any of the obligors named above is less
than 15% of the total balance then due on all applicable
Account Borrowing Base Party's accounts,
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<PAGE> 16
and the amount of said account in excess of 15% of such total
balance then due shall be excluded from Eligible Accounts; and
(p) Said account has not been otherwise
determined by the Agent, in its good faith discretion, to be
unacceptable in accordance with its customary practices for
facilities of this nature.
"Eligible Inventory" shall mean, at any time, all inventory
(as such term is defined in Section 9-104(4) of the UCC) of the
Inventory Borrowing Base Parties, including, without limitation, the
In Transit Inventory and inventory in the Tesoro Terminals, for which
each of the following statements is accurate and complete (and the
Company by including such inventory in any computation of the
Borrowing Base shall be deemed to represent and warrant to the Agent,
each Issuing Bank and each Lender the accuracy and completeness of
such statements):
(a) Said inventory is, and at all times will be,
free and clear of all Liens (except for perfected Liens in
favor of the Agent and, in the case of In Transit Inventory
described in the definition of In Transit Inventory below,
Liens securing the payment of tariffs owed by Tesoro Alaska to
a common carrier transporting feedstocks or blendstocks
through the Trans-Alaska Pipeline System or the KPL Facility,
as defined below), and the Agent has a first priority,
perfected security interest in such inventory;
(b) Said inventory does not include capitalized
goods which are part of inventory of any Inventory Borrowing
Base Party;
(c) Said inventory is located in Alaska,
California or Washington, or to the extent that it qualifies
as In Transit Inventory, is located in the territorial waters
of Alaska, California, Oregon, Washington or British Columbia,
Canada (and not in international waters);
(d) Said inventory is not stored at any terminal
other than a Tesoro Terminal; and
(e) Other than inventory which qualifies as In
Transit Inventory, said inventory is not in transit to or from
the Kenai Refinery.
For purposes of this definition, "In Transit Inventory" shall mean, at
any time, feedstocks, blendstocks or refined products solely owned by
an Inventory Borrowing Base Party that are in transit:
(a) to the Kenai Refinery (i) from Pump Station No. 1
on the Trans-Alaska Pipeline System, including feedstocks or
blendstocks in storage at the Valdez Terminal in Valdez,
Alaska, (ii) in a tanker or barge located within Alaska,
California, Washington or British Columbia, Canada or their
respective territorial waters (and not in international
waters) that has been time chartered by any Inventory
Borrowing Base Party, (iii) in or on any pipeline, terminal,
dock or storage tank of the Kenai Pipeline Company in the area
of Cook Inlet, Alaska (the "KPL Facility"), or (iv) in the
Cook Inlet Pipeline
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<PAGE> 17
Company System in the area of Cook Inlet, Alaska, including
feedstocks or blendstocks in storage at the Drift River
Terminal in Drift River, Alaska; or
(b) from the Kenai Refinery (i) in a tanker or barge
located within Alaska, California, Oregon, Washington or
British Columbia, Canada or their respective territorial
waters (and not in international waters) that has been time
chartered by any Inventory Borrowing Base Party, (ii) in the
Anchorage Pipeline owned by Tesoro Alaska Pipeline Company
(formerly known as the Nikiski Alaska Pipeline), or (iii) in
the KPL Facility (as defined in Clause (a) above).
"Eligible Transferee" shall mean any financial institution
which is a Lender as of the Effective Date or which is a commercial
bank, a financial institution or an "accredited investor" (as defined
in Regulation D) which makes loans in the ordinary course of its
business and that makes or acquires Loans for its own account in the
ordinary course of its business and which has capital, surplus and
undivided profits aggregating at least $250,000,000 (as of the date of
its most recent financial statements).
"Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any
Governmental Authority pertaining to health or the environment in
effect in any and all jurisdictions in which the Company or its
Subsidiaries are conducting or at any time have conducted business, or
where any Property of the Company or its Subsidiaries is located, or
where any hazardous substances generated by or disposed of by the
Company or its Subsidiaries are located, including but not limited to
the Oil Pollution Act of 1990 ("OPA"), the Clean Air Act, as amended,
the Comprehensive Environmental, Response, Compensation, and Liability
Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of
1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the
Toxic Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, and other environmental
conservation or protection laws. The term "oil" shall have the
meaning specified in OPA; the terms "hazardous substance," "release"
and "threatened release" have the meanings specified in CERCLA, and
the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA; provided, however, in the event either
CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment, and provided, further, that, to the
extent the laws of the state in which any Property of the Company or
its Subsidiaries is located establish a meaning for "oil," "hazardous
substance," "release," "solid waste" or "disposal" which is broader
than that specified in either OPA, CERCLA or RCRA, such broader
meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether
or not incorporated) which together with the Company or a Subsidiary
of the Company would be deemed to be a "single employer" within the
meaning of Section 4001(b)(1) of ERISA or Subsections 414(b), (c), (m)
or (o) of the Code.
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<PAGE> 18
"ERISA Termination Event" shall mean (i) a "Reportable Event"
described in Section 4043 of ERISA and the regulations issued
thereunder (other than a "Reportable Event" not subject to the
provision for 30-day notice to the PBGC under Subsections .14, .18,
.19 or .20 of Part 2615 of the PBGC regulations), (ii) the withdrawal
of the Company, a Subsidiary of the Company or any ERISA Affiliate
from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, (iii) the filing
of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, (iv) the
institution of proceedings to terminate a Plan by the PBGC, or (v) any
other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan.
"Eurodollar Loan" shall mean a Revolving Credit Loan or a Term
Loan bearing interest at the rate provided in Subsection 2.06(b).
"Eurodollar Rate" shall mean the offered quotation, if any, to
first-class banks in the Eurodollar market by the Agent for Dollar
deposits of amounts in funds comparable to the principal amount of the
Eurodollar Loan to which such Eurodollar Rate is to be applicable with
maturities comparable to the Interest Period for which such Eurodollar
Rate will apply as of approximately 10:00 a.m. (Houston time) two
Business Days prior to the commencement of such Interest Period.
"Event of Default" shall have the meaning provided in Article
VI.
"Excess Cash Flow" shall mean (a) Cash Flow of Tesoro Alaska
for any calendar year, minus (b) regularly scheduled payments of
principal and interest, to the extent not previously deducted from net
income of Tesoro Alaska, on the outstanding Term Loans for any
calendar year, minus (c) capital expenditures of Tesoro Alaska
(excluding capital expenditures for the addition of the Vacuum Unit)
during such calendar year, minus (d) $10,000,000.
"Exchange Notes" shall mean the 13% Exchange Notes due
December 1, 2000, issued by the Company.
"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 the Agent from three Federal funds brokers of
recognized standing selected by it.
"Financial Statements" shall mean the consolidated financial
statements of the Company and its Subsidiaries described or referred
to in Section 4.06.
"Financing Documents" shall mean this Agreement, the Notes,
the Guaranty Agreement, the Security Instruments, the Applications,
the Letters of Credit, Borrowing Requests, Borrowing Base Reports, and
the other documents, instruments or agreements described in Subsection
3.02(d), together with any other document, instrument or agreement
(other than participation,
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<PAGE> 19
agency or similar agreements among the Lenders or between any Lender
and any other bank or creditor with respect to any indebtedness or
obligations of the Company hereunder) now or hereafter entered into in
connection with the Loans, the Indebtedness or the Mortgaged
Properties, as such documents, instruments or agreements may be
amended, modified or supplemented from time to time.
"Fixed Charges" shall mean, as to the Company and its
Subsidiaries on a consolidated basis and for each Rolling Period, the
sum of scheduled debt payments, plus cash interest expense, plus cash
dividends.
"Form 1001 Certification" shall have the meaning provided in
Section 2.21(f).
"Form 4224 Certification" shall have the meaning provided in
Section 2.21(f).
"Funded Indebtedness" shall mean all Indebtedness for borrowed
money, any Capital Lease Obligations and any guaranty with respect to
Funded Indebtedness of another Person.
"GAAP" shall mean generally accepted accounting principles as
applied in accordance with Section 1.02.
"Governmental Authority" shall mean any (domestic or foreign)
federal, state, province, county, city, municipal or other political
subdivision or government, department, commission, board, bureau,
court, agency or any other instrumentality of any of them, which
exercises jurisdiction over the Company or any of its Property or any
Subsidiary of the Company or any of such Subsidiary's Property.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other
direction or requirement (including but not limited to any of the
foregoing which relate to Environmental Laws, energy regulations and
occupational, safety and health standards or controls) of any
Governmental Authority.
"Guaranty Agreement" shall mean the Guaranty Agreement dated
as of the Closing Date executed by the Guarantors.
"Guarantors" shall mean those Subsidiaries designated as
Guarantors on Exhibit C and any other Subsidiary of the Company, other
than a Non-Guarantor Subsidiary, designated as a Guarantor by (i) the
Company with the approval of the Agent or (ii) the Majority Lenders,
in each case pursuant to Section 5.01(k).
"Hedge Agreement" shall mean (i) any Hydrocarbon Swap
Agreement or (ii) any Interest Rate Swap Agreement.
"Highest Lawful Rate" shall mean, with respect to each Lender,
the maximum nonusurious interest rate, if any, that at any time or
from time to time may be contracted for, taken, reserved, charged or
received on the Notes or on other Lender Indebtedness, as the case may
be, owed to it under the law of any jurisdiction whose laws may be
mandatorily applicable
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<PAGE> 20
to such Lender notwithstanding other provisions of this Agreement, or
law of the United States of America applicable to such Lender and the
Transactions which would permit such Lender to contract for, charge,
take, reserve or receive a greater amount of interest than under such
jurisdiction's law.
"Hydrocarbon Interests" shall mean all rights, titles,
leasehold and other interests and estates in and to oil and gas
leases, oil, gas and mineral leases, or other liquid or gaseous
hydrocarbon leases, mineral fee interests, overriding royalty and
royalty interests, net profit interests and production payment
interests, including any reserve or residual interest of whatever
nature.
"Hydrocarbon Swap Agreement" shall mean any contract for sale
for future delivery of Hydrocarbons (whether or not the subject
Hydrocarbons are to be delivered), hedging contract, forward contract,
swap agreement, futures contract or other hydrocarbon pricing
protection agreement or option with respect to any such transaction,
designed to hedge against fluctuations in Hydrocarbon prices.
"Hydrocarbons" shall mean oil, gas, casinghead gas,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined therefrom.
"Improvements" shall mean all improvements owned by Tesoro
Alaska now or hereafter attached to or placed, erected, constructed or
developed on the Refinery Premises (excluding the Property leased
pursuant to the Solar Turbine Lease).
"Indebtedness" of any Person shall mean:
(i) all obligations of such Person which, in
accordance with GAAP, are or should be shown on the balance
sheet of such Person as a liability (including, but not
limited to, obligations for borrowed money and for the
deferred purchase price of property or services, and
obligations evidenced by bonds, debentures, notes or other
similar instruments);
(ii) all Capital Lease Obligations;
(iii) all guaranties (direct or indirect), all
contingent reimbursement obligations under undrawn letters of
credit and other contingent obligations of such Person in
respect of, or obligations to purchase or otherwise acquire or
to assure payment of, Indebtedness of others;
(iv) Indebtedness of others secured by any Lien
upon Property owned by such Person, whether or not assumed;
and
(v) obligations of such Person under agreements
of the types described in the definitions of Hydrocarbon Swap
Agreement and Interest Rate Swap Agreement.
"Interest Period" shall mean, with respect to each Borrowing
of Eurodollar Loans, an interest period complying with the terms and
provisions of Section 2.07.
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<PAGE> 21
"Interest Rate Swap Agreement" shall mean any rate swap, rate
cap, rate floor, rate collar, forward rate agreement or other rate
protection agreement or option with respect to any such transaction,
designed to hedge against fluctuations in interest rates.
"Inventory Borrowing Base Parties" shall mean Tesoro Alaska
and Tesoro R&M, and "Inventory Borrowing Base Party" shall mean any
one of them.
"Issuing Bank" shall mean, for each Letter of Credit, TCB or
BP as the issuing bank for such Letter of Credit at the option of the
Company.
"Kenai Refinery" shall mean the refinery of Tesoro Alaska
located in the area of Kenai, Alaska, consisting of the Refinery
Premises and the Kenai Refinery Related Property.
"Kenai Refinery Related Property" shall mean (i) all
Improvements; (ii) all Refinery Personal Property; (iii) all water and
water rights pertaining to the Refinery Premises; (iv) all building
materials and equipment now or hereafter delivered to and intended to
be installed in or on the Refinery Premises or on the Improvements;
(v) all plans and specifications for the Improvements; (vi) all rights
of Tesoro Alaska (but not its obligations) under any contracts
relating to the Refinery Premises, the Improvements or the Refinery
Personal Property, including without limitation, the Solar Turbine
Lease, but excluding contract rights under contracts containing
prohibitions against assignment of or the granting of a security
interest in the rights of a party thereunder; (vii) all rights of
Tesoro Alaska (but not its obligations) under any accounts,
construction contracts, architectural agreements and general
intangibles, other than contract rights under contracts containing
prohibitions against assignment of or the granting of a security
interest in the rights of a party thereunder, (but excluding
trademarks, trade names and symbols) arising from or by virtue of any
transactions related to the Refinery Premises, Improvements or
Refinery Personal Property; (viii) all permits, licenses, franchises,
certificates, and other rights and privileges obtained in connection
with the Refinery Premises, the Improvements and the Refinery Personal
Property; (ix) all proceeds arising from or by virtue of the sale,
lease or other disposition of the Refinery Premises, the Improvements
or the Refinery Personal Property; (x) all proceeds of each policy of
insurance relating to the Refinery Premises, the Improvements or the
Refinery Personal Property; (xi) all proceeds from the taking of any
of the Refinery Premises, the Improvements, the Refinery Personal
Property or any rights appurtenant thereto by right of eminent domain
or by private or other purchase in lieu thereof, including change of
grade of streets, curb cuts or other rights of access, for any public
or quasi-public use under any Governmental Requirement; (xii) all
right, title and interest of Tesoro Alaska in and to all streets,
roads, public places, easements and rights-of-way, existing or
proposed, public or private, adjacent to or used in connection with,
belonging or pertaining to the Refinery Premises; (xiii) all of the
leases, rents, royalties, bonuses, issues, profits, revenues or other
benefits of the Refinery Premises, the Improvements or the Refinery
Personal Property, including without limitation, cash or securities
deposited pursuant to leases to secure performance by the lessees of
their obligations thereunder; (xiv) all consumer goods located in, on
or about the Refinery Premises or the Improvements or used in
connection with the use or operation thereof; (xv) all rights,
hereditaments and appurtances pertaining to the foregoing; and (xvi)
all other interests of every kind and character that Tesoro Alaska now
has or at any time hereafter acquires in and to the Refinery Premises,
Improvements and Refinery Personal Property described herein and all
Property that is used or useful in connection therewith, including,
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<PAGE> 22
without limitation, rights of ingress and egress and all reversionary
rights or interests of Tesoro Alaska with respect to such Refinery
Premises, Improvements or Refinery Personal Property.
"Lender Indebtedness" shall mean any and all amounts owing or
to be owing by the Company to the Agent, the Issuing Banks or the
Lenders with respect to or in connection with the Loans, any Letter of
Credit Liabilities, the Notes, this Agreement, or any other Financing
Document.
"Lender" shall have the meaning assigned such term in the
opening paragraph of this Agreement.
"Lending Office" shall mean for each Lender the office
specified opposite such Lender's name on the signature pages hereof,
or in the Assignment and Acceptance pursuant to which it became a
Lender, with respect to each Type of Loan, or such other office as
such Lender may designate in writing from time to time to the Company
and the Agent with respect to such Type of Loan.
"Letters of Credit" shall have the meaning assigned such term
in Section 2.03(a) and shall include the Outstanding Letters of Credit
which are hereby deemed to be issued under this Agreement.
"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 as of the date of
determination plus (ii) the aggregate unpaid amount of all
Reimbursement Obligations due and payable as of the date of
determination in respect of previous drawings made under such Letter
of Credit.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of
the Property, whether such interest is based on the common law,
statute or contract, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purposes of
this Agreement, the Company or any Subsidiary of the Company shall be
deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, financing lease or other
arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.
"Loan" shall mean a Revolving Credit Loan or a Term Loan, and
"Loans" shall mean collectively the Revolving Credit Loans or Term
Loans or one or more of them as provided herein.
"Loan Parties" shall mean the Company and the Guarantors and
"Loan Party" shall mean any one of them.
"Loan Value of Eligible Inventory" shall mean, at a particular
date, an amount equal to the Eligible Inventory at such date, valued
at current market as described on Annex II of the
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<PAGE> 23
Credit Agreement or valued at current market as may otherwise be
mutually agreed upon from time to time between the Company and the
Agent.
"Majority Lenders" shall mean at any time (a) prior to the
Commitments expiring or being terminated in full, Lenders holding at
least 66-2/3% of the Commitments in effect at such time, or (b)
thereafter, Lenders holding at least 66-2/3% of the sum of (i) the
then Aggregate Revolving Credit Exposure, plus (ii) the then unpaid
principal amount of the Term Loans at such time.
"Margin Stock" shall have the meaning provided in Regulation U
and Regulation X.
"Material Adverse Effect" shall mean any material and adverse
effect on the business, financial condition, results of operations or
prospects of the Company and its Subsidiaries taken as a whole.
"Maximum Available Amount" shall mean, at any date, an amount
equal to the lesser of (a) the aggregate Revolving Credit Commitments
as of such date and (b) the Borrowing Base as of such date.
"Maximum Revolving Credit Loan Available Amount" shall mean,
at any date, an amount equal to the lesser of (a) the difference
between (i) Maximum Available Amount as of such date and (ii) the
aggregate amount of all Letter of Credit Liabilities as of such date
and (b) the E&P Loan Value as of such date.
"MetLife Louisiana" shall mean MetLife Security Insurance
Company of Louisiana.
"MetLife Option" shall mean the option to purchase granted by
MetLife Louisiana to the Company pursuant to which the Company shall
have the option to purchase all shares of the $2.20 Preferred Stock
and the Common Stock held by MetLife Louisiana.
"Mortgaged Property" shall mean the Company's and the
Guarantors' Properties described in and subject to the Liens,
privileges, priorities and security interests existing and to exist
under the terms of the Security Instruments, including but not limited
to the Kenai Refinery and the Oil and Gas Properties owned by the
Company or the Guarantors which have been or are hereafter mortgaged
to the Agent for the benefit of the Lenders pursuant to the Security
Instruments.
"Non-Guarantor Subsidiary" shall mean a Subsidiary of the
Company that is not a Guarantor and that has been designated by the
Company to the Agent as a "Non-Guarantor Subsidiary;" provided, the
aggregate amount invested after the Closing Date directly or
indirectly by the Company in such Subsidiaries shall not exceed
$1,000,000.
"Notes" shall mean the Revolving Credit Notes and the Term
Notes.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
properties now or hereafter pooled or unitized with Hydrocarbon
Interests; all presently existing or future unitization, pooling
agreements and declarations of pooled units and the units created
thereby (including, but not limited to, units created under orders,
regulations and rules of any
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<PAGE> 24
Governmental Authority having jurisdiction) which may affect all or
any portion of the Hydrocarbon Interests; all operating agreements,
contracts and other agreements which relate to any of the Hydrocarbon
Interests or the production, sale, purchase, exchange or processing of
Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, the lands covered thereby
and all oil in tanks and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the
Hydrocarbon Interests; all tenements, hereditaments, appurtenances and
Properties in anywise appertaining, belonging, affixed or incidental
to the Hydrocarbon Interests, Properties, rights, titles, interests
and estates described or referred to above, including any and all
Property, real or personal, now owned or hereafter acquired and
situated upon, used, held for use or useful in connection with the
operating, working or development of any of such Hydrocarbon Interests
or Property (excluding drilling rigs, automotive equipment or other
personal property which may be on such premises for the purpose of
drilling a well or for other similar temporary uses) and including any
and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants,
plant compressors, pumps, pumping units, field gathering systems,
tanks and tank batteries, fixtures, valves, fittings, machinery and
parts, engines, boilers, meters, apparatus, equipment, appliances,
tools, implements, cables, wires, towers, casing, tubing and rods,
surface leases, rights-of-way, easements and servitudes together with
all additions, substitutions, replacements, accessions and attachments
to any and all of the foregoing.
"Other Taxes" shall have the meaning provided in Subsection
2.21(b).
"Outstanding Letters of Credit" shall mean the following
letters of credit issued by BP under the BP Letter of Credit
Agreement:
<TABLE>
<CAPTION>
LC # Loan Party Stated Amount Expiry Beneficiary
---- ---------- ------------- ------ -----------
<S> <C> <C> <C> <C>
023214 Tesoro Alaska $5,940,000 10/31/94 Union Oil Company of California
023215 Tesoro Alaska $1,107,700 10/31/94 Conoco, Inc.
024511 Tesoro Alaska $ 700,000 10/31/94 Exxon Pipeline Company
024512 Tesoro Bolivia $2,000,000 10/14/94 Banco De La Union S.A.
024515 Tesoro Bolivia $2,000,000 05/12/95 Banco De La Union S.A.
023248 The Company $ 854,250 09/30/94 National Union Fire Insurance Company (automatically
renewable)
024513 The Company $1,000,000 09/30/94 Fireman's Insurance Company (automatically renewable)
</TABLE>
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<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C>
024509 Tesoro Petroleum $1,045,000 06/30/94 Conoco, Inc.
Distributing
Company
</TABLE>
"Payment Office" shall mean the Agent's office located at 712
Main Street, Houston, Texas, 77002; Attention: Mr. P. Stan Burge.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereto.
"PEDCO" shall mean Tesoro Petroleum Distributing Company, a
Louisiana corporation.
"Percentage Share" shall mean, as to any Lender, the fraction,
expressed as a percentage, the numerator of which is the amount of
such Lender's Revolving Credit Commitment and the denominator of which
is the amount of the aggregate Revolving Credit Commitments.
"Permitted Dividends" shall mean those dividends that the
Company is permitted to declare and pay pursuant to Section 5.04(d).
"Person" shall mean any individual, partnership, firm,
corporation (including, but not limited to the Company), association,
joint venture, trust or other entity, or any government or political
subdivision or agency, department or instrumentality thereof;
provided,however, for the purpose of the definition of "Change of
Control," "Person" shall mean a "person" or group of persons within
the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended.
"Plan" shall mean any employee pension benefit plan, as
defined in Section 3(2) of ERISA, which (i) is currently or hereafter
sponsored, maintained or contributed to by the Company, a Subsidiary
or an ERISA Affiliate, or (ii) was at any time during the six calendar
years preceding the date of this Agreement sponsored, maintained or
contributed to by the Company, a Subsidiary or an ERISA Affiliate.
"Prime Rate" shall mean the rate which the Agent announces
from time to time as its prime rate, and is thereafter entered in the
minutes of the 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 such
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. The Agent may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Proved" shall mean Hydrocarbon reserves which geological and
engineering data demonstrate with reasonable certainty to be
economically recoverable in future years with present operating
methods and expenses.
"Proved Undeveloped Hydrocarbon Reserves" shall mean Proved
Hydrocarbon reserves which are not Developed.
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<PAGE> 26
"Quarterly Dates" shall mean the last day of each March, June,
September, and December, in each year, the first of which shall be
June 30, 1994; provided, however, that if any such day is not a
Business Day, such Quarterly Date shall be the next succeeding
Business Day.
"Recapitalization" shall mean the consummation of (a) the
exchange of a minimum of $44,116,000 of Subordinated Debentures for
Exchange Notes, (b) the reclassification of the $2.16 Preferred Stock
into an aggregate of approximately 6,465,859 shares of Common Stock,
(c) an agreement with MetLife Louisiana, the sole holder of the $2.20
Preferred Stock pursuant to which it will agree to waive certain put
options and mandatory redemption requirements existing in connection
with the $2.20 Preferred Stock and make certain other concessions and
waivers with regard to the $2.20 Preferred Stock and will grant to the
Company the MetLife Option, and (d) amendments to the Company's
Certificate of Incorporation to provide for the above described
transactions, all as more particularly described in that certain Proxy
Statement, Prospectus and Consent Solicitation of the Company dated
January 3, 1994.
"Refinery Personal Property" shall mean all equipment,
fixtures, furnishings, inventory and articles of personal property of
Tesoro Alaska (excluding from the foregoing the Property leased
pursuant to the Solar Turbine Lease) now or hereafter attached to or
used in or about the Improvements or that are necessary or useful for
the complete and comfortable use and occupancy of the Improvements for
the purposes for which they were or are to be attached, placed,
erected, constructed or developed, or which are or may be used in or
related to the planning, development, financing or operation of the
Improvements, and all renewals of or replacements or substitutions for
any of the foregoing, whether or not the same are or shall be attached
to the Refinery Premises or the Improvements.
"Refinery Premises" shall mean the real property owned by
Tesoro Alaska described on Exhibit A attached to the Alaska Deed of
Trust.
"Register" shall mean the register maintained by the Agent at
its Payment Office showing the name and address of each Lender, its
Commitment, and the principal amount of the Loans owing to each Lender
from time to time.
"Regulation D", "Regulation U" and "Regulation X" shall mean
Regulation D, Regulation U, and Regulation X, respectively, of the
Board of Governors of the Federal Reserve System as from time to time
in effect and any successor thereto.
"Reimbursement Obligations" shall mean, at any date, the
obligations of the Company then outstanding in respect of the Letters
of Credit, to reimburse the Agent for the account of the Issuing Bank
for the amount paid by the Issuing Bank in respect of any drawings
under the Letters of Credit.
"Reserve Report" shall mean an engineering report meeting the
requirements set forth in Subsection 5.02(e) (and as to scheduled
redeterminations, provided on the dates set forth in such Subsection)
and such other reports, data and supplemental information as may from
time to time be reasonably requested by the Agent in connection with
any redetermination of the E&P Loan Value.
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<PAGE> 27
"Responsible Officer" shall mean the Chief Executive Officer,
the Chief Financial Officer, the Treasurer or the Controller, in each
case of the Company.
"Revolving Credit Commitment" shall have the meaning assigned
such term in Subsection 2.01(c).
"Revolving Credit Exposure" shall mean, at any time and as to
each Lender, the sum of (a) the aggregate principal amount of the
Revolving Credit Loans made by such Lender as of such date plus (b)
such Lender's Percentage Share of the aggregate amount of all Letter
of Credit Liabilities as of such date.
"Revolving Credit Loan" shall have the meaning provided in
Subsection 2.01(a)(ii); the Revolving Credit Loans shall not include
any Letter of Credit Liabilities.
"Revolving Credit Maturity Date" shall mean April 1, 1997.
"Revolving Credit Note" shall mean a promissory note of the
Company described in Section 2.05(a) payable to any Lender and being
substantially in the form of Exhibit A, evidencing the aggregate
Indebtedness of the Company to such Lender resulting from Revolving
Credit Loans made by such Lender.
"Rolling Period" shall mean for each calendar quarter, such
quarter and the three preceding calendar quarters.
"Security Instruments" shall mean the agreements or
instruments described or referred to in Subsections 3.02(d)(iii)
through (vii) and any and all other agreements or instruments now or
hereafter executed and delivered by the Company, any Subsidiary of the
Company or any other Person as security for the payment or performance
of the Lender Indebtedness.
"Solar Turbine Lease" shall mean that certain Lease Agreement
dated as of October 1, 1987, from Solar Turbines Incorporated, as
lessor, to the Company, as lessee.
"Standby Letter of Credit" shall mean a letter of credit
denominated in Dollars (i) the terms of which are in the reasonable
judgment of the Issuing Bank for such Letter of Credit standard in the
petroleum industry, (ii) which is used in lieu or in support of
performance guarantees or performance, surety or other similar bonds
(but expressly excluding stay and appeal bonds) arising in the
ordinary course of business, (iii) which is used in lieu or in support
of stay or appeal bonds; provided all such letters of credit used in
lieu or in support of stay or appeal bonds shall not exceed
$10,000,000 in aggregate amount at any time outstanding, (iv) which
supports the payment of insurance premiums for reasonably necessary
casualty insurance carried by the Company or any of its consolidated
Subsidiaries, or (v) which supports payment or performance for
identified purchases or exchanges of crude oil, condensate and/or
petroleum products.
"Subordinated Debentures" shall mean the 12 3/4% Subordinated
Debentures due March 15, 2001, issued by the Company.
-20-
<PAGE> 28
"Subsidiary" of any Person shall mean (a) a corporation of
which a majority of the outstanding shares of stock of each class
having ordinary voting power is owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries and (b) Tesoro LP.
"Taxes" shall have the meaning provided in Subsection 2.21(a).
"TCB" shall mean Texas Commerce Bank National Association, in
its individual capacity or as an Issuing Bank, as the case may be, and
not as Agent.
"Term Loan" shall have the meaning provided in Subsection
2.01(a)(i).
"Term Loan Commitment" shall have the meaning assigned such
term in Subsection 2.01(d)
"Term Loan Drawdown Termination Date" shall mean March 31,
1995, unless extended to a later date pursuant to Subsection 2.05(b).
"Term Loan Maturity Date" shall mean March 31, 1998.
"Term Note" shall mean a promissory note of the Company
described in Section 2.05(b) payable to any Lender and being
substantially in the form of Exhibit B, evidencing the aggregate
indebtedness of the Company to such Lender resulting from Term Loans
made by such Lender.
"Tesoro Alaska" shall mean Tesoro Alaska Petroleum Company, a
Delaware corporation.
"Tesoro Bolivia" shall mean Tesoro Bolivia Petroleum Company,
a Texas corporation.
"Tesoro E&P" shall mean (a) Tesoro Exploration and Production
Company, a Delaware corporation and, (b) at all times after the
consummation of the E&P Restructuring, Tesoro Exploration and
Production Company, Tesoro LP and Tesoro Gas Resources Company, Inc.,
a Delaware corporation, as a single consolidated group.
"Tesoro Environmental" shall mean Tesoro Environmental
Resources Company, a Delaware corporation.
"Tesoro LP" shall mean Tesoro E&P Company, L.P., a Delaware
limited partnership.
"Tesoro R&M" shall mean Tesoro Refining, Marketing & Supply
Company, a Delaware corporation.
"Tesoro Terminals" shall mean the Vancouver Terminal located
in the area of Vancouver, Washington, the Sacramento Terminal located
in the area of Sacramento, California, the Stockton Terminal located
in the area of Stockton, California, the Port Hueneme Terminal located
in the area of Port Hueneme, California and such other terminals which
Tesoro Alaska or any other Inventory Borrowing Base Party owns or has
possession of pursuant to a long-term lease.
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<PAGE> 29
"Transactions" shall mean the transactions provided for in and
contemplated by this Agreement and the other Financing Documents.
"Type" of Loan shall mean a Base Rate Loan or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the State of Texas or, where applicable as to
specific Mortgaged Property, any other relevant state.
"Unavailable Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name on Annex I under the
caption "Unavailable Commitment" (as the same may be reduced pursuant
to Section 2.01(f) or Section 2.09 or otherwise from time to time
modified pursuant to Section 8.07(b) hereof) and "Unavailable
Commitments" shall mean the aggregate amount, collectively for all
Lenders, of each such Lender's Unavailable Commitment.
"Vacuum Unit" shall mean the vacuum fractionation tower
operating at near absolute vacuum and related hydraulic, heat exchange
and process control systems.
Section 1.02 Accounting Terms and Determinations. Unless
otherwise defined or specified herein, all accounting terms shall be construed
herein, all accounting determinations hereunder shall be made, all financial
statements required to be delivered hereunder shall be prepared and all
financial records shall be maintained in accordance with GAAP applied on a
basis consistent with the financial statements referred to in Subsection
4.06(a).
Section 1.03 Other Definitional Terms. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, schedule, exhibit and like
references are to this Agreement unless otherwise specified.
ARTICLE II
AMOUNT AND TERMS OF LOANS
Section 2.01 Commitments.
(a) Loans. Subject to and upon the terms and conditions
herein set forth, each Lender severally agrees (i) to make, on any
Business Day prior to the Term Loan Drawdown Termination Date, term
loans (each a "Term Loan") to the Company; and (ii) on any Business
Day prior to the Revolving Credit Maturity Date, to make Revolving
Credit Loans (each a "Revolving Credit Loan") to the Company.
(b) Types of Loans. The Revolving Credit Loans and the
Term Loans made pursuant hereto by each Lender shall, at the option of
the Company, be either Base Rate Loans or Eurodollar Loans and may be
continued or converted pursuant to Section 2.11, provided that, except
as otherwise specifically provided herein, all Loans made pursuant to
the same Borrowing shall be of the same Type.
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<PAGE> 30
(c) Revolving Credit Commitments. Each Lender's
Revolving Credit Exposure shall not exceed at any one time the amount
set forth opposite such Lender's name on Annex I under the caption
"Revolving Credit Commitment" (as the same may be increased pursuant
to Section 2.01(f), reduced pursuant to Section 2.01(e) or Section
2.09 or otherwise from time to time modified pursuant to Section
8.07(b), its "Revolving Credit Commitment," and collectively for all
Lenders, the "Revolving Credit Commitments"); provided, however, that
the Aggregate Revolving Credit Exposure at any one time outstanding
shall not exceed the Maximum Available Amount in effect at such time;
and, provided, further, the aggregate principal amount of all
Revolving Credit Loans at any one time outstanding shall not exceed
the Maximum Revolving Credit Loan Available Amount in effect at such
time. There may be more than one Borrowing with respect to Revolving
Credit Loans on any day. Within the foregoing limits and subject to
the conditions set out in Article III, the Company may obtain
Borrowings of Revolving Credit Loans, repay or prepay such Revolving
Credit Loans, and reborrow such Revolving Credit Loans.
(d) Term Loan Commitments. Subject to Section 2.01(e),
the Term Loans made pursuant hereto by each Lender shall not exceed in
aggregate principal amount outstanding the amount set forth opposite
such Lender's name on Annex I under the caption "Term Loan Commitment"
(as the same may be reduced pursuant to Section 2.09 or otherwise from
time to time modified pursuant to Section 8.07(b), its "Term Loan
Commitment," and collectively for all Lenders, the "Term Loan
Commitments"). There may be no more than one Borrowing with respect
to Term Loans during any calendar month. Any portion of each Lender's
Term Loan Commitment not utilized on or before the Term Loan Drawdown
Termination Date shall be permanently cancelled. Any Term Loans that
are repaid or prepaid may not be reborrowed.
(e) Term Loan Activation Option. The Revolving Credit
Commitments as of the Effective Date shall be $100,000,000 and until
the Company elects to activate the Term Loan Commitments, the Term
Loan Commitments shall be $0. The Company may, at its option,
activate the Term Loan Commitments at any time within 90 days of the
Closing Date by providing the Agent with written notice in the Form of
Exhibit H. Concurrently with such notice, the Company shall deliver
the Term Notes to the Agent in accordance with Section 2.05(b), and
the Term Loan Commitments shall then be available. Concurrently with
such activation of the Term Loan Commitments, the Revolving Credit
Commitments shall be permanently reduced by $15,000,000.
(f) Unavailable Commitments. The Company may from time
to time, by written notice to the Agent, the Issuing Banks and each
Lender, designate all, or an aggregate portion in the minimum amount
of $5,000,000 or in integral multiples of $1,000,000, of the
Unavailable Commitments as Revolving Credit Commitments. Any amount
of the Unavailable Commitments so designated, shall be permanently
converted to Revolving Credit Commitments and the Revolving Credit
Commitment of each Lender shall be proportionately increased.
(g) Amounts of Borrowings, etc. The aggregate principal
amount of each Borrowing (i) of Eurodollar Loans shall be not less
than $5,000,000 and shall be in an integral multiple of $1,000,000,
and (ii) of Base Rate Loans hereunder shall be not less than
$1,000,000 and shall be in an integral multiple of $100,000, except
that any Borrowing of Revolving Credit Loans that are Base Rate Loans
may be in the aggregate amount of the unused Maximum Revolving Credit
Loan Amount in effect at such time. Borrowings of more than one Type
may be outstanding at
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<PAGE> 31
the same time; provided, however, that the Company shall not be
entitled to request any Borrowing that, if made, would result in an
aggregate of more than four separate Borrowings of Eurodollar Loans
being outstanding at any one time. For purposes of the foregoing,
Borrowings having different Interest Periods, regardless of whether
they commence on the same date, shall be considered separate
Borrowings.
Section 2.02 Borrowing Requests.
(a) Borrowing Requests. Whenever the Company desires to
make a Borrowing hereunder, it shall give Advance Notice in the form
of a Borrowing Request, specifying, subject to the provisions hereof,
(i) whether such Borrowing will be Revolving Credit Loans or Term
Loans, (ii) the aggregate principal amount of the Loans to be made
pursuant to such Borrowing, (iii) the date of Borrowing (which shall
be a Business Day), (iv) whether the Loans being made pursuant to such
Borrowing are to be Base Rate Loans or Eurodollar Loans, and (v) in
the case of Eurodollar Loans, the Interest Period to be applicable
thereto.
(b) Notice by Agent. The Agent shall promptly give each
Lender telecopy or telephonic notice (and, in the case of telephonic
notices, confirmed by telecopy or otherwise in writing) of the
proposed Borrowing, of such Lender's proportionate share thereof and
of the other matters covered by the Advance Notice. Without in any
way limiting the Company's obligation to confirm in writing any
telephonic notice, the Agent may act without liability upon the basis
of telephonic notice believed by the Agent in good faith to be from
the Company prior to receipt of written confirmation. In each such
case, the Company hereby waives the right to dispute the Agent's
record of the terms of such telephonic notice, absent manifest error.
Section 2.03 Letters of Credit.
(a) Issuance of Letters of Credit. Subject to the terms
and conditions hereof, the Company shall have the right, in addition
to Revolving Credit Loans provided for in Section 2.01, to utilize the
Revolving Credit Commitments from time to time prior to the Revolving
Credit Maturity Date by obtaining the issuance of either Documentary
Letters of Credit or Standby Letters of Credit for the account of any
Loan Party by an Issuing Bank if the Company shall so request in the
notice referred to in Subsection 2.03(b)(i) (such letters of credit
being collectively referred to as the "Letters of Credit"); provided,
however, that the Aggregate Revolving Credit Exposure at any one time
outstanding shall not exceed the Maximum Available Amount in effect at
such time. The Letters of Credit may be issued to support the
obligations of the Company or any of its Subsidiaries. Upon the date
of the issuance of a Letter of Credit, the applicable Issuing Bank
shall be deemed, without further action by any party hereto, to have
sold to each Lender, and each Lender shall be deemed, without further
action by any party hereto, to have purchased from such Issuing Bank,
a participation, to the extent of such Lender's Percentage Share, in
such Letter of Credit and the related Letter of Credit Liabilities.
No Letter of Credit issued pursuant to this Agreement shall have an
expiry date later than one year from date of issuance (other than
Outstanding Letter of Credit No. 024515), provided that any Letter of
Credit having an expiry date after the Revolving Credit Maturity Date
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 each of
the Agent and the Issuing Bank in their sole discretion, provided,
further, that, subject to the immediately preceding proviso, any
Letter of Credit may give the beneficiary thereof the right to draw
such Letter of Credit unless the expiry date thereof is extended for
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<PAGE> 32
periods of up to one year per extension. The Company and the Lenders
agree that, as of the Effective Date, the Outstanding Letters of
Credit shall for all purposes of this Agreement be deemed to be
Letters of Credit issued under and pursuant to the terms of this
Agreement.
(b) Additional Letter of Credit Provisions. The
following additional provisions shall apply to each Letter of Credit:
(i) The Company shall give the Agent and the Issuing Bank at
least one Business Days' prior notice (effective upon receipt), or in
each case, such shorter period as may be agreed to by such Issuing
Bank, specifying the date such Letter of Credit is to be issued (which
shall be a Business Day) and the Issuing Bank and describing: (A) the
face amount of the Letter of Credit, (B) the expiration date of the
Letter of Credit, (C) the name and address of the beneficiary, (D)
information concerning the transaction proposed to be supported by
such Letter of Credit as the Agent or such Issuing Bank may reasonably
request, (E) such other information and documents relating to the
Letter of Credit as the Agent or such Issuing Bank may reasonably
request, and (F) a precise description of documents and the verbatim
text of any certificate to be presented by the beneficiary, which, if
presented prior to the expiry date of the Letter of Credit, would
require such Issuing Bank to make payment under the Letter of Credit;
provided that such Issuing Bank, in its reasonable judgment, may
require changes in such documents and certificates; and provided
further that neither Issuing Bank shall be required to issue any
Letter of Credit that on its terms requires payment thereunder prior
to the next Business Day following receipt by such Issuing Bank of
such documents and certificates. Each such notice shall be
accompanied by the applicable Issuing Bank's Application and by a
certificate executed by a Responsible Officer setting forth
calculations evidencing availability for such Letter of Credit
pursuant to Subsection 2.03(b)(2)(i) and stating that all conditions
precedent to such issuance have been satisfied. Each Letter of Credit
shall, to the extent not inconsistent with the express terms hereof or
the applicable Application, be subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 (together with any subsequent
revisions thereof approved by a Congress of the International Chamber
of Commerce and adhered to by the Issuing Lender, the "UCP"), and
shall, as to matters not governed by the UCP, be governed by, and
construed and interpreted in accordance with, the laws of the State of
Texas. In determining whether to pay any Letter of Credit, the
applicable Issuing Bank shall be responsible only to use reasonable
care to determine that the documents and certificates required to be
delivered under that Letter of Credit have been delivered and that
they comply on their face with the requirements of that Letter of
Credit.
(ii) No Letter of Credit may be issued if after giving
effect thereto the Aggregate Revolving Credit Exposure would exceed
the Maximum Available 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 have been terminated, the
Revolving Credit Commitment of each Lender shall be deemed to be
utilized for all purposes hereof in an amount equal to such Lender's
Percentage Share of the amount of the Letter of Credit Liabilities
related to such Letter of Credit.
(iii) Upon receipt from the beneficiary of any Letter of
Credit of any demand for payment thereunder, the Issuing Bank shall
promptly notify the Company and the Agent of such demand (provided
that the failure of an Issuing Bank to give such notice shall not
affect the Reimbursement Obligations of the Company hereunder) and the
Company shall immediately, and in any event no later than 11:00 a.m.
(Houston, Texas time) on the date of such drawing,
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<PAGE> 33
reimburse the Agent for the account of the applicable Issuing Bank for
any amount paid by the Issuing Bank upon any drawing under any Letter
of Credit, without presentment, demand, protest or other formalities
of any kind in an amount, in same day funds, equal to the amount of
such drawing. Unless prior to 11:00 a.m. (Houston, Texas time) on the
date of such drawing, the Company shall have either notified the
Issuing Bank and the Agent that the Company intends to reimburse the
Agent for the account of the applicable Issuing Bank for the amount of
such drawing with funds other than the proceeds of a Revolving Credit
Loan or delivered to the Agent a Borrowing Request for Revolving
Credit Loans in an amount equal to such drawing, the Company will be
deemed to have given a Borrowing Request to the Agent requesting that
the Lenders make Revolving Credit Loans which shall be Base Rate Loans
on the date on which such drawing is honored in an amount equal to the
amount of such drawing. Such Loans shall be subject to satisfaction
of the conditions in Article III and to existence of Maximum Revolving
Credit Loan Available Amount. Subject to the preceding sentence, if
so requested by the Agent, the Lenders shall, on the date of such
drawing, make such Revolving Credit Loans in an amount equal to such
Lender's Percentage Share of such drawing, the proceeds of which shall
be applied directly by the Agent to reimburse the applicable Issuing
Bank for the amount of such drawing.
(iv) If the Company fails to reimburse the applicable Issuing
Bank as provided in clause (iii) above, such Issuing Bank shall
promptly notify the Agent and the Agent shall notify each Lender of
the unreimbursed amount of such drawing and of such Lender's
respective participation therein based on such Lender's Percentage
Share. Each Lender will pay to the Agent for the account of the
applicable Issuing Bank on the date of such notice an amount equal to
such Lender's Percentage Share of such unreimbursed drawing (or, if
such notice is made after 11:00 a.m. (Houston, Texas time) on such
date, on the next succeeding Business Day). If any Lender fails to
make available to such Issuing Bank the amount of such Lender's
participation in such Letter of Credit as provided in this clause
(iv), such Issuing Bank shall be entitled to recover such amount on
demand from such Lender together with interest at the Federal Funds
Rate for one Business Day and thereafter at the Base Rate. Nothing in
this clause (iv) shall be deemed to prejudice the right of any Lender
to recover from such Issuing Bank any amounts made available by such
Lender to such Issuing Bank pursuant to this clause (iv) if it is
determined by a court of competent jurisdiction that the payment with
respect to a Letter of Credit by such Issuing Bank was wrongful and
such wrongful payment was the result of gross negligence or willful
misconduct on the part of such Issuing Bank. The applicable Issuing
Bank shall pay to the Agent and the Agent to each Lender such Lender's
Percentage Share of all amounts received from the Company for payment,
in whole or in part, of the Reimbursement Obligation in respect of any
Letter of Credit, but only to the extent such Lender has made payment
to such Issuing Bank in respect of such Letter of Credit pursuant to
this clause (iv).
(v) The issuance by the applicable Issuing Bank of each
Letter of Credit shall, in addition to the conditions precedent set
forth in Article III, 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 such Issuing Bank, and that the Company
shall have executed and delivered such other instruments and
agreements relating to such Letter of Credit as such Issuing Bank
shall have reasonably requested and that are not inconsistent with the
terms of this Agreement including the applicable Issuing Bank's
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.
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(vi) AS BETWEEN THE COMPANY AND ANY ISSUING BANK, THE COMPANY
ASSUMES ALL RISKS OF THE ACTS AND OMISSIONS OF OR MISUSE OF THE
LETTERS OF CREDIT ISSUED BY SUCH ISSUING BANK BY THE RESPECTIVE
BENEFICIARIES OF SUCH LETTERS OF CREDIT. IN FURTHERANCE AND NOT IN
LIMITATION OF THE FOREGOING, SUCH ISSUING BANK SHALL NOT BE
RESPONSIBLE: (A) FOR THE FORM, VALIDITY, SUFFICIENCY, ACCURACY,
GENUINENESS OR LEGAL EFFECT OF ANY DOCUMENT SUBMITTED BY ANY PERSON IN
CONNECTION WITH THE APPLICATION FOR OR ISSUANCE OF SUCH LETTERS OF
CREDIT, EVEN IF IT SHOULD IN FACT PROVE TO BE IN ANY OR ALL RESPECTS
INVALID, INSUFFICIENT, INACCURATE, FRAUDULENT OR FORGED; (B) FOR THE
VALIDITY OR SUFFICIENCY OF ANY INSTRUMENT TRANSFERRING OR ASSIGNING OR
PURPORTING TO TRANSFER OR ASSIGN ANY SUCH LETTER OF CREDIT OR THE
RIGHTS OR BENEFITS THEREUNDER OR PROCEEDS THEREOF, IN WHOLE OR IN
PART, WHICH MAY PROVE TO BE INVALID OR INEFFECTIVE FOR ANY REASON; (C)
FOR FAILURE OF THE BENEFICIARY OF ANY SUCH LETTER OF CREDIT TO COMPLY
FULLY WITH CONDITIONS REQUIRED IN ORDER TO DRAW UPON SUCH LETTER OF
CREDIT, WHICH FAILURE IS NOT THE RESULT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH ISSUING BANK AS DETERMINED BY A COURT OF COMPETENT
JURISDICTION; (D) FOR ERRORS, OMISSIONS, INTERRUPTIONS OR DELAYS IN
TRANSMISSION OR DELIVERY OF ANY MESSAGES, BY MAIL, CABLE, TELEGRAPH,
TELEX OR OTHERWISE, WHETHER OR NOT THEY ARE IN CIPHER; (E) FOR ERRORS
IN INTERPRETATION OF TECHNICAL TERMS; (F) FOR ANY LOSS OR DELAY IN THE
TRANSMISSION OR OTHERWISE OF ANY DOCUMENT REQUIRED IN ORDER TO MAKE A
DRAWING UNDER ANY SUCH LETTER OF CREDIT OR OF THE PROCEEDS THEREOF;
(G) FOR THE MISAPPLICATION BY THE BENEFICIARY OF ANY SUCH LETTER OF
CREDIT OF THE PROCEEDS OF ANY DRAWING UNDER SUCH LETTER OF CREDIT; AND
(H) FOR ANY CONSEQUENCES ARISING FROM CAUSES BEYOND THE CONTROL OF
SUCH ISSUING BANK, INCLUDING, WITHOUT LIMITATION, THE ACTIONS OF ANY
GOVERNMENTAL AUTHORITY. NONE OF THE ABOVE SHALL AFFECT, IMPAIR, OR
PREVENT THE VESTING OF ANY OF SUCH ISSUING BANK'S RIGHTS OR POWERS
HEREUNDER. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
CLAUSE (VI), THE COMPANY SHALL HAVE NO OBLIGATION TO INDEMNIFY AN
ISSUING BANK IN RESPECT OF ANY LIABILITY INCURRED BY SUCH ISSUING BANK
ARISING SOLELY OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH ISSUING BANK, AS DETERMINED BY A COURT OF COMPETENT JURISDICTION.
(vii) Each Issuing Bank will send to the Company and the
Agent immediately upon issuance of any Letter of Credit, or an
amendment thereto, a true and complete copy of such Letter of Credit,
or such amendment thereto. Upon issuance of any Letter of Credit or
an amendment thereto, the Agent shall promptly notify each Lender of
the terms of such Letter of Credit or amendment thereto, the Issuing
Bank for such Letter of Credit or amendment thereto, and of such
Lender's Percentage Share of the amount of such Letter of Credit or
amendment thereto, and the Agent shall provide to each Lender a copy
of such Letter of Credit or such amendment thereto. Upon cancellation
or termination of any Letter of Credit, the Issuing Bank shall
promptly notify the Agent and the Company, and the Agent will then
promptly notify each Lender, of such cancellation or termination.
(viii) The obligation of the Company to reimburse each Issuing
Bank for Reimbursement Obligations with regard to the Letters of
Credit issued by it and the obligations of Lenders under clause (iv)
shall be unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement and under all
circumstances including, without limitation, the following
circumstances:
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(A) any lack of validity or enforceability of any
Letter of Credit;
(B) the existence of any claim, set-off, defense or
other right that the Company may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons
for whom any such transferee may be acting), any Lender or any other
Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any
underlying transaction between the Company or one of its Subsidiaries
and the beneficiary for which the Letter of Credit was procured) other
than a defense based on the gross negligence or willful misconduct of
such Issuing Bank, as determined by a court of competent jurisdiction;
(C) any draft, demand, certificate or any other
document presented under any Letter of Credit is proved to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein is untrue or inaccurate in any respect;
(D) payment by such Issuing Bank under any Letter of
Credit against presentation of a demand, draft or certificate or other
document that does not comply with the terms of such Letter of Credit,
provided that such payment does not occur as a result of the gross
negligence or willful misconduct of such Issuing Bank, as determined
by a court of competent jurisdiction;
(E) any adverse change in the condition (financial
or otherwise) of the Company;
(F) any breach of this Agreement or any other
Financing Document by the Company, Agent or any Lender (other than the
applicable Issuing Bank);
(G) any other circumstance or happening whatsoever
which is similar to any of the foregoing; provided that such other
occurrence or happening is not the result of the gross negligence or
willful misconduct of such Issuing Bank, as determined by a court of
competent jurisdiction; or
(H) the fact that a Default shall have occurred and
be continuing.
Section 2.04 Disbursement of Funds.
(a) Availability. No later than 11:00 a.m. (Houston
time) on the date of each Borrowing, each Lender will make available
its pro rata portion of the amount (if any) by which the principal
amount of the Borrowing requested to be made on such date exceeds the
principal amount of Loans (if any) maturing or Reimbursement
Obligations (if any) due and owing on such date, in Dollars and in
immediately available funds at the Payment Office. The Agent will
make available to the Company at the Payment Office the aggregate of
the amounts (if any) so made available by the Lenders by depositing
the same, in immediately available funds, to an account of the Company
at the Agent designated by the Company for such purpose. To the
extent that Loans mature or Reimbursement Obligations are due and
owing on the date of a requested Borrowing of Revolving Credit Loans,
the Lenders shall apply the proceeds of the Revolving Credit Loans
then being made, to the extent thereof, to the repayment of such
maturing Loans or Reimbursement Obligations, such Revolving Credit
Loans and repayments intended to be a contemporaneous exchange.
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(b) Funds to the Agent. Unless the Agent shall have been
notified by any Lender prior to the date of a Borrowing that such
Lender does not intend to make available to the Agent such Lender's
portion of the Borrowing to be made on such date, the Agent may assume
that such Lender has made such amount available to the Agent on such
date, and the Agent may make available to the Company a corresponding
amount. If such corresponding amount is not in fact made available to
the Agent by such Lender on the date of a Borrowing, the Agent shall
be entitled to recover such corresponding amount on demand from such
Lender together with interest at the Federal Funds Rate. If such
Lender does not pay such corresponding amount forthwith upon the
Agent's demand therefor, the Agent shall promptly notify the Company,
and the Company shall immediately pay such corresponding amount to the
Agent together with interest at the rate specified for the Borrowing
which includes such amount paid. Nothing in this Section shall be
deemed to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights which the Company may
have against any Lender as a result of any default by such Lender
hereunder.
(c) Lenders' Responsibilities. No Lender shall be
responsible for any default by any other Lender in its obligation to
make Loans hereunder, and each Lender shall be obligated to make the
Loans provided to be made by it hereunder, regardless of the failure
of any other Lender to fulfill its Commitment hereunder.
Section 2.05 Notes.
(a) Revolving Credit Notes. The Company's obligation to
pay the principal of, and interest on, the Revolving Credit Loans made
by each Lender shall be further evidenced by the Company's issuance,
execution and delivery of a Revolving Credit Note payable to the order
of each such Lender in the amount of the sum of such Lender's
Revolving Credit Commitment plus its Unavailable Commitment and shall
be dated as of the date of issuance of such Revolving Credit Note.
The principal amount of each Revolving Credit Note shall be payable on
or before the Revolving Credit Maturity Date.
(b) Term Notes. The Company's obligation to pay the
principal of, and interest on, the Term Loans made by each Lender
shall be further evidenced by the Company's issuance, execution and
delivery of a Term Note payable to the order of each such Lender in
the amount of such Lender's Term Loan Commitment and dated as of the
date of issuance of such Term Note. The principal amount of each Term
Note shall be payable in twelve (12) equal installments commencing on
the first Quarterly Date to occur after the Term Loan Drawdown
Termination Date, and on each Quarterly Date thereafter; provided
however, if the Vacuum Unit has not been completed and placed in
operation on or prior to the Term Loan Drawdown Termination Date, the
Company may extend the Term Loan Drawdown Termination Date to June 30,
1995 and defer the first such installment payment to the next
Quarterly Date to occur after such extended Term Loan Drawdown
Termination Date, in which event, the principal amount of each Term
Note shall be payable in eleven (11) equal installments commencing on
such Quarterly Date. The Company agrees to make such installments on
each Quarterly Date with the final installment in the amount of the
aggregate unpaid principal balance then owing thereunder being payable
on or before the Term Loan Maturity Date. Any prepayment of the
principal amount of the Term Notes shall be applied to the
installments unpaid at such time in the inverse order of maturity.
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(c) Right to Collect on the Notes. The Company and the
Guarantors are personally obligated and fully liable for the amounts
due under the Notes. The Lenders have the right to sue on the Notes
and obtain a personal judgment against the Company and the Guarantors
for satisfaction of the amounts due under the Notes either before or
after a judicial foreclosure of the Alaska Deed of Trust under Alaska
Statute 09.45.170 - 09.45.220.
Section 2.06 Interest. In all cases subject to Section 8.13:
(a) Base Rate Loans. Subject to Section 2.06(c), the
Company agrees to pay interest in respect of the unpaid principal
amount of each Base Rate Loan from the date thereof until payment in
full thereof at a rate per annum which shall be, for any day, equal to
the sum of the Applicable Margin plus the Base Rate in effect on such
day, but in no event to exceed the Highest Lawful Rate. The term
"Base Rate" shall mean the higher of (i) the Prime Rate in effect on
such day or (ii) one-half of one percent ( 1/2%) plus the Federal
Funds Rate in effect for such day (rounded upwards, if necessary, to
the nearest 1/16th of 1%), but in no event to exceed the Highest
Lawful Rate. For purposes of this Agreement, any change in the Base
Rate due to a change in the Federal Funds Rate or the Prime Rate shall
be effective on the effective date of such change in the Federal Funds
Rate or the Prime Rate, as the case may be. If for any reason the
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 but not limited to the
inability of the Agent to obtain sufficient bids or publications in
accordance with the terms hereof, the Base Rate shall be the Prime
Rate until the circumstances giving rise to such inability no longer
exist.
(b) Eurodollar Loans. Subject to Section 2.06(c), the
Company agrees to pay interest in respect of the unpaid principal
amount of each Eurodollar Loan from the date thereof until payment in
full thereof at a rate per annum which shall be the sum of the
Applicable Margin plus the relevant Eurodollar Rate, but in no event
to exceed the Highest Lawful Rate.
(c) Default Interest. Overdue principal and, to the
extent permitted by law, overdue interest in respect of each Loan and
all other amounts owing hereunder shall bear interest for each day
that such amounts are overdue at a rate per annum equal to three
percent (3%) in excess of the Base Rate in effect for each such day.
(d) Miscellaneous. Interest on each Loan shall accrue
from and including the date of such Loan to but excluding the date of
payment in full thereof. Interest on each Eurodollar Loan shall be
payable on the last day of each Interest Period applicable thereto
and, in the case of an Interest Period in excess of three months, on
each day which occurs every three months after the initial date of
such Interest Period, and on any prepayment (on the amount prepaid),
at maturity (whether by acceleration or otherwise) and, after
maturity, on demand. Interest on Base Rate Loans shall be payable on
each Quarterly Date, commencing on the first of such days to occur
after such Loan is made, at maturity (whether by acceleration or
otherwise) and, after maturity, on demand.
(e) Notice by the Agent. The Agent, upon determining the
Eurodollar Rate for any Interest Period, shall promptly notify by
telephone (confirmed in writing) or in writing the Company and the
Lenders thereof.
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Section 2.07 Interest Periods. In connection with each Borrowing
of Eurodollar Loans, the Company shall elect an Interest Period to be
applicable to such Borrowing, which Interest Period shall begin on and include,
as the case may be, the date selected by the Company pursuant to Section
2.02(a), the conversion date or the date of expiration of the then current
Interest Period applicable thereto, and end on but exclude the date which is
either one, two, three or six months thereafter, as selected by the Company;
provided that:
(a) Business Days. If any Interest Period would
otherwise expire on a day which is not a Business Day, such Interest
Period shall expire on the next succeeding Business Day, provided,
further, that if any Interest Period (other than in respect of a
Borrowing of Eurodollar Loans the Interest Period of which is expiring
pursuant to Section 2.15(b) hereof) would otherwise expire on a day
which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(b) Month End. Any Interest Period which begins on the
last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to Subsection (c) below, end on
the last Business Day of a calendar month;
(c) Payment Limitations. No Interest Period shall extend
beyond any date that any principal payment or prepayment is scheduled
to be due unless the aggregate principal amount of Borrowings which
are Borrowings of Base Rate Loans or which have Interest Periods which
will expire on or before such date, less the aggregate amount of any
other principal payments or prepayments due during such Interest
Period, is equal to or in excess of the amount of such principal
payment or prepayment; and
(d) Maturity Dates. No Interest Period with regard to
Revolving Credit Loans shall extend beyond the Revolving Credit
Maturity Date and no Interest Period with regard to Term Loans shall
extend beyond the Term Loan Maturity Date.
Section 2.08 Repayment of Loans. Subject to the provisions of
Sections 2.09 and 2.10, the Company shall pay to the Agent for the ratable
benefit of the Lenders the unpaid principal amount of (i) each Eurodollar Loan
made by such Lender hereunder on the last day of the Interest Period in respect
of such Loan and (ii) each Base Rate Loan on or before the Revolving Credit
Maturity Date.
Section 2.09 Termination or Reduction of Commitments.
(a) Revolving Credit Commitments. The Company may, upon
at least three Business Days' notice to the Agent, terminate entirely
at any time, or proportionately reduce from time to time by an
aggregate amount of $5,000,000 or any larger multiple of $1,000,000,
the unused portions of the Revolving Credit Commitments, provided that
any such reduction shall apply proportionately to the Revolving Credit
Commitment of each Lender. If the Revolving Credit Commitments are
terminated in their entirety, all accrued commitment fees with respect
thereto shall be payable on the effective date of such termination.
(b) Term Loan Commitments. The Company may, upon at
least three Business Days' notice to the Agent, terminate entirely at
any time, or proportionately reduce from time
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to time by an aggregate amount of $1,000,000 or any larger multiple of
$500,000, the unused portions of the Term Loan Commitments, provided
that any such reduction shall apply proportionately to the Term Loan
Commitment of each Lender. If the Term Loan Commitments are
terminated in their entirety, all accrued commitment fees with respect
thereto shall be payable on the effective date of such termination.
(c) Unavailable Commitments. The Company may, upon at
least three Business Days' notice to the Agent, terminate entirely at
any time, or proportionately reduce from time to time by an aggregate
amount of $5,000,000 or any larger multiple of $1,000,000, the unused
portions of the Unavailable Commitments, provided that any such
reduction shall apply proportionately to the Unavailable Commitment of
each Lender. If the Unavailable Commitments and the Revolving Credit
Commitments are terminated in their entirety, all accrued commitment
fees with respect to the Unavailable Commitments shall be payable on
the effective date of such termination.
Section 2.10 Prepayments.
(a) Mandatory E&P Loan Value Prepayments. If, after
giving effect to any reduction of the Maximum Revolving Credit Loan
Available Amount as a result of a redetermination of the E&P Loan
Value as provided in Section 2.20, the outstanding aggregate principal
amount of the Revolving Credit Loans exceeds the amount of such
redetermined E&P Loan Value, the Company shall pay or prepay the
Revolving Credit Loans in the amount of such excess within five
Business Days of the date of such redetermination. All prepayments
pursuant to this Subsection shall be applied first to such Base Rate
Loans which are Revolving Credit Loans as the Company may designate
and second to such Eurodollar Loans which are Revolving Credit Loans
as the Company may designate.
(b) Mandatory Borrowing Base Prepayments. If at any time
the Aggregate Revolving Credit Exposure is in excess of the Maximum
Available Amount, the Company shall make a prepayment of Revolving
Credit Loans or provide Cover for Letter of Credit Liabilities, or a
combination thereof, in an amount equal to such excess. Any such
prepayment or Cover shall be payable or provided in full within five
Business Days of the earlier of (i) the date of the Borrowing Base
Report first reporting such excess or (ii) the date on which the Agent
provides notice thereof to the Company.
(c) Mandatory Excess Cash Flow Prepayments. On or before
the 120th day after each December 31, commencing on December 31, 1995,
the Company shall prepay (by payment to the Agent for the benefit of
the Lenders) an aggregate principal amount of Term Loans equal to 50%
of Excess Cash Flow for the Calendar Year ending on such date less the
amount of any voluntary prepayments of Term Loans made by the Company
as permitted in Subsection 2.10(d) during such calendar year, such
prepayment shall be applied to installments of principal in the
inverse order of their maturity; provided that such prepayments shall
not exceed $5,000,000 in the aggregate.
(d) Voluntary Prepayments. The Company may, at its
option, at any time and from time to time, prepay Loans, in whole or
in part, without premium or penalty (other than funding losses, if
any, resulting from such prepayment being made other than on the last
day of an Interest Period with respect to any Eurodollar Loan as
provided in Section 2.18), upon giving,
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in the case of a Eurodollar Loan, three Business Days' prior written
notice to the Agent, and, in the case of a Base Rate Loan, one
Business Day's prior written notice to the Agent. Such notice shall
specify the date and amount of prepayment and the Loan or Loans
(including the Type thereof) to which such prepayment is to be
applicable. Upon receipt of such notice, the Agent shall promptly
notify each Lender of the contents thereof and of such Lender's
ratable share of such prepayment. The payment amount specified in the
such notice shall be due and payable on the date specified. Each
prepayment of Base Rate Loans shall be in the minimum principal amount
of $1,000,000 and in integral multiples of $100,000 and each
prepayment of Eurodollar Loans shall be in the minimum principal
amount of $5,000,000 and in integral multiples of $1,000,000 or, in
the case of either Base Rase Loans or Eurodollar Loans, or the
aggregate balance outstanding on the applicable Notes. Each
prepayment of Term Loans made pursuant to this Section shall be
accompanied by any funding losses resulting from such prepayment being
made other than on the last day of an Interest Period with respect to
any Eurodollar Loan as provided in Section 2.18. Each prepayment
shall be applied ratably to prepay the Loans of the several Lenders.
(e) Notice by Agent. Upon receipt of a notice of
prepayment pursuant to this Section, the Agent shall promptly notify
each Lender of the contents thereof and of such Lender's ratable share
of such prepayment.
Section 2.11 Continuation and Conversion Options.
(a) Continuation. The Company may elect to continue all
or any part of any Borrowing of Eurodollar Loans beyond the expiration
of the then current Interest Period relating thereto by giving Advance
Notice to the Agent of such election, specifying the Eurodollar Loan
or portion thereof to be continued and the Interest Period therefor.
In the absence of such a timely and proper election with regard to
Eurodollar Loans, the Company shall be deemed to have elected to
convert such Eurodollar Loan to a Base Rate Loan pursuant to
Subsection 2.11(d).
(b) Amounts of Continuations. All or part of any
Eurodollar Loan may be continued as provided herein, provided that any
continuation of such Loan shall not be (as to each Loan as continued
for an applicable Interest Period) less than $5,000,000 and shall be
in an integral multiple of $1,000,000.
(c) Continuation or Conversion Upon Default. If no
Default shall have occurred and be continuing, each Eurodollar Loan
may be continued or converted as provided in this Section. If a
Default shall have occurred and be continuing, the Company shall not
have the option to elect to continue any such Eurodollar Loan pursuant
to Subsection 2.11(a) or to convert Base Rate Loans pursuant to
Subsection 2.11(e).
(d) Conversion to Base Rate. The Company may elect to
convert any Eurodollar Loan on the last day of the then current
Interest Period relating thereto to a Base Rate Loan by giving Advance
Notice to the Agent of such election.
(e) Conversion to Eurodollar Rate. The Company may elect
to convert any Base Rate Loan at any time or from time to time to a
Eurodollar Loan by giving Advance Notice to the Agent of such
election, specifying each Interest Period therefor.
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(f) Amounts of Conversions. All or any part of the
outstanding Loans may be converted as provided herein, provided that
any conversion of such Loans shall not result in a Borrowing of
Eurodollar Loans in an amount less than $5,000,000 and in integral
multiples of $1,000,000.
Section 2.12 Fees.
(a) Revolving Credit Commitments. The Company shall pay
to the Agent for the account of and distribution to each Lender in
accordance with its Percentage Share a commitment fee for the period
commencing on the Closing Date to and including the Revolving Credit
Maturity Date (or such earlier date as the Revolving Credit
Commitments shall have been terminated entirely) computed at a rate
equal to one-half of one percent (1/2%) per annum on the average daily
excess amount of the Revolving Credit Commitments over the Revolving
Credit Exposure, payable in arrears on the Quarterly Dates, commencing
on the first Quarterly Date to occur after the Closing Date.
(b) Unavailable Commitments. The Company shall pay to
the Agent for the account of and distribution to each Lender in
accordance with its Percentage Share a commitment fee for the period
commencing on the Closing Date to and including the Revolving Credit
Maturity Date (or such earlier date as the Unavailable Commitments
shall have been converted or terminated entirely) computed at a rate
equal to one-fourth of one percent (1/4%) per annum on the average
daily amount of the Unavailable Commitments, payable in arrears on the
Quarterly Dates, commencing on the first Quarterly Date to occur after
the Closing Date. In the event that the Company elects to designate
all or part of the Unavailable Commitments as Revolving Credit
Commitments pursuant to Section 2.01(f), the Company shall pay to the
Agent for the account of and distribution to each Lender in accordance
with its Percentage Share an additional commitment fee for the period
commencing on the date six months prior to the date of such
designation (but in no event earlier than the Closing Date) to and
including such date of designation computed at a rate equal to
one-fourth of one percent (1/4%) per annum on the amount so
designated. Payment of such additional commitment fee shall be due
and payable upon delivery of the notice of designation provided to the
Agent pursuant to Section 2.01(f).
(c) Term Loan Commitments. The Company shall pay to the
Agent for the account of and distribution to each Lender in accordance
with its Percentage Share a commitment fee for the period commencing
on the Closing Date to and including the Term Loan Drawdown
Termination Date (or such earlier date as the Term Loan Commitments
shall have been terminated entirely) computed at a rate equal to
one-half of one percent (1/2%) per annum on the average daily unused
portion of the Term Loan Commitments, payable in arrears on the
Quarterly Dates, commencing on the first Quarterly Date to occur after
the Closing Date.
(d) Letters of Credit. (i) As consideration for the
issuance of any Letter of Credit, the Company will pay to the
applicable Issuing Bank the greater of (A) $300 or (B) a fee on 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 (or in the case of the Outstanding
Letters of Credit, from and including the Effective Date) to and
excluding the date of expiration or termination thereof computed at a
rate equal to one-fourth of one percent ( 1/4%) per annum, payable in
arrears on each Quarterly Date. The Company shall pay to the Issuing
Bank in arrears on each Quarterly Date, with respect to any amendment
or transfer of any Letter
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of Credit and for each drawing made thereunder, documentary and
processing charges in accordance with the Issuing Bank's standard
schedule for such charges in effect at the time of such amendment,
transfer or drawing, as the case may be. All fees payable pursuant to
this clause (i) shall be retained by the applicable Issuing Bank.
(ii) The Company will pay to the Agent for the account of
and pro rata distribution to each Lender a fee on 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 (or in the case of the Outstanding Letters of Credit,
from and including the Effective Date) to and excluding the date of
expiration or termination thereof computed at a per annum rate for
each day equal to the Applicable Margin for Eurodollar Loans in effect
at the time of the issuance of such Letter of Credit less one-fourth
of one percent (1/4%) per annum, payable in arrears on each Quarterly
Date.
(e) Agent and Co-Agent Fees. The Company shall pay to
the Agent such fees as are set forth in the letter agreement between
the Agent and the Company dated as of February 7, 1994, and accepted
and agreed to by the Company as of February 23, 1994, as the same has
been or may be hereafter amended or supplemented, on the dates
specified therein. The Company shall pay to the Co-Agent such fees as
are set forth in the letter agreement, dated as of the Closing Date,
between the Co-Agent and the Company on the dates specified therein.
(f) Facility Fee. The Company shall pay to the Agent on
the Closing Date for the account of each Lender, a facility fee in the
amount set forth, for each Lender (other than TCB or BP), in a
facility fee letter agreement dated as of the Closing Date between the
Company and each such Lender.
Section 2.13 Payments, etc.
(a) Without Setoff, etc. Except as otherwise
specifically provided herein, all payments under this Agreement shall
be made to the Agent on behalf of the Lenders without defense, set-off
or counterclaim to the Agent not later than 11:00 a.m. Houston time on
the date when due and shall be made in Dollars in immediately
available funds at the Payment Office. The Agent will promptly
thereafter distribute funds in the form received relating to the
payment of principal or interest or commitment fees ratably to the
Lenders for the account of their respective Lending Offices, and funds
in the form received relating to the payment of any other amount
payable to any Lender to such Lender for the account of its Lending
Office.
(b) Non-Business Days. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a day which
is not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day (except as otherwise provided in Section
2.07 hereof) and, with respect to payments of principal, interest
thereon shall be payable at the applicable rate during such extension.
(c) Computations. All computations of interest shall be
made on the basis of a year of 360 days (unless such calculation would
result in a usurious rate, in which case interest shall be calculated
on the basis of a year of 365 or 366 days, as the case may be) in the
case of Eurodollar Loans, and 365 or 366 days (as the case may be) in
the case of Base Rate Loans, and all computations of fees shall be
made on the basis of a year of 360 days (unless such calculation
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would result in a usurious rate, in which case interest shall be
calculated on the basis of a year of 365 or 366 days, as the case may
be), in each case for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by the Agent of an
interest rate or fee hereunder shall, except for manifest error, be
final, conclusive and binding for all purposes, provided that such
determination shall be made in good faith in a manner generally
consistent with the Agent's standard practice. If the Agent and the
Company determine that manifest error exists, said parties shall
correct such error by way of an adjustment to the payment due on the
next Quarterly Date.
Section 2.14 Interest Rate Not Ascertainable, etc. In the event
that the Agent shall have determined (which determination shall be reasonably
exercised and shall, absent manifest error, be final, conclusive and binding
upon all parties) that on any date for determining the Eurodollar Rate for any
Interest Period, by reason of any changes arising after the date of this
Agreement affecting the interbank Eurodollar market, or any Lender's position
in such market, adequate and fair means do not exist for ascertaining the
applicable interest rate on the basis provided for in the definition of
Eurodollar Rate, then, and in any such event, the Agent shall forthwith give
notice (by telephone confirmed in writing) to the Company and to the Lenders of
such determination. Until the Agent notifies the Company that the
circumstances giving rise to the suspension described herein no longer exist,
the obligations of the Lenders to make Eurodollar Loans shall be immediately
suspended; any Eurodollar Loan that is requested (by continuation, conversion
or otherwise) shall instead be made as a Base Rate Loan, and any outstanding
Eurodollar Loan shall be converted, on the last day of the then current
Interest Period applicable thereto, to a Base Rate Loan.
Section 2.15 Illegality.
(a) Determinations of Illegality. In the event that any
Lender shall have determined (which determination shall be reasonably
exercised and shall, absent manifest error, be final, conclusive and
binding upon all parties) at any time that the making or continuance
of any Eurodollar Loan has become unlawful by compliance by such
Lender in good faith with any applicable law, governmental rule,
regulation, guideline or order (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful),
then, in any such event, the Lender shall give prompt notice (by
telephone confirmed in writing) to the Company and to the Agent of
such determination (which notice the Agent shall promptly transmit to
the other Lenders).
(b) Eurodollar Loans Suspended. Upon the giving of the
notice to the Company referred to in Subsection (a) above, (i) the
Company's right to request (by continuation, conversion or otherwise)
and such Lender's obligation to make Eurodollar Loans shall be
immediately suspended, and any such requested Eurodollar Loan shall
instead be made as a Base Rate Loan, and (ii) if the affected
Eurodollar Loan or Loans are then outstanding, the Company shall
immediately, or if permitted by applicable law, no later than the date
permitted thereby, upon at least one Business Day's written notice to
the Agent and the affected Lender, convert each such Eurodollar Loan
into a Base Rate Loan, provided that if more than one Lender is
affected at any time, then all affected Lenders must be treated the
same pursuant to this Subsection.
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Section 2.16 Increased Costs.
(a) Eurodollar Regulations, etc. If, by reason of (x)
after the date hereof, the introduction of or any change (including,
but not limited to, any change by way of imposition or increase of
reserve requirements) in or in the interpretation of any law or
regulation, or (y) the compliance with any guideline or request from
any central bank or other governmental authority or quasi-governmental
authority exercising control over banks or financial institutions
generally (whether or not having the force of law):
(i) any Lender (or its applicable Lending Office)
shall be subject to any tax, duty or other charge with respect
to its Eurodollar Loans or its obligation to make Eurodollar
Loans, or shall change the basis of taxation of payments to
any Lender of the principal of or interest on its Eurodollar
Loans or its obligation to make Eurodollar Loans (except for
changes in the rate of tax on the overall net income or gross
receipts of such Lender or its applicable Lending Office
imposed by the jurisdiction in which such Lender's principal
executive office or applicable Lending Office is located); or
(ii) any reserve (including, but not limited to,
any imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended
by, any Lender's applicable Lending Office shall be imposed or
deemed applicable or any other condition affecting its
Eurodollar Loans or its obligations to make Eurodollar Loans
shall be imposed on any Lender or its applicable Lending
Office or the interbank Eurodollar market or the secondary
certificate of deposit market;
and as a result thereof there shall be any increase in the cost to
such Lender of agreeing to make or making, funding or maintaining
Eurodollar Loans (except to the extent already included in the
determination of the applicable Eurodollar Rate) or there shall be a
reduction in the amount received or receivable by such Lender or its
applicable Lending Office, then the Company shall from time to time,
upon written notice from and demand by such Lender (with a copy of
such notice and demand to the Agent), pay to such Lender, within 30
days after the date specified in such notice and demand, additional
amounts determined by such Lender in a reasonable manner to be
sufficient to indemnify such Lender against such increased cost. A
certificate as to the amount of such increased cost and the
calculation thereof, submitted to the Company and the Agent by such
Lender, shall, except for manifest error, be final, conclusive and
binding for all purposes, provided that the determination of such
amount shall be made in good faith in a manner generally consistent
with such Lender's standard practice.
(b) Costs. If any Lender shall advise the Agent that at
any time, because of the circumstances described in clauses (x) or (y)
in Subsection 2.16(a) or any other circumstances arising after the
Effective Date affecting such Lender or the interbank Eurodollar
market or such Lender's position in such market, the Eurodollar Rate,
as determined in good faith by the Agent, will not adequately and
fairly reflect the cost to such Lender of funding its Eurodollar
Loans, then, and in any such event:
(i) the Agent shall forthwith give notice (by
telephone confirmed in writing) to the Company and to the
Lenders of such advice;
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(ii) the Company's right to request and such
Lender's obligation to make Eurodollar Loans shall be
immediately suspended, any such Eurodollar Loan that is
requested (by continuation, conversion or otherwise) shall
instead be made as a Base Rate Loan, and any such outstanding
Eurodollar Loan shall be converted, on the last day of the
then current Interest Period applicable thereto, to a Base
Rate Loan.
(c) Capital Adequacy. If, by reason of (i) after the
date hereof, the introduction of or any change (including, but not
limited to, any change by way of imposition or increase of reserve
requirements) in or in the interpretation of any law or regulation, or
(ii) the compliance with any guideline or request from any central
bank or other governmental authority or quasi-governmental authority
exercising control over banks or financial institutions generally
(whether or not having the force of law) affects or would affect the
amount of capital required to be maintained by any Lender or any
corporation controlling such Lender, and the amount of such capital is
increased by or based upon the existence of such Lender's Commitment
to lend hereunder and other commitments of this Type or of the Letters
of Credit (or similar contingent obligations), then, within 30 days
after written request therefor by such Lender (with a copy of such
request to the Agent), the Company shall pay to such Lender, from time
to time as specified by such Lender, additional amounts sufficient to
compensate such Lender for the increased cost of such additional
capital in light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the
existence of such Lender's Commitment to lend hereunder or to the
issuance or maintenance of the Letters of Credit. A certificate as to
such amounts and the calculation thereof, submitted to the Company and
the Agent by such Lender, shall be conclusive and binding for all
purposes, absent manifest error, provided that the determination of
such amount shall be made in good faith in a manner generally
consistent with such Lender's standard practice.
(d) Issuing Bank. The rights and benefits of the Lenders
under this Section 2.16 shall also apply to any Issuing Bank in its
capacity as such.
(e) Notice. The Company shall not be obligated to
compensate any Lender pursuant to this Section 2.16 for any amounts
attributable to a period more than 90 days prior to the giving of
notice by such Lender to the Company of its intention to seek
compensation under this Section 2.16.
Section 2.17 Change of Lending Office. Each Lender agrees that it
will use reasonable efforts to designate an alternate Lending Office with
respect to any of its Eurodollar Loans affected by the matters or circumstances
described in Sections 2.14, 2.15 or 2.16 to reduce the liability of the Company
or avoid the results provided thereunder, so long as such designation is not
disadvantageous to such Lender as determined by such Lender in its sole
discretion; provided that such Lender shall have no obligation to so designate
an alternate Lending Office located in the United States.
Section 2.18 Funding Losses. The Company shall compensate each
Lender, upon its written request (which request shall set forth the basis for
requesting such amounts and which request shall be reasonably exercised and
shall, absent manifest error, be final, conclusive and binding upon all of the
parties hereto), for all losses, expenses and liabilities (including, but not
limited to, any interest paid by such Lender to lenders of funds borrowed by it
to make or carry its Eurodollar Loans to the extent not recovered by the Lender
in connection with the re-employment of such funds and including loss of
anticipated profits), which the Lender may sustain: (i) if for any reason
(other than a default by such
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Lender) a Borrowing of Eurodollar Loans does not occur on the date specified
therefor in a Borrowing Request (whether or not withdrawn), (ii) if any
repayment (or conversion pursuant to Section 2.16) of any of its Eurodollar
Loans occurs on a date which is not the last day of an Interest Period
applicable thereto, or (iii) if, for any reason, the Company defaults in its
obligation to repay its Eurodollar Loans when required by the terms of this
Agreement.
Section 2.19 Sharing of Payments, etc. If any Lender shall obtain
any payment or reduction (including, but not limited to, any amounts received
as adequate protection of a deposit treated as cash collateral under the
Bankruptcy Code) of any obligation of the Company hereunder (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its ratable share of payments or reductions on account of such
obligations obtained by all the Lenders, such Lender shall forthwith (i) notify
each of the other Lenders and the Agent of such receipt, and (ii) purchase from
the other Lenders such participations in the affected obligations as shall be
necessary to cause such purchasing Lender to share the excess payment or
reduction, net of costs incurred in connection therewith, ratably with each of
them, provided that if all or any portion of such excess payment or reduction
is thereafter recovered from such purchasing Lender or additional costs are
incurred, the purchase shall be rescinded and the purchase price restored to
the extent of such recovery or such additional costs, but without interest.
The Company agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Company in the amount of such participation.
Section 2.20 E&P Loan Value.
(a) Redetermination Date; Initial E&P Loan Value. The
E&P Loan Value shall be determined in accordance with Section 2.20(b)
by the Agent with the concurrence of the Majority Lenders and is
subject to redetermination in accordance with Section 2.20(d). Upon
any redetermination of the E&P Loan Value, such redetermination shall
remain in effect until the next successive Redetermination Date.
"Redetermination Date" shall mean the date that the redetermined E&P
Loan Value becomes effective subject to the notice requirements
specified in Section 2.20(e) both for scheduled redeterminations and
unscheduled redeterminations. During the period from and after the
Closing Date until September 1, 1994 unless redetermined pursuant to
any unscheduled redeterminations, the amount of the E&P Loan Value
shall be $31,700,000.
(b) Redetermination. Upon receipt of the Reserve Reports
by the Agent, the Agent will redetermine the E&P Loan Value. Such
redetermination by the Agent, in its sole discretion, will be in
accordance with its normal and customary procedures for evaluating oil
and gas reserves and other related assets as such exist at that
particular time. The Agent shall propose to the Lenders a new E&P
Loan Value within 15 days following receipt by the Agent and the
Lenders of the complete Reserve Reports. After having received notice
of such proposal by the Agent, the Majority Lenders shall have ten
days to agree or disagree with such proposal. If at the end of the
ten days, the Majority Lenders have not communicated their approval or
disapproval, such silence shall be deemed to be an approval and the
Agent's proposal shall be the new E&P Loan Value. If however, the
Majority Lenders notify Agent within ten days of their disapproval,
the Majority Lenders shall, within a reasonable period of time, agree
on a new E&P Loan Value.
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(c) Exclusion of Certain Property. The Agent in its
reasonable discretion, may exclude any Oil and Gas Property or portion
of production therefrom or any income from any other Property from the
E&P Loan Value, at any time and for any reason, including, but not
limited to, the following: the title information for such Property is
not satisfactory, such Property is not Mortgaged Property, such
Property is located outside of the United States of America, or such
Property is not assignable.
(d) Time of Redetermination, etc. So long as any of the
Commitments are in effect and so long as there remains any Revolving
Credit Exposure as to any Lender, on or around the first Business Day
of each September 1 and March 1, commencing September 1, 1994 (each
being a "Scheduled Redetermination Date"), the Agent and the Lenders
shall redetermine the amount of the E&P Loan Value in accordance with
Section 2.20(b). In addition, the Agent may initiate, with the
concurrence of the Majority Lenders, a redetermination of the E&P Loan
Value at any other time as they so elect one unscheduled
redetermination during any consecutive twelve (12) month period by
specifying in writing to the Borrower the date on which the Borrower
is to furnish a Reserve Report and the date on which such
redetermination is to occur. The Company may initiate up to two
additional redeterminations of the E&P Loan Value in any calendar
year. Each such request shall be accompanied by a Reserve Report and
a $10,000 redetermination fee for the account of the Agent. In the
event of any such unscheduled redetermination, the Agent and the
Lenders shall redetermine the amount of the E&P Loan Value in
accordance with Section 2.20(b).
(e) Notice by Agent. The Agent shall promptly notify in
writing the Borrower and the Lenders of the new E&P Loan Value. Any
redetermination of the E&P Loan Value shall not be in effect until
written notice is received by the Borrower.
Section 2.21 Taxes.
(a) Payments Free and Clear. Any and all payments by the
Company under this Agreement or any other Financing Document shall be
made, in accordance with Section 2.13, free and clear of and without
deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender, the Agent and each
Issuing Bank, taxes imposed on its income, and franchise or similar
taxes imposed on it, by (i) any jurisdiction (or political subdivision
thereof) of which the Agent, such Issuing Bank or such Lender, as the
case may be, is a citizen or resident or in which such Lender has a
permanent establishment (or is otherwise engaged in the active conduct
of its banking business through an office or a branch) which is such
Lender's applicable Lending Office, (ii) the jurisdiction (or any
political subdivision thereof) in which the Agent, such Issuing Bank
or such Lender is organized, or (iii) any jurisdiction (or political
subdivision thereof) in which such Lender, such Issuing Bank or the
Agent is presently doing business which taxes are imposed solely as a
result of doing business in such jurisdiction (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and
liabilities so arising out of payments by the Company being
hereinafter referred to as "Taxes"). If the Company shall be required
by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Lenders, the Issuing Banks or the Agent (i) the sum
payable shall be increased by the amount necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 2.21) such Lender, such
Issuing Bank or the Agent (as the case may be) shall receive an amount
equal to the sum it would have received had no such deductions been
made, (ii) the
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Company shall make such deductions and (iii) the Company shall pay the
full amount deducted to the relevant taxing authority or other
Governmental Authority in accordance with applicable law.
(b) Other Taxes. In addition, the Company agrees to pay
any present or future stamp or documentary taxes or any other excise
or property taxes, charges or similar levies that arise from any
payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement, any Assignment and
Acceptance or any other Financing Document (hereinafter referred to as
"Other Taxes").
(C) INDEMNIFICATION. THE COMPANY WILL INDEMNIFY EACH
LENDER, EACH ISSUING BANK AND THE AGENT FOR THE FULL AMOUNT OF TAXES
AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER
TAXES IMPOSED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS
SECTION 2.21) PAID BY SUCH LENDER OR SUCH ISSUING BANK OR THE AGENT
(ON THEIR BEHALF OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND
ANY LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING
THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER
TAXES WERE CORRECTLY OR LEGALLY ASSERTED. ANY PAYMENT PURSUANT TO
SUCH INDEMNIFICATION SHALL BE MADE WITHIN 30 DAYS AFTER THE DATE ANY
LENDER, ANY ISSUING BANK OR THE AGENT, AS THE CASE MAY BE, MAKES
WRITTEN DEMAND THEREFOR. IF ANY LENDER, ANY ISSUING BANK OR THE AGENT
RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR
WHICH SUCH LENDER, SUCH ISSUING BANK OR THE AGENT HAS RECEIVED PAYMENT
FROM THE COMPANY HEREUNDER IT SHALL PROMPTLY NOTIFY THE COMPANY OF
SUCH REFUND OR CREDIT AND SHALL, WITHIN 30 DAYS AFTER RECEIPT OF A
REQUEST BY THE COMPANY (OR PROMPTLY UPON RECEIPT, IF THE COMPANY HAS
REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY
AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE COMPANY WITHOUT
INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED
THAT THE COMPANY, UPON THE REQUEST OF SUCH LENDER, SUCH ISSUING BANK
OR THE AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES,
INTEREST OR OTHER CHARGES) TO SUCH LENDER, SUCH ISSUING BANK OR THE
AGENT IN THE EVENT SUCH LENDER, SUCH ISSUING BANK OR THE AGENT IS
REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Receipts. Within 30 days after the date of any
payment of Taxes or Other Taxes withheld by the Company in respect of
any payment to any Lender, any Issuing Bank or the Agent, the Company
will furnish to the Agent the original or a certified copy of a
receipt evidencing payment thereof.
(e) Survival. Without prejudice to the survival of any
other agreement contained herein, the agreements and obligations
contained in this Section 2.21 shall survive the payment in full of
principal and interest hereunder.
(f) Lender Representations. Each Lender represents that
it is either (i) a corporation organized under the laws of the United
States of America or any state thereof or (ii) it is entitled to
complete exemption from United States withholding tax imposed on or
with respect to any payments, including fees, to be made to it
pursuant to this Agreement (A) under an applicable provision of a tax
convention to which the United States of America is a party or (B)
because it is acting through a branch, agency or office in the United
States of America and any payment to
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be received by it hereunder is effectively connected with a trade or
business in the United States of America. Each Lender that is not a
corporation organized under the laws of the United States of America
or any state thereof agrees to provide to the Company and the Agent on
the Effective Date, or on the date of its delivery of the Assignment
and Acceptance pursuant to which it becomes a Lender, and at such
other times as required by United States law or as the Company or the
Agent shall reasonably request, two accurate and complete original
signed copies of either (A) Internal Revenue Service Form 4224 (or
successor form) certifying that all payments to be made to it
hereunder will be effectively connected to a United States trade or
business (the "Form 4224 Certification") or (B) Internal Revenue
Service Form 1001 (or successor form) certifying that it is entitled
to the benefit of a provision of a tax convention to which the United
States of America is a party which completely exempts from United
States withholding tax all payments to be made to it hereunder (the
"Form 1001 Certification"). In addition, each Lender agrees that if
it previously filed a Form 4224 Certification it will deliver to the
Company and the Agent a new Form 4224 Certification prior to the first
payment date occurring in each of its subsequent taxable years; and if
it previously filed a Form 1001 Certification, it will deliver to the
Company and the Agent a new certification prior to the first payment
date falling in the third year following the previous filing of such
certification. Each Lender also agrees to deliver to the Company and
the Agent such other or supplemental forms as may at any time be
required as a result of changes in applicable law or regulation in
order to confirm or maintain in effect its entitlement to exemption
from United States withholding tax on any payments hereunder, provided
that the circumstances of the Lender at the relevant time and
applicable laws permit it to do so. If a Lender determines, as a
result of any change in either (i) applicable law, regulation or
treaty, or in any official application thereof or (ii) its
circumstances, that it is unable to submit any form or certificate
that it is obligated to submit pursuant to this Section, or that it is
required to withdraw or cancel any such form or certificate previously
submitted, it shall promptly notify the Company and the Agent of such
fact. If a Lender is organized under the laws of a jurisdiction
outside the United States of America, unless the Company and the Agent
have received a Form 1001 Certification or Form 4224 Certification
satisfactory to them indicating that all payments to be made to such
Lender hereunder are not subject to United States withholding tax, the
Company shall withhold taxes from such payments at the applicable
statutory rate, provided that such withholding shall not increase the
amount of payments for the account of such Lender to be made by the
Company pursuant to Subsection 2.21(a). Each Lender agrees to
indemnify and hold harmless from any United States taxes, penalties,
interest and other expenses, costs and losses incurred or payable by
(i) the Agent as a result of such Lender's failure to submit any form
or certificate that it is required to provide pursuant to this Section
or (ii) the Company or the Agent as a result of their reliance on any
such form or certificate which it has provided to them pursuant to
this Section.
(g) Efforts to Avoid or Reduce. Any Lender claiming any
additional amounts payable pursuant to this Section 2.21 shall use
reasonable efforts (consistent with legal and regulatory restrictions)
to file any certificate or document requested by the Company or the
Agent or to change the jurisdiction of its applicable Lending Office
or to contest any tax imposed if the making of such a filing or change
or contesting such tax would avoid the need for or reduce the amount
of any such additional amounts that may thereafter accrue and would
not, in the sole determination of such Lender, be otherwise
disadvantageous to such Lender.
Section 2.22 Pro Rata Treatment. Except as required under Section
2.15 or 2.16, each Borrowing, each payment or prepayment of principal of any
Borrowing, each payment of interest on the
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Loans, each payment of the fees, each reduction of the Commitments, and each
refinancing of any Borrowing with, conversion of any Borrowing to or
continuation of any Borrowing as a Borrowing of any Type shall be allocated
ratably and pro rata among the Lenders in accordance with their respective
Percentage Share. Each Lender agrees that in computing such Lender's portion
of any Borrowing to be made hereunder, the Agent may, in its discretion, round
each Lender's portion of such Borrowing to the next higher or lower whole
dollar amount.
Section 2.23 Disposition of Proceeds. The E&P Mortgage contains
an assignment by Tesoro E&P to the Agent of all production and all proceeds
attributable thereto which may be produced from or allocated to the Oil and Gas
Properties described therein, and the E&P Mortgage further provides in general
for the application of such proceeds to the satisfaction of the indebtedness,
liabilities and obligations described therein and secured thereby.
Notwithstanding such assignment in such E&P Mortgage, the Agent, the Issuing
Banks and the Lenders hereby grant to Tesoro E&P a license to receive, collect
and use the proceeds attributable to such production and agree not to notify
the purchaser or purchasers of such production and not to take any other action
to cause such proceeds to be remitted to the Agent, the Issuing Banks or the
Lenders, in each case unless and until an Event of Default has occurred and is
continuing; provided that so long as no Default has occurred and is continuing,
the Agent shall execute and deliver a letter in the form of Exhibit I to such
Persons as the Company may direct; provided, further, if the Agent, any Issuing
Bank or any Lender shall receive any such proceeds directly from any such
purchaser prior to the occurrence and continuation of a Default, then such
Person so receiving such proceeds shall notify the Company thereof and upon
request of the Company and pursuant to its written instructions shall promptly
remit such proceeds to the Company for the account of Tesoro E&P.
Section 2.24 Senior Debt. The Lender Indebtedness is Senior Debt
as such term is defined in that certain Subordination Agreement dated December
15, 1993, among the Company, Tesoro Alaska, and the State of Alaska, attached
as Exhibit 7 to the Settlement Agreement dated December 15, 1992, among the
Company, Tesoro Alaska, and the State of Alaska.
ARTICLE III
CONDITIONS TO BORROWINGS AND TO
PURCHASE, RENEWAL AND REARRANGEMENT
The obligation of each Lender to make a Loan or an Issuing Bank to
issue a Letter of Credit hereunder is subject to the satisfaction of the
following conditions:
Section 3.01 Closing. The Company shall have delivered to the
Agent (unless waived by the Agent) at least three Business Days' advance
written notice of the proposed Effective Date, which shall be a Business Day
not later than 10 days from the Closing Date, for the delivery of all
instruments, certificates and opinions referred to in Section 3.02 not
theretofore delivered.
Section 3.02 Conditions Precedent to Initial Loan. At the time of
the making by such Lender of its initial Loan hereunder or the issuance by such
Issuing Bank of the initial Letter of Credit (including, but not limited to,
the assumption by the Lenders of the Outstanding Letters of Credit), all
obligations of the Company hereunder to the Agent or any Lender incurred prior
to such initial Loan or Letter of Credit (including, but not limited to, the
Company's obligation to reimburse the reasonable fees and
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disbursements of counsel to the Agent for which the Company has been provided
an invoice and any fees payable to the Lenders or the Agent on or before the
Effective Date), shall have been paid in full, and the Agent shall have
received the following, each dated as of the Closing Date, in form and
substance satisfactory to the Agent, with an original thereof for the Agent and
with sufficient copies thereof for each Lender (except that in the case of the
Notes, the originals thereof will be delivered to the respective Lenders):
(a) Notes - A duly completed and executed Revolving
Credit Note for each Lender and in each case payable to the order of
the Agent for the benefit of such Lender.
(b) Resolutions and Incumbency Certificates -
(i) certified copies of the resolutions of the
Board of Directors of the Company and its Subsidiaries that
are parties to any Financing Document approving, as
appropriate, the Loans, the Notes, this Agreement and the
other Financing Documents, and all other documents, if any, to
which the Company or such Subsidiary is a party evidencing
corporate authorization with respect to such documents;
(ii) a certificate of the Secretary or an
Assistant Secretary of the Company certifying (A) the name,
title and true signature of each officer of such Person
authorized to execute the Notes, this Agreement, Applications
and the other Financing Documents to which it is a party, (B)
the name, title and true signature of each officer of such
Person authorized to provide the certifications required
pursuant to this Agreement including, but not limited to,
certifications required pursuant to Section 5.02, Borrowing
Requests, and Borrowing Base Reports, and (C) that attached
thereto is a true and complete copy of the articles of
incorporation and bylaws of the Company, as amended to date,
and a recent good standing certificate; and
(iii) a certificate of the Secretary or an
Assistant Secretary of each Subsidiary that is a party to any
Financing Document certifying (x) the name, title and true
signature of each officer of each Subsidiary authorized to
execute each such Financing Document to which it is a party,
and (y) that attached thereto is a true and complete copy of
the articles of incorporation and bylaws of such Subsidiary,
as amended to date, and a recent good standing certificate.
(c) Opinions of Counsel - The following opinions of
counsel, in each case addressed to the Agent, the Issuing Bank and
each of the Lenders and covering such other matters as any Lender
through the Agent, the Issuing Bank or the Agent may reasonably
request:
(i) Fulbright & Jaworski, L.L.P., counsel to the
Company and its Subsidiaries, substantially in the form of
Exhibit E-1 hereto;
(ii) James C. Reed, Jr., special counsel to the
Company, substantially in the form of Exhibit E-2 hereto; and
(iii) Groh, Eggers & Price, local Alaska counsel to
the Company, substantially in the form of Exhibit E-3 hereto.
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(d) The Security Instruments -
(i) Guaranty Agreement;
(ii) Subrogation and Contribution Agreement dated
as of the Closing Date among the Guarantors;
(iii) Security Agreements dated as of the Closing
Date executed by each of the Company, Tesoro E&P, Tesoro
Alaska, Tesoro R&M and Tesoro Petroleum Distributing Company,
a Delaware corporation, granting to the Agent a first priority
security interest in all personal Property described therein
of each such Person, as security for the indebtedness
respectively defined therein as the "Obligations;"
(iv) Pledge Agreements dated as of the Closing
Date executed by the Company granting to the Agent a first
priority security interest in 100% of the capital stock of
Tesoro Alaska, Tesoro R&M, and Tesoro Alaska Pipeline Company,
a Delaware corporation, as security for the Lender
Indebtedness;
(v) the Alaska Deed of Trust;
(vi) the E&P Mortgage;
(vii) Financing Statements, as appropriate, to
perfect the security interests created by the instruments
delivered under clauses (iii) through (vi) above;
(viii) Stock certificates and corresponding stock
powers to perfect the Agent's security in the stock pledged by
the instrument delivered under clause (iv) above;
(ix) all Property in which the Agent shall, at
such time, be entitled to have a Lien pursuant to this
Agreement or any other Financing Document shall have been
physically delivered to the possession of the Agent or any
bailee accepted by the Agent to the extent that such
possession is necessary for the purpose of perfecting the
Agent's Lien in such collateral security; and
(x) the Cash Collateral Account Agreement
described in the definition of "Cover".
(e) Insurance. A certificate of insurance coverage of
the Borrower evidencing that the Borrower is carrying insurance in
accordance with Section 5.01(e) hereof. In addition, the Agent shall
have received evidence satisfactory to the Agent that the Kenai
Refinery and Tesoro Terminals are not situated in an area that has
been identified by the Director of the Federal Emergency Management
Agency or any other Governmental Authority as an area having special
flood hazards. Should it be determined, however, that any of the
Kenai Refinery or Tesoro Terminals are situated in an area identified
as having special flood hazards, the Agent shall have received a copy
of the applicable flood insurance policies (or policy applications),
in form and substance satisfactory to the Agent, indicating that the
maximum limits of coverage have been obtained and that the full
premium therefor has been paid in full.
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(f) Title Opinions. Title opinions as the Agent may
require from attorneys satisfactory to the Agent setting forth the
status of title to the Oil and Gas Properties that constitute a part
of the Mortgaged Property.
(g) Title Insurance; Survey. A Mortgagee's Policy of
Title Insurance in form and substance satisfactory to the Agent
insuring the lien granted pursuant to the Alaska Deed of Trust and a
current survey covering the Refinery Premises.
(h) Environmental Report. A review by Pilko &
Associates, Inc. of prior environmental site assessments for the Kenai
Refinery and such other reviews or further assessments that may be
determined to be required by the Agent, in its sole discretion, to
assess existence of any environmental items which could reasonably be
expected to have a Material Adverse Affect.
(i) Miscellaneous. Such other documents or conditions
precedent which the Agent may reasonably have requested or require in
its sole discretion.
Section 3.03 Conditions Precedent to Each Loan. At the time of
the making by such Lender of each Loan, including the initial Loan but not
including continuations or conversions pursuant to Section 2.11 (before as well
as after giving effect to such Loan and to the proposed use of the proceeds
thereof):
(a) Notes. The Company shall have issued, executed and
delivered the Notes;
(b) No Default. There shall exist no Default or Event of
Default;
(c) Representations and Warranties. Except for facts
timely disclosed to the Agent from time to time in writing, not
materially more adverse to the Company and its Subsidiaries than those
existing on the Effective Date, all representations and warranties
contained herein and in the other Financing Documents executed and
delivered on or after the date hereof shall be true and correct in all
material respects with the same effect as though such representations
and warranties had been made on and as of the date of such Loan; and
(d) Documentation. The Agent shall have received such
other documents as the Agent or any Lender or special counsel to the
Agent may reasonably request, all in form and substance satisfactory
to the Agent.
Each Borrowing Request submitted by the Company, and the acceptance by
the Company of the proceeds of such Borrowing (but not including continuations
or conversions pursuant to Section 2.11), shall constitute a representation and
warranty by the Company, as of the date of the Loans comprising such Borrowing,
that the conditions specified in Subsections 3.03(b) and (c) have been
satisfied.
Section 3.04 Recordings. The Security Instruments and
accompanying financing statements covering the Mortgaged Property, or other
notices related thereto if necessary or appropriate, shall have been duly
delivered by the Agent to the appropriate offices for filing or recording.
Section 3.05 Activation of Term Loan Commitments. At the time of
the activation by the Company of the Term Loan Commitments, the Agent and, as
appropriate, each Lender shall have
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received the following, each dated as of the date on which the Term Loan
Commitments are activated pursuant to Subsection 2.01(e), in form and substance
satisfactory to the Agent, with an original thereof for the Agent and with
sufficient copies thereof for each Lender:
(a) Term Notes - A duly completed and executed Term Loan
Note for each Lender and in each case payable to the order of the
Agent for the benefit of such Lender.
(b) Notice of Activation - Notice, in the form of Exhibit
H, that the Term Loan Commitments have been activated pursuant to
Subsection 2.01(e).
(c) Termination of AIDA Financing - Evidence satisfactory
to the Agent that the Indebtedness permitted by Subsection
5.04(a)(xii) has not been utilized and any commitments in connection
therewith have been terminated.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement, the
Company represents and warrants to the Lenders (which representations and
warranties will survive the delivery of the Notes) that:
Section 4.01 Corporate Existence. The Company and each of its
Subsidiaries are corporations duly organized, legally existing and in good
standing under the laws of the 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, except where the failure to be so qualified would not have a
Material Adverse Effect.
Section 4.02 Corporate Power and Authorization. The Company is
authorized and empowered to create and issue the Notes; the Company and each of
its Subsidiaries are duly authorized and empowered to execute, deliver and
perform the Financing Documents, including this Agreement, to which they
respectively are parties; and all corporate action on the Company's part
requisite for the due creation and issuance of the Notes on the Company's and
each of its Subsidiaries' respective part requisite for the due execution,
delivery and performance of the Financing Documents, including this Agreement,
to which the Company and each of its Subsidiaries respectively are parties has
been duly and effectively taken.
Section 4.03 Binding Obligations. This Agreement does, and the
Notes and other Financing Documents to which the Company and each of its
Subsidiaries respectively are parties upon their creation, issuance, execution
and delivery will, when issued and delivered under this Agreement, constitute
valid and binding obligations of the Company and each such Subsidiary that is a
party thereto, respectively, and will be enforceable in accordance with their
respective terms (except that enforcement may be subject to any applicable
bankruptcy, insolvency or similar laws generally affecting the enforcement of
creditors' rights and subject to the availability of equitable remedies).
Section 4.04 No Legal Bar or Resultant Lien. The Notes and the
other Financing Documents, including this Agreement, to which the Company or
any of its Subsidiaries is a party do not and will not violate or create a
default under any provisions of the articles or certificate of incorporation or
bylaws of the Company or any of its Subsidiaries, or any contract, agreement,
instrument or Governmental
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Requirement to which the Company or any of its Subsidiaries is subject, or
result in the creation or imposition of any Lien upon any Properties of the
Company or any of its Subsidiaries, other than those violations and defaults
that would not affect the Company's or such Subsidiaries' use of such
Properties or those permitted by this Agreement.
Section 4.05 No Consent. Except as set forth on Schedule 4.05,
the Company's and each of its Subsidiaries' respective execution, delivery and
performance of the Notes and the other Financing Documents, including this
Agreement, to which the Company and each such Subsidiary respectively are
parties do not require notice to or filing or registration with, or the
authorization, consent or approval of or other action by any other Person,
including, but not limited to, any Governmental Authority.
Section 4.06 Financial Information.
(a) Annual Financial Statements. The consolidated
balance sheet of the Company and its Subsidiaries as of December 31,
1993, and the related consolidated statements of income, retained
earnings and cash flows for the 12-month period then ended, including
in each case the related schedules and notes, reported on by Deloitte
& Touche, true copies of which have been previously delivered to each
of the Lenders, fairly present the consolidated financial condition of
the Company and its Subsidiaries as at the date thereof and the
consolidated results of operations and the cash flows for such period,
in accordance with generally accepted accounting principles applied on
a consistent basis. The unaudited consolidating balance sheet of the
Consolidating Statement Entities as of December 31, 1993, and the
related unaudited consolidating statements of income and cash flows,
which shall be delivered to each Lender as soon as available and in
any event within 90 days of the Closing Date and certified to by a
Responsible Officer, form the basis of the Company's consolidated
financial statements and are fairly stated in all material respects
when considered in relation thereto.
(b) No Material Adverse Effect. Since December 31, 1993,
there has been no event or occurrence that could reasonably be
expected to have a Material Adverse Effect.
Section 4.07 Investments and Guaranties. At the date of this
Agreement, neither the Company nor any of its Subsidiaries has made investments
in or advances to any Person or guaranties of the obligations of any Person
that is not a Subsidiary of the Company, except those permitted by Subsections
5.04(e)(ii) through (vi), those reflected in the Financial Statements or
described in Schedule 4.07.
Section 4.08 Litigation. Except as set forth in Schedule 4.08,
there is no action, suit or proceeding, or any governmental investigation or
any arbitration, in each case pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any material
Property of any thereof before any court or arbitrator or any Governmental
Authority which (i) challenges the validity of this Agreement, any Note, any
Application, the Guaranty Agreement, or any of the other Financing Documents or
(ii) if adversely determined would have a Material Adverse Effect.
Section 4.09 Use of Proceeds. The proceeds of the Revolving
Credit Loans will be used only to provide working capital and for general
corporate purposes. The proceeds of the Term Loan will be used only to
finance the addition of the Vacuum Unit to the Kenai Refinery and constitute
Expansion Debt as such term is defined in that certain Subordination Agreement
dated December 15, 1992, among the Company, Tesoro Alaska and the State of
Alaska attached as Exhibit 7 to the Settlement Agreement dated December 15,
1992, among the Company, Tesoro Alaska and the State of Alaska. The Letters of
Credit
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shall be used only for the purposes provided in Section 2.03. Neither the
Company nor any of its Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying Margin Stock
(within the meaning of Regulation U or X) and no part of the proceeds of any
Loan hereunder will be used to buy or carry any Margin Stock. Neither the
Company nor any Person acting on behalf of the Company has taken or will take
any action which might cause the Notes or any of the Financing Documents,
including this Agreement, to violate Regulation U or X or any other regulation
of the Board of Governors of the Federal Reserve System or to violate Section 7
of the Securities and Exchange Commission (or any successor thereto) or any
rule or regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
Section 4.10 Compliance with ERISA. Neither the Company, any of
its Subsidiaries nor any ERISA Affiliate sponsors, maintains or contributes to,
or has at any time in the six-year period preceding the date of this Agreement
sponsored, maintained or contributed to, any Plan, including, but not limited
to, any Plan which is a "multi-employer plan" as such term is defined in
Section 3(37) or 4001(a)(3) of ERISA. Except as set forth in Schedule 4.10,
each Plan described in such schedule has been terminated with no resulting
liability to the PBGC. No act, omission or transaction has occurred which
could result in imposition on the Company, any of its Subsidiaries or any ERISA
Affiliate (whether directly or directly) of (i) either a civil penalty assessed
pursuant to Sections 502(c) or 502(i) of ERISA or a tax imposed pursuant to
Section 4975 of the Code, or (ii) breach of fiduciary duty liability damages
under Section 409 of ERISA, which in each case would have a Material Adverse
Effect.
Section 4.11 Taxes; Governmental Charges. The Company and its
Subsidiaries have filed all tax returns and reports required to be filed and
have paid all 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 if required in accordance with generally
accepted accounting principles for the payment thereof, except such interest
and penalties as are being contested in good faith by appropriate actions or
proceedings and for which adequate reserves for the payment thereof as required
by general accepted accounting principles have been provided.
Section 4.12 Titles, etc. The Company and its Subsidiaries have
indefeasible title to their respective material (individually or in the
aggregate) Properties, free and clear of all Liens except (i) Liens referred to
in the Financial Statements, (ii) Liens disclosed to the Lenders in Schedule
4.12, (iii) Liens and minor irregularities in title which do not materially
interfere with the occupation, use and enjoyment by the Company or any
Subsidiary of the Company of any of their respective Properties in the normal
course of business as presently conducted or materially impair the value
thereof for such business, or (iv) Liens otherwise permitted or contemplated by
this Agreement or the other Financing Documents.
Section 4.13 Defaults. Neither the Company nor any of its
Subsidiaries is in default nor has any event or circumstance occurred which,
but for the passage of time or the giving of notice, or both, would constitute
a default (in any respect that would have a Material Adverse Effect) under any
loan or credit agreement, indenture, mortgage, deed of trust, security
agreement or other instrument or agreement evidencing or pertaining to any
Indebtedness of the Company or any of its Subsidiaries, or under any material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound, except as
disclosed to the Lenders in Schedule 4.13. No Default hereunder has occurred
and is continuing.
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Section 4.14 Casualties; Taking of Properties. Since the date of
the Financial Statements, neither the business nor the Properties of the
Company or any of its Subsidiaries have been affected in a manner that has had
or would have a Material Adverse Effect as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of Property or cancellation of
contracts, permits or concessions by any domestic or foreign government or any
agency thereof, riot, activities of armed forces or acts of God or of any
public enemy.
Section 4.15 Compliance with the Law. Neither the Company nor any
of its Subsidiaries:
(a) is in violation of any Governmental Requirement; or
(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 would have (in the event that such a violation or
failure were asserted by any Person through appropriate action) a Material
Adverse Effect.
Section 4.16 No Material Misstatements. No information, exhibit
or report furnished to the Agent or the Lenders by or at the direction of the
Company or any of its Subsidiaries in connection with the negotiation of this
Agreement contained any material misstatement of fact or, when such statement
is considered with all other written statements furnished to the Lenders in
that connection, omitted to state a material fact or any fact necessary to make
the statement contained therein not misleading.
Section 4.17 Investment Company Act. The Company is not an
"investment company" or a company "controlled" by an "investment company" that
is incorporated in or organized under the laws of the United States or any
"State," as those terms are defined in the Investment Company Act of 1940, as
amended. The execution and delivery by the Company and its Subsidiaries of
this Agreement and the other Financing Documents to which they respectively are
parties and their respective performance of the obligations provided for
therein, will not result in a violation of the Investment Company Act of 1940,
as amended.
Section 4.18 Public Utility Holding Company Act. The Company is
not a "holding company," or a "subsidiary company" of a "holding company," or
an "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 4.19 Subsidiaries. The Company has no Subsidiaries except
those shown in Exhibit C hereto, which exhibit is complete and accurate. The
Company owns 100% of all stock of the Subsidiaries listed in such Exhibit.
Section 4.20 Insurance. Schedule 4.20 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation, casualty, flood, business interruption and other forms
of insurance owned or held by the Company and each of its Subsidiaries. All
such policies are in full force and effect, all premiums with respect thereto
have been paid in accordance with their respective terms, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with all requirements of law and of
all agreements to which the Company or any of its Subsidiaries is a party; are
valid, outstanding
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and enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Company and each of its Subsidiaries; and will not in any way be affected by,
or terminate or lapse by reason of, the transactions contemplated by this
Agreement. Schedule 4.20 identifies all material risks, if any, which the
Company and its Subsidiaries and their respective Board of Directors or
officers have designated as being self insured. Neither the Company nor any of
its Subsidiaries has been unable to obtain any insurance with respect to its
assets or operations, nor has its coverage been limited below usual and
customary policy limits during the last three years.
Section 4.21 Mortgaged Property. Substantially all of the
Mortgaged Property is described in and covered by the engineering or other
written reports which have previously been delivered to and relied upon by the
Lenders in connection with this Agreement.
Section 4.22 Gas Imbalances. Except as disclosed to the Agent in
Schedule 4.22, there are no gas imbalances, take or pay or other prepayments
owed by the Company in excess of $5,000,000 in the aggregate with respect to
any of the Mortgaged Property (or in the case of any of the Mortgaged Property
operated by a Person other than the Company or its Subsidiaries, to the best of
the Company's knowledge) which would require the Company or its Subsidiaries to
deliver Hydrocarbons produced from any of the Mortgaged Property at some future
time without then or thereafter receiving full payment therefor.
Section 4.23 Environmental Matters.
(a) Environmental Laws, etc. Neither any Property of the
Company or its Subsidiaries nor the operations conducted thereon
violate any applicable order of any court or Governmental Authority or
Environmental Laws, which violation could reasonably be expected to
have a Material Adverse Effect or which could reasonably be expected
to result in remedial obligations having a Material Adverse Effect
assuming disclosure to the applicable Governmental Authority of all
relevant facts, conditions and circumstances, if any, pertaining to
the relevant Property.
(b) No Litigation. Without limitation of Subsection (a)
above, no Property of the Company or its Subsidiaries nor the
operations currently conducted thereon or by any prior owner or
operator of such Property or operation, are in violation of or subject
to any existing, pending or threatened action, suit, investigation,
inquiry or proceeding by or before any court or Governmental Authority
or to any remedial obligations under Environmental Laws, which
violation, action, suit, investigation, inquiry or proceeding could
reasonably be expected to have a Material Adverse Effect or which
could reasonably be expected to result in remedial obligations having
a Material Adverse Effect assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to the relevant Property.
(c) Notices, Permits, etc. All notices, permits,
licenses or similar authorizations, if any, required to be obtained or
filed by the Company or its Subsidiaries in connection with the
operation or use of any and all Property of the Company or its
Subsidiaries, including but not limited to past or present treatment,
storage, disposal or release of a hazardous substance or solid waste
into the environment, have been duly obtained or filed except to the
extent the failure to obtain or file such notices, permits, licenses
or similar authorizations could not reasonably be
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expected to have a Material Adverse Effect or which could reasonably
be expected to result in remedial obligations having a Material
Adverse Effect assuming disclosure to the applicable Governmental
Authority of all relevant facts, conditions and circumstances, if any,
pertaining to the relevant Property.
(d) Hazardous Substances Carriers. All hazardous
substances or solid waste generated at any and all Property of the
Company or its Subsidiaries have in the past been transported, treated
and disposed of only by carriers maintaining valid permits under RCRA
and any other Environmental Law, except to the extent the failure to
have such substances or waste transported, treated or disposed by such
carriers could not reasonably be expected to have a Material Adverse
Effect, and only at treatment, storage and disposal facilities
maintaining valid permits under RCRA and any other Environmental Law,
which carriers and facilities have been and are operating in
compliance with such permits, except to the extent the failure to have
such substances or waste treated, stored or disposed at such
facilities, or the failure of such carriers or facilities to so
operate, could not reasonably be expected to have a Material Adverse
Effect or which could reasonably be expected to result in remedial
obligations having a Material Adverse Effect assuming disclosure to
the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to the relevant
Property.
(e) Hazardous Substances Disposal. The Company and its
Subsidiaries have taken all reasonable steps necessary to determine
and have determined that no hazardous substances or solid waste have
been disposed of or otherwise released and there has been no
threatened release of any hazardous substances on or to any Property
of the Company or its Subsidiaries except in compliance with
Environmental Laws, except to the extent the failure to do so could
not reasonably be expected to have a Material Adverse Effect or which
could reasonably be expected to result in remedial obligations having
a Material Adverse Effect assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to the relevant Property.
(f) OPA Requirements. Except to the extent the failure
to so comply would not have a Material Adverse Effect, to the extent
applicable, the Company and its Subsidiaries have complied with all
design, operation and equipment requirements imposed by OPA or
scheduled to be imposed by OPA during the term of this Agreement, and
the Company does not have reason to believe that either it or its
Subsidiaries will not be able to maintain such compliance with OPA
requirements during the term of this Agreement.
(g) No Contingent Liability. The Company and its
Subsidiaries have no material contingent liability in connection with
any release or threatened release of any hazardous substance or solid
waste into the environment other than such contingent liabilities at
any one time and from time to time which could reasonably be expected
to exceed $1,500,000 in excess of applicable insurance coverage and
for which adequate reserves for the payment thereof as required by
GAAP have not been provided, or which could reasonably be expected to
result in remedial obligations having a Material Adverse Effect
assuming disclosure to the applicable Governmental Authority of all
relevant facts, conditions and circumstances, if any, pertaining to
such release or threatened release.
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Section 4.24 Recapitalization. As of the Closing Date, the
Company has consummated the Recapitalization and all transactions required in
connection therewith.
ARTICLE V
COVENANTS
Section 5.01 Certain Affirmative Covenants. So long as any Lender
has any Commitment hereunder or any Loan remains unpaid or any Revolving Credit
Exposure remains outstanding, the Company will at all times comply with the
following covenants:
(a) Maintenance and Compliance, etc. The Company will
and will cause each of its Subsidiaries to (i) except as permitted by
Section 5.04(c), preserve and maintain its corporate existence, rights
and franchises and (ii) observe and comply in all material respects
with all Governmental Requirements, except where failure to do so
could not reasonably be expected to have a Material Adverse Effect.
(b) Payment of Taxes and Claims, etc. The Company will
pay, and cause each of its Subsidiaries to pay, (i) all taxes,
assessments and governmental charges imposed upon it or upon its
Property, and (ii) all claims (including, but not limited to, claims
for labor, materials, supplies or services) which might, if unpaid,
become a Lien upon its Property, unless, in each case, the validity or
amount thereof is being contested in good faith by appropriate action
or proceedings and the Company has established adequate reserves in
accordance with GAAP with respect thereto.
(c) Further Assurances. The Company will and will cause
each of its Subsidiaries to cure promptly any defects in the creation
and issuance of the Notes, and the execution and delivery of the
Financing Documents, including this Agreement. The Company at its
expense will, as promptly as practical, execute and deliver to the
Agent or the applicable Issuing Bank 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 performance of
the covenants and agreements of the Company or any of its Subsidiaries
in the Financing Documents, including this Agreement, or to further
evidence and more fully describe the collateral intended as security
for the Notes or other Lender Indebtedness, or to correct any
omissions in the Financing Documents, or more fully to state the
security obligations set out herein or in any of the Financing
Documents, or to perfect, protect or preserve any Liens created
pursuant to any of the Financing Documents, or to make any recordings,
to file any notices, or obtain any consents, all as may be necessary
or appropriate in connection therewith.
(d) Performance of Obligations. The Company will pay the
Notes according to the reading, tenor and effect thereof; 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 the Financing Documents, including this Agreement, 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 Financing Documents to which
they respectively are parties.
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(e) Insurance. The Company and its Subsidiaries will
maintain or cause to be maintained, 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 (including business interruption
insurance and flood insurance) and amounts as is customary in the case
of Persons engaged in the same or similar businesses and similarly
situated or in accordance with any Governmental Requirement. Upon
request of the Agent, the Company will furnish or cause to be
furnished to the Agent from time to time a summary of the insurance
coverage of the Company and its Subsidiaries in form and substance
reasonably satisfactory to the Agent and if requested will furnish the
Agent copies of the applicable policies. In the case of any fire,
accident or other casualty causing loss or damage to any Properties of
the Company, the proceeds of such policies shall be used, in the
Company's sole discretion, (i) to reasonably promptly repair or
replace the damaged Property, or (ii) to prepay the Lender
Indebtedness. The Company will obtain endorsements to the policies
pertaining to all physical Properties in which the Agent or the
Lenders shall have a Lien under the Financing Documents, naming the
Agent as a loss payee and containing provisions that such policies
will not be cancelled without 30 days prior written notice having been
given by the insurance company to the Agent.
(f) Accounts and Records. The Company will keep and will
cause each of its Subsidiaries to keep proper books of record and
account in which full, true and correct entries will be made of all
financial or business dealings or transactions in relation to their
respective business and activities.
(g) Right of Inspection. The Company will permit and
will cause each of its Subsidiaries to permit any officer, employee or
agent of the Agent or any of the Lenders to visit and inspect any of
the Properties of the Company or any of its Subsidiaries, examine the
Company's or any such Subsidiary's books of record and accounts, take
copies and extracts therefrom, and discuss the affairs, finances and
accounts of the Company or any of its Subsidiaries with the Company's
or such Subsidiary's officers, accountants and auditors, as often and
all at such reasonable times during normal business hours as may be
reasonably requested by the Agent or any of the Lenders.
(h) Operation and Maintenance of Mortgaged Property and
Compliance with Leases. Subject to Subsection 5.01(j), the Company
will, and will cause each of its Subsidiaries to, operate its
Properties or cause its Properties to be operated in accordance with
prudent industry practice and in compliance with all material terms
and provisions of all applicable leases, contracts and agreements and
in compliance with all applicable proration and conservation laws of
the jurisdiction in which such Properties may be situated, and all
applicable laws, rules and regulations of every other agency and
authority from time to time constituted to regulate the development
and operation of such Properties, and as to any Oil and Gas
Properties, the production and sale of Hydrocarbons and other minerals
therefrom.
(i) Stock of Subsidiaries. The Company will at all times
own, directly or indirectly, 100% of all stock of all Guarantors,
except as otherwise permitted pursuant to Subsection 5.04(c).
(j) Certain Additional Assurances Regarding Maintenance
and Operation of Properties. With respect to those Properties of the
Company or a Subsidiary of the Company which are being operated by
operators other than the Company or such Subsidiary, the Company
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or such Subsidiary shall not be obligated, itself, to perform any
undertakings contemplated by the covenants and agreements contained in
Subsections 5.01(b), 5.01(e), and 5.01(h) which are performable only
by such operators and are beyond the control of the Company or such
Subsidiary; however, the Company agrees to promptly take and to cause
such Subsidiary to promptly take all reasonable actions available
under any operating agreements or otherwise to bring about the
performance of any such undertakings required to be performed under
such Subsections.
(k) Designation of Subsidiaries as Additional Guarantors.
If at any time the Majority Lenders, in their sole discretion, or the
Company, with the approval of the Agent, designate any one or more
Subsidiaries of the Company (other than a Non-Guarantor Subsidiary) to
be additional Guarantors, the Company shall cause any such newly
designated Guarantor to execute, within 30 days of such designation, a
guaranty agreement in substantially the same form as the Guaranty
Agreement executed by the Guarantors in connection with this
Agreement.
(l) Minimum Capital Expenditures. The Company and each
of its Subsidiaries shall make capital expenditures in accordance with
prudent industry practice for the development of their Proved
Undeveloped Hydrocarbon Reserves.
(m) Payment of Charters and Tariffs. The Company will
pay, and will cause each of its Subsidiaries to pay before or when due
(i) the amount owed for the time charter of any tanker or barge used
to transport feedstocks, blendstocks or refined products and (ii) the
tariff owed by any Inventory Borrowing Base party for the transport or
storage of any inventory, including but not limited to, the tariff
owed by Tesoro Alaska to the Trans-Alaska Pipeline System, unless in
each case, the validity or amount thereof is being contested in good
faith by appropriate action or proceedings and the Company has
established appropriate reserves in accordance with GAAP.
(n) Title Opinions. Within 60 days of the Closing Date,
the attorneys who furnished the title opinions required pursuant to
Section 3.02(f) will provide to the Agent a supplemental opinion
stating that there has been no change in the status of title from that
reflected in such opinions through the filing and recordation of the
E&P Mortgage and that, subject only to the liens referenced in such
earlier title opinions, the Liens granted by the E&P Mortgage are
first priority.
Section 5.02 Reporting Covenants. So long as any Lender has any
Commitment hereunder or any Loan remains unpaid or any Revolving Credit
Exposure remains outstanding, the Company will furnish to each Lender:
(a) Annual Financial Statements. As soon as available
and in any event within 105 days after the end of each calendar year
of the Company, a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year and the related consolidated
statements of income, retained earnings and cash flows of the Company
and its Subsidiaries for such calendar year, setting forth in each
case in comparative form the figures for the previous calendar year,
all in reasonable detail and accompanied by a report thereon of
Deloitte & Touche or other independent public accountants of
comparable recognized national standing, which such report shall state
that such consolidated financial statements present fairly the
consolidated financial condition as at the end of such calendar year,
and the consolidated results of operations and cash
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flows for such calendar year, of the Company and its Subsidiaries in
accordance with GAAP, applied on a consistent basis. At the same
time, a consolidating balance sheet of the Consolidating Statement
Entities as at the end of such year and related consolidating
statements of income and cash flows for such calendar year,
accompanied by a certification thereon of a Responsible Officer,
stating that such consolidating financial statements form the basis of
the Company's consolidated financial statements and are fairly stated
in all material respects when considered in relation thereto.
(b) Quarterly Financial Statements. As soon as available
and in any event within 50 days after the end of each calendar quarter
of the Company, a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter and the related
consolidated statements of income, retained earnings and cash flows of
the Company and its Subsidiaries for such calendar quarter and for the
portion of the Company's calendar year ended at the end of such
quarter, setting forth in each case in comparative form the figures
for the corresponding quarter and the corresponding portion of the
Company's previous calendar year, all in reasonable detail and
certified by a Responsible Officer that such financial statements are
complete and correct and fairly present the consolidated financial
condition as at the end of such calendar quarter, and the consolidated
results of operations and cash flows for such calendar quarter and
such portion of the Company's calendar year, of the Company and its
Subsidiaries in accordance with GAAP (subject to normal, year-end
adjustments). At the same time, a consolidating balance sheet of the
Consolidating Statement Entities at the end of such calendar quarter
and related consolidating statements of income and cash flows, for the
portion of the Company's calendar year ended at such quarter
accompanied by a certification from a Responsible Officer that such
consolidating financial statements form the basis of the Company's
consolidated financial statements and are fairly stated in all
material respects when considered in relation thereto.
(c) No Default/Compliance Certificate. Together with the
financial statements required pursuant to subsections (a) and (b)
above, a certificate of a Responsible Officer (i) stating that a
review of such financial statements during the period covered thereby
and of the activities of the Company and its Subsidiaries has been
made under such Responsible Officer's supervision with a view to
determining whether the Company and its Subsidiaries have fulfilled
all of their obligations under this Agreement, the other Financing
Documents, and the Notes; (ii) stating that the Company and its
Subsidiaries have fulfilled their obligations under such instruments
and that all representations made in this Agreement continue to be
true and correct (or specifying the nature of any change), or if there
shall be a Default or Event of Default, specifying the nature and
status thereof and the Company's proposed response thereto; (iii)
demonstrating in reasonable detail compliance (including, but not
limited to, showing all material calculations) as at the end of such
calendar year or such calendar quarter with Subsections 5.03(a),
5.03(b) and 5.03(c); and (iv) containing or accompanied by such
financial or other details, information and material as the Agent may
reasonably request to evidence such compliance.
(d) Auditors' No Default Certificate; Management Letters.
Together with the financial statements required pursuant to subsection
(a) above, a certificate of the independent public accountants who
audited the annual report referred to therein to the effect that their
audit has not disclosed the existence of an Event of Default or a
Default under this Agreement, or if there exists an Event of Default
or a Default hereunder, specifying the nature thereof; and copies of
each management letter issued to the Company by such accountants
promptly following
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consideration or review by the Board of Directors of the Company, or
any committee thereof (together with any response thereto prepared by
the Company).
(e) Engineering Reports. Promptly after December 31st
and June 30th of each year, but in no event later than 30 days after
such date, a report (the "Reserve Report") in form and substance
satisfactory to the Majority Lenders prepared by Netherland, Sewell &
Associates or other independent petroleum consultant(s) acceptable to
the Majority Lenders (the previous acceptability of an independent
petroleum consultant satisfactory to the Majority Lenders shall have
no bearing on such consultant's present or future acceptability),
which Reserve Report shall evaluate the Hydrocarbon reserves included
in the Mortgaged Property as of each such date and which shall,
together with any other information reasonably requested by any
Lender, set forth the total Proved Hydrocarbon reserves by accepted
and customary reserve category attributable to such Mortgaged
Property, together with a projection of the rate of production and
future net income with respect thereto as of each such date.
(f) Title Information. Within a reasonable time after a
request by the Agent, additional title information in form and
substance acceptable to the Majority Lenders as is reasonably
necessary covering the Mortgaged Property so that the Lenders shall
have received, together with the title information previously received
by the Lenders, satisfactory title information covering all of the
Mortgaged Property.
(g) Events or Circumstances with respect to Mortgaged
Property. Promptly after the occurrence of any event or circumstance
(other than as known to affect oil and gas prices generally)
concerning or changing any of the Mortgaged Property that would have a
Material Adverse Effect, notice of such event or circumstance in
reasonable detail.
(h) Bi-Weekly Borrowing Base Reports.
(i) As soon as available and in any event by the
Thursday following the close of each two calendar week period,
a Borrowing Base Report dated and reflecting amounts as of the
close of business on Friday of the preceding calendar week.
(ii) As soon as available and in any event by the
50th day after the end of each calendar quarter of the
Company, a quarterly Borrowing Base Report dated and
reflecting amounts as of the last day of such calendar quarter
which have been reconciled to the financial statements
delivered pursuant to Subsection 5.02(b).
(i) Notice of Certain Events. Promptly after the Company
learns of the receipt or occurrence of any of the following, a
certificate of a Responsible Officer specifying (i) any official
notice of any violation, possible violation, non-compliance or
possible non-compliance, or claim made by any Governmental Authority
pertaining to all or any part of the Properties of the Company or any
of its Subsidiaries which, if adversely determined, would have a
Material Adverse Effect; (ii) any event which constitutes a Default or
Event of Default, together with a detailed statement specifying the
nature thereof and the steps being taken to cure such Default or Event
of Default; (iii) 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 in excess of $1,000,000 of the Company or any
of its Subsidiaries with respect to a claimed default, together with a
detailed statement specifying the notice given or other action taken
by such holder and the
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nature of the claimed default and what action the Company or its
Subsidiary is taking or proposes to take with respect thereto; (iv)
any default or noncompliance of any party to any of the Financing
Documents with any of the terms and conditions thereof or any notice
of termination or other proceedings or actions which could reasonably
be expected to adversely affect any of the Financing Documents; (v)
the creation, dissolution, merger or acquisition of any Subsidiary of
the Company with material operations; (vi) any event or condition
which violates any Environmental Law and which could potentially have
a Material Adverse Effect or which could potentially result in
remedial obligations having a Material Adverse Effect, assuming
disclosure to the applicable Governmental Authority of all relevant
facts, conditions and circumstances, if any, pertaining to such event
or condition; or (vii) any event or condition which may reasonably be
expected to have a Material Adverse Effect.
(j) Shareholder Communications, Filings, etc. Promptly
upon the mailing or filing thereof, copies of all financial
statements, reports and proxy statements mailed to the Company's
shareholders, and copies of all registration statements, periodic
reports and other documents (excluding the related exhibits except to
the extent expressly requested by the Agent) filed with or received by
the Company in connection therewith from the Securities and Exchange
Commission (or any successor thereto) or any national securities
exchange.
(k) Litigation. Promptly after (i) the occurrence
thereof, notice of the institution of or any material adverse
development in any action, suit or proceeding or any governmental
investigation or any arbitration, before any court or arbitrator or
any governmental or administrative body, agency or official, against
the Company, any Guarantor or any material Property of any thereof; or
(ii) actual knowledge thereof, notice of the threat of any such
action, suit, proceeding, investigation or arbitration, in either case
in which the amount involved is material and is not covered by
insurance or which, if adversely determined, would have a Material
Adverse Effect.
(l) ERISA. Promptly after (i) the Company's obtaining
knowledge of the occurrence thereof, notice that an ERISA Termination
Event or a "prohibited transaction," as such term is defined in
Section 406 of ERISA or Section 4975 of the Code, with respect to any
Plan has occurred, which such notice shall specify the nature thereof,
the Company's proposed response thereto and, where known, any action
taken or proposed by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto, and (ii) the Company's
obtaining knowledge thereof, copies of any notice of the PBGC's
intention to terminate or to have a trustee appointed to administer
any Plan.
(m) Borrowing Base Audit. Each calendar year, as of a
date to be designated by the Agent, but at the cost of the Company, a
report of an independent collateral field examiner approved by the
Agent in writing and reasonably acceptable to the Company (which may
be the Agent or an affiliate thereof) with respect to the Eligible
Accounts and Eligible Inventory components included in the Borrowing
Base, and the Agent shall have the option to receive such additional
reports as the Agent or the Majority Lenders shall reasonably request;
provided, however, that so long as no Default has occurred and is
continuing, neither the Agent nor the Majority Lenders shall request
more than one such additional report (for a total of two such reports)
per calendar year.
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(n) Other Information. With reasonable promptness, such
other information about the business and affairs and financial
condition of the Company or its Subsidiaries as any Lender may
reasonably request from time to time.
Section 5.03 Financial Covenants. So long as any Lender has any
Commitment hereunder or any Loan remains unpaid or any Revolving Credit
Exposure remains outstanding, the Company will:
(a) Consolidated Tangible Net Worth. Maintain
Consolidated Tangible Net Worth in an amount not less than (i) for the
calendar year ending December 31, 1994, $110,000,000, and (ii) for
the calendar year beginning January 1, 1995, and for each calendar
year thereafter, the sum of the amount calculated pursuant to this
Subsection for the previous year plus 75% of the Company's
consolidated net income for such previous year; provided if at any
time the Company issues equity securities of any kind, such minimum
amount of Consolidated Tangible Net Worth shall be permanently
increased by an amount equal to 75% of the net cash proceeds from the
issuance of such equity securities, except that to the extent such
proceeds are used as permitted in Subsection 5.04(d)(ii), such amount
shall not so increase the minimum Consolidated Tangible Net Worth; and
provided further, that such amount of minimum Consolidated Tangible
Net Worth shall be adjusted so as to remove the effect of any
accounting adjustments that would otherwise result from the exercise
of the MetLife Option pursuant to Subsection 5.04(d)(ii) or from the
retirement of the Subordinated Debentures and Exchange Notes due to
write-offs of original issue discount or deferred financing costs.
(b) Working Capital. Maintain at all times its
Consolidated Working Capital Ratio of at least 1.50 to 1.00.
(c) Company's Cash Flow Coverage. Maintain a cash flow
coverage ratio for itself and its Subsidiaries on a consolidated basis
as of any Quarterly Date equal to or greater than 1.10 to 1.00 for the
Rolling Period ending on the applicable Quarterly Date. As used in
this Subsection 5.03(c), cash flow coverage ratio shall mean, as to
the Company, and for the Rolling Period ending on such Quarterly Date,
the ratio of (i) the sum of (A) Cash Flow of the Company and its
Subsidiaries on a consolidated basis, plus (B) the difference between
E&P Loan Value on the last day of the applicable Rolling Period and
the outstanding principal amount of the Revolving Credit Loans on the
first day of the last calendar quarter of such Rolling Period, plus
(C) interest expense of the Company and its Subsidiaries on a
consolidated basis to (ii) the sum of (A) regularly scheduled
principal payments of Funded Indebtedness paid in cash, plus (B) cash
interest expense of the Company and its Subsidiaries on a consolidated
basis, plus (C) capital expenditures by the Company and its
Subsidiaries on a consolidated basis, excluding capital expenditures
made by way of exchanges of equity or for the addition of the Vacuum
Unit, plus (D) cash dividends actually paid by the Company and its
Subsidiaries on a consolidated basis.
(d) Tesoro Alaska EBITDA. Cause Tesoro Alaska to
maintain the Tesoro Alaska EBITDA (i) for each Rolling Period ending
on or before September 30, 1995, in an amount equal to or greater than
$15,000,000 and (ii) for each Rolling Period thereafter, in an amount
equal to or greater than $20,000,000. As used in this Subsection,
Tesoro Alaska EBITDA shall mean, as to Tesoro Alaska, and for any
Rolling Period, the amount equal to net income of Tesoro Alaska less
any non-cash income included in net income, plus, to the extent
deducted from net income, interest expense, depreciation, depletion
and impairment, amortization of leasehold and
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intangibles, other non-cash expenses, and taxes, provided, that, gains
or losses on the disposition of assets shall not be included in Tesoro
Alaska EBITDA.
Section 5.04 Certain Negative Covenants. So long as any Lender
has any Commitment hereunder or any Loan remains unpaid or any Revolving Credit
Exposure remains outstanding, the Company will not:
(a) Indebtedness. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or
suffer to exist, any Indebtedness, other than:
(i) the Lender Indebtedness;
(ii) Indebtedness outstanding on the date hereof
which is set out in the Company's financial statements
referred to in Section 4.06(a) or on Schedule 5.04(a) and any
renewal, extension, refinancing or refunding of such
Indebtedness; provided that (A) principal amount of such
Indebtedness that renews, extends, refinances or refunds any
such Indebtedness shall not exceed the principal amount of
such renewed, extended, refunded or refinanced Indebtedness,
plus up to 5% to cover the costs associated with such renewal,
extension, refinancing or refunding of such Indebtedness and
(B) the Indebtedness that renews, extends, refinances or
refunds such Indebtedness is scheduled to mature no earlier
than the Indebtedness being renewed, extended, refunded or
refinanced;
(iii) accounts payable (for the deferred purchase
price of Property or services) from time to time incurred in
the ordinary course of business and which are not in excess of
90 days past the invoice or billing date, or if in excess of
90 days past the invoice or billing date are being currently
contested in good faith by appropriate actions or proceedings
diligently conducted;
(iv) guaranties issued by the Company or any
Subsidiary in the ordinary course of its business of
obligations of others (other than for borrowed money) incurred
in oil and gas drilling, oil and gas production, oil and gas
transportation, crude oil and refined products purchasing, oil
and gas exploration or other similar programs or operations;
(v) obligations whether current or long term
incurred in the normal course of business under or pursuant to
customary oil, gas and mineral leases, royalties and oil and
gas operating agreements, farm-out and farm-in agreements,
development agreements and other agreements which are
customary in the oil and gas industry;
(vi) Indebtedness created, incurred, assumed or
guaranteed after the date hereof not otherwise permitted
pursuant to this Subsection 5.04(a), provided that the
aggregate outstanding principal amount of such Indebtedness
shall not exceed $10,000,000 at any one time outstanding;
(vii) Indebtedness owing by (A) the Company to
Non-Guarantor Subsidiaries not to exceed $5,000,000 in the
aggregate, (B) any Subsidiary of the Company to the
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Company, (C) the Company to any Guarantor and (D) any
Guarantor to any other Guarantor;
(viii) obligations for current taxes, assessments
and other governmental charges and taxes, assessments or other
governmental charges which are not yet due or are being
contested in good faith by appropriate action or proceeding
promptly initiated and diligently conducted, if such reserve
as shall be required by GAAP shall have been made therefor;
(ix) Capital Lease Obligations not to exceed
$7,500,000 at any one time;
(x) Indebtedness relating to personal injury or
property claims against the Company or any of its Subsidiaries
in an amount not to exceed $5,000,000 in the aggregate unless
and to the extent such claims are covered by insurance;
(xi) Indebtedness, not to exceed $10,000,000 in
the aggregate outstanding at any one time, in respect of
letters of credit (other than the Letters of Credit) or bank
guaranties provided by the Company or any of its Subsidiaries
in the ordinary course of business and used in lieu or in
support of performance guarantees, performance, surety or
other similar bonds, or bankers acceptances, or stay and
appeal bonds; provided, however, to the extent such letters of
credit or bank guaranties are used in lieu or in support of
stay or appeal bonds, such $10,000,000 maximum amount shall be
reduced by an amount equal to the aggregate amount of any
Letters of Credit used in lieu or support of stay or appeal
bonds;
(xii) Indebtedness owed to National Bank of Alaska
and the Alaska Industrial Development and Export Authority
regarding financing for the Vacuum Unit; provided that such
Indebtedness is subject to documentation (including, but not
limited to, documentation setting forth the terms pursuant to
which the Lien on the Kenai Refinery securing the Lender
Indebtedness is subordinated) satisfactory to the Agent and
the principal amount of such Indebtedness shall not exceed
$15,000,000 in the aggregate; and provided further that such
Indebtedness shall only be permitted if the Term Loan
Commitments have been terminated in full as provided in
Subsection 2.09(b); and
(xiii) Indebtedness existing in connection with
Hedge Agreements, provided that such Hedge Agreements are
entered into by the Company or its Subsidiaries in the
ordinary course of business and for the purpose of hedging
against fluctuations in price or interest rates.
(b) Liens. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Lien on any of its Property now owned or hereafter acquired
to secure any Indebtedness of any Person, other than:
(i) Liens existing on the date hereof and set out
on Schedule 5.04(b);
(ii) Liens securing the Lender Indebtedness;
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(iii) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being
contested in good faith by appropriate action or proceedings
and with respect to which adequate reserves are being
maintained;
(iv) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen, repairmen,
workmen, and other Liens imposed by law created in the
ordinary course of business for amounts which are not past due
for more than 30 days or which are being contested in good
faith by appropriate proceedings and with respect to which
adequate reserves in accordance with GAAP are being
maintained;
(v) Liens (other than any inchoate Lien imposed
by ERISA) incurred or deposits or pledges made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, old
age or other similar obligations, or to secure the performance
of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
(vi) easements, rights-of-way, restrictions,
servitudes, permits, reservations, exceptions, conditions,
covenants and other similar charges or encumbrances not
interfering with the ordinary conduct of the business of the
Company or any of its Subsidiaries;
(vii) any Lien securing Indebtedness, neither
assumed nor guaranteed by the Company or any of its
Subsidiaries nor on which it customarily pays interest,
existing upon real estate or rights in or relating to real
estate acquired by the Company for substation, metering
station, pump station, storage, gathering line, transmission
line, transportation line, distribution line or for
right-of-way purposes, and any Liens reserved in leases for
rent and for 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 (vii) does not materially impair
the use of the Property covered by such Lien for the purposes
of which such Property is held by the Company or any of its
Subsidiaries;
(viii) inchoate Liens arising under ERISA;
(ix) any Lien on any Property securing
Indebtedness incurred or assumed for the purpose of financing
all or any part of the acquisition cost of such Property,
provided that such Lien does not extend to any other Property
of the Company and the aggregate unpaid purchase price secured
by all such Liens at any time shall not exceed $2,500,000;
(x) Liens reserved in customary oil, gas and/or
mineral leases for bonus or rental payments and for compliance
with the terms of such leases and Liens reserved in customary
operating agreements, farm-out and farm-in agreements,
exploration agreements, development agreements and other
similar agreements for compliance with the terms of such
agreements;
(xi) any obligations or duties affecting any of
the Property of the Company or its Subsidiaries to any
municipality or public authority with respect to any
franchise,
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grant, license or permit which do not materially impair the
use of such Property for the purposes for which it is held;
(xii) defects, irregularities and deficiencies in
title of any rights of way or other Property of the Company or
any Subsidiary which in the aggregate do not materially impair
the use of such rights of way or other Property for the
purposes for which such rights of way and other Property are
held by the Company or any Subsidiary, and defects,
irregularities and deficiencies in title to any Property of
the Company or its Subsidiaries, which defects, irregularities
or deficiencies have been cured by possession under applicable
statutes of limitation;
(xiii) royalties, overriding royalties, revenue
interests, net revenue interests, production payments (other
than production payments granted or created by the Company in
connection with the borrowing of money), advance payment
obligations (other than obligations in respect of advance
payment received by the Company in connection with the
borrowing of money) and other similar burdens now existing on
Oil and Gas Properties now owned or, as to Properties
hereafter acquired, at the time of acquisition by the Company
or any of its Subsidiaries;
(xiv) Liens arising out of all presently existing
and future division and transfer orders, advance payment
agreements, processing contracts, gas processing plant
agreements, operating agreements, gas balancing or deferred
production agreements, pooling, unitization or communitization
agreements, pipeline, gathering or transportation agreements,
platform agreements, drilling contracts, injection or
repressuring agreements, cycling agreements, construction
agreements, salt water or other disposal agreements, leases or
rental agreements (but only as otherwise permitted by this
Agreement), farm-out and farm-in agreements, exploration and
development agreements, and any and all other contracts or
agreements covering, arising out of, used or useful in
connection with or pertaining to the exploration, development,
operation, production, sale, use, purchase, exchange, storage,
separation, dehydration, treatment, compression, gathering,
transportation, processing, improvement, marketing, disposal
or handling of any Property of the Company or its
Subsidiaries, provided such agreements are entered into in the
ordinary course of business and contain terms customary for
such agreements in the industry;
(xv) Liens on the Kenai Refinery securing the
Indebtedness described in Section 5.04(a)(xii); provided
further, up to the maximum amount allowed by such Section,
such Liens may be prior to the Lien on the Kenai Refinery
securing the Lender Indebtedness;
(xvi) Liens securing up to $5,000,000 of the
Indebtedness permitted by Subsection 5.04(a)(xi) to the extent
such Indebtedness is issued in support of the Company's (or
its Subsidiaries') Bolivian operations; and
(xvii) extensions, renewals or replacements of any
Lien referred to in Subsections 5.04(b)(i) through (xvi),
provided that the principal amount of the Indebtedness or
obligation secured thereby is not increased and that any such
extension, renewal or replacement is limited to the Property
originally encumbered thereby.
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<PAGE> 71
(c) Mergers, Sales, etc. Merge into or with or
consolidate with, or permit any of its Subsidiaries to merge into or
with or consolidate with, any other Person, or sell, lease or
otherwise dispose of, or permit any of its Subsidiaries to sell, lease
or otherwise dispose of (whether in one transaction or in a series of
transactions) all or any part of its Property to any other Person,
other than (i) (A) a merger of any Guarantor into the Company or into
another Guarantor other than Tesoro Bolivia, PEDCO, Tesoro
Environmental, or any Subsidiary thereof, (B) a merger of any
Guarantor with any Person other than the Company or another Guarantor
if immediately thereafter and giving effect thereto the Company or a
Guarantor, other than Tesoro Bolivia, PEDCO, Tesoro Environmental, or
any Subsidiary thereof, shall own 100% of the stock of the surviving
corporation and (C) a merger of the Company with any other Person if
the Company is the surviving corporation, provided, however, that in
each such case, immediately thereafter and giving effect thereto, no
event shall have occurred and be continuing which constitutes a
Default, (ii) a sale, lease or other disposition of all or any part of
its Property by any Guarantor to another Guarantor other than Tesoro
Bolivia, PEDCO, Tesoro Environmental, or any Subsidiary thereof, or
(iii) sales, leases or other dispositions of all or any part of its
Property by the Company or any of its Subsidiaries to any other Person
not in excess of $2,000,000 in any 12-month period and not to exceed
$5,000,000 cumulatively from the Closing Date and provided further,
that the Company or any such Subsidiary of the Company receives fair
market consideration for any such sale, lease or disposition of such
Properties. Notwithstanding the foregoing limitations, the Company
and its Subsidiaries may (A) sell inventory, Hydrocarbon production
and other similar assets in the ordinary course of business, (B) sell,
transfer or otherwise dispose of personal property (including, but not
limited to, pipe, equipment, machinery and vehicles) in the ordinary
course of business or when, in the reasonable judgment of the Company,
such property is no longer used or useful in the conduct of its
business or the business of its Subsidiaries, (C) farm-out in the
ordinary course of business any Oil and Gas Properties owned by the
Company or its Subsidiaries which do not constitute a portion of the
Mortgaged Property, (D) sell Properties of the Non-Guarantor
Subsidiaries, (E) sell the Property of or stock issued by Tesoro
Bolivia, PEDCO, Tesoro Environmental, or any of their respective
Subsidiaries, provided, that, in connection with any sale of property
or stock pursuant to this clause (E), any Letter of Credit issued for
the account of, or to support the assets or operations of the
Guarantor whose Properties or stock is being sold, shall be terminated
or backed by a letter of credit in form and substance, and issued by
an issuer, acceptable to each of the Agent and the applicable Issuing
Bank in their sole discretion and (F) consummate the E&P
Restructuring.
(d) Dividends, etc. Declare or pay any dividend on its
capital stock, make any payment to purchase, redeem, retire or acquire
any of its capital stock or any option, warrant, or other right to
acquire such capital stock, return any capital to its stockholders,
make any distribution of its assets to its stockholders as such, or
permit any of its Subsidiaries to purchase or otherwise acquire for
value any stock of the Company, except that the Company may (i)
declare and deliver stock dividends, (ii) redeem or purchase stock
from MetLife Louisiana pursuant to the MetLife Option with, but only
with, (A) the proceeds from the issuance of new shares of common stock
of the Company, (B) the proceeds from the issuance of new shares of
non-redeemable preferred stock of the Company having terms
satisfactory to the Majority Lenders, or (C) the proceeds from up to
$10,000,000 of Indebtedness permitted by Subsection 5.04(a)(vi), (iii)
issue shares of common stock and pay cash not to exceed $1,000,000 in
lieu of fractional shares of common stock upon the exercise of the
MetLife Option, (iv) declare and pay cash dividends (A) on the $2.20
Preferred Stock or (B) at any time after all of the $2.20
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Preferred Stock has been redeemed or purchased and retired pursuant to
clause (ii) above, on common stock or preferred stock issued by the
Company in an amount not to exceed (i) ten percent of consolidated net
income up to $25,000,000 and (ii) twenty percent of consolidated net
income in excess of $25,000,000 of the Company and its Subsidiaries in
any calendar year; provided that both before and after giving effect
to any such dividend, a Default shall not have occurred and be
continuing.
(e) Investments, Loans, etc. Make or permit any loans to
or investments in any Person, or permit any of its Subsidiaries to
make or permit any loans to or investments in any Person, other than:
(i) investments, loans or advances, the material
details of which have been set forth in the Financial
Statements or are disclosed to the Agent in Schedule 4.07
hereto;
(ii) investments in direct obligations of the
United States of America or any agency thereof;
(iii) investments in certificates of deposit of
maturities less than one year, issued by commercial banks in
the United States having capital and surplus in excess of
$500,000,000; provided, however, the Company may, with the
written approval of the Agent, invest in such certificates of
deposit issued by commercial banks in the United States having
capital and surplus in excess of $200,000,000 and a Thomson's
Bank Watch rating of B or better;
(iv) investments in commercial paper of maturities
less than one year rated A1 or P1 by Standard & Poor's or
Moody's Investors Services, Inc., respectively, or any
equivalent rating from any other rating agency satisfactory to
the Agent;
(v) routine loans or advances to employees made
in the ordinary course of business not to exceed (A) $25,000
at any one time outstanding to any one employee and (B)
$250,000 in the aggregate;
(vi) investments in securities purchased by the
Company or any Subsidiary of the Company under repurchase
obligations pursuant to which arrangements are made with
selling financial institutions (being (A) a financial
institution having unimpaired capital and surplus of not less
than $500,000,000 and with a rating of A1 or P1 by Standard &
Poor's or Moody's Investors Services, Inc., respectively; or
(B) with the written approval of the Agent, a financial
institution having unimpaired capital and surplus of not less
than $200,000,000 and a Thomson's Bank Watch rating of B or
better) for such financial institutions to repurchase such
securities within 30 days from the date of purchase by the
Company or such Subsidiary, and other similar short-term
investments made in connection with the Company's or any of
its Subsidiary's cash management practices;
(vii) the purchase, redemption or acquisition of
capital stock of the Company as permitted by Section 5.04(d);
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<PAGE> 73
(viii) investments described in Exhibit J;
(ix) entering into a joint venture or partnership
in connection with the sale to such joint venture or
partnership of the assets of Tesoro Bolivia or Tesoro
Environmental; and
(x) the purchase of stock issued by the Company from
participants in the incentive stock plans of the Company made
for the purpose of satisfying federal withholding tax
obligations of such participants or due to a failure by a
participant to comply with the terms and conditions of a stock
incentive as provided for under the terms of such incentive
stock plans or stock incentive grants thereunder.
(f) Lease Payments. Except for (i) oil and gas lease
obligations permitted under Subsection 5.04(a), (ii) lease obligations
(excluding Capital Lease Obligations) existing under leases for oil
field equipment and tools rented in the ordinary course of business
for a duration of less than one year and (iii) time charter payments
with regard to barges or tankers used to transport feedstocks,
blendstocks or refined products in the ordinary course of business;
create, incur, assume or suffer to exist, nor permit any of its
Subsidiaries to create, incur, assume or suffer to exist, any
obligation for the payment of rent or hire of Property of any kind
whatsoever (real or personal), whether directly or as a guarantor, if,
after giving effect thereto, the aggregate amount of all payments
required to be made by the Company and its Subsidiaries on a
consolidated basis pursuant to such leases or lease agreements
(excluding Capital Lease Obligations) would exceed $8,000,000 in any
calendar year.
(g) Sales and Leasebacks. Enter into, or permit any of
its Subsidiaries to enter into, any arrangement, directly or
indirectly, with any Person whereby the Company or any such Subsidiary
shall sell or transfer any Property, whether now owned or hereafter
acquired, and whereby the Company or any such Subsidiary shall then or
thereafter rent or lease as lessee such Property or any part thereof
or other Property which the Company or any such Subsidiary intends to
use for substantially the same purpose or purposes as the Property
sold or transferred.
(h) Nature of Business. Permit any material change to be
made in the character of its business or the business of any Guarantor
as carried on at the date hereof, except as may be permitted pursuant
to this Agreement.
(i) ERISA Compliance.
(i) Engage in, or permit any ERISA Affiliate to
engage in, any transaction in connection with which the
Company, a Subsidiary of the Company or any ERISA Affiliate
could be subjected to either a civil penalty assessed pursuant
to Sections 502(c) or 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, except where such assessment or
imposition would not have Material Adverse Effect;
(ii) Terminate, or permit any ERISA Affiliate to
terminate, any Plan in a manner, or take any other action with
respect to any Plan, which could result in any liability of
the Company, a Subsidiary of the Company or any ERISA
Affiliate to the PBGC;
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(iii) Fail to make, or permit any ERISA Affiliate
to fail to make, full payment when due of all amounts which,
under the provisions of any Plan, agreement relating thereto
or applicable law, the Company, a Subsidiary of the Company or
any ERISA Affiliate is required to pay as contributions
thereto, except where the failure to make such payments would
not have Material Adverse Effect;
(iv) Permit to exist, or allow any ERISA Affiliate
to permit to exist, any accumulated funding deficiency within
the meaning of Section 302 of ERISA or Section 412 of the
Code, whether or not waived, with respect to any Plan, except
where the existence of such a deficiency would not have a
Material Adverse Effect;
(v) Contribute to or assume an obligation to
contribute to, or permit any ERISA Affiliate to contribute to
or assume an obligation to contribute to, any "multiemployer
plan" as such term is defined in Section 3(37) or 4001(a)(3)
of ERISA;
(vi) Acquire, or permit any ERISA Affiliate to
acquire, an interest in any Person that causes such Person to
become an ERISA Affiliate with respect to the Company or a
Subsidiary of the Company or with respect to any ERISA
Affiliate of the Company or a Subsidiary of the Company if
such Person sponsors, maintains or contributes to, or at any
time in the six-year period preceding such acquisition has
sponsored, maintained, or contributed to, (1) any
"multiemployer plan" as such term is defined in Section 3(37)
or 4001(a)(3) of ERISA, or (2) any other Plan that is subject
to Title IV of ERISA under which the actuarial present value
of the benefit liabilities under such Plan exceeds the current
value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to
such benefit liabilities;
(vii) Fail to pay, or cause to be paid, to the PBGC
in a timely manner, and without incurring any late payment or
underpayment charge or penalty, all premiums required pursuant
to Sections 4006 and 4007 of ERISA, except where such failure
would not have a Material Adverse Effect; or
(viii) Amend, or permit any ERISA Affiliate to
amend, a Plan resulting in an increase in current liability
such that the Company, a Subsidiary of the Company or any
ERISA Affiliate is required to provide security to such Plan
under Section 401(a)(29) of the Code.
(j) Sale or Discount of Receivables. Discount or sell
(with or without recourse), or permit any of its Subsidiaries to
discount or sell (with or without recourse), any of its or its
Subsidiaries' notes receivable or accounts receivable; provided that
the Company may discount or sell (with or without recourse) up to
$3,000,000 in the aggregate of its accounts receivables that are more
than 60 days past due.
(k) Negative Pledge Agreements. Create, incur, assume or
suffer to exist, or permit any of its Subsidiaries to create, incur,
assume or suffer to exist, any contract, agreement or understanding
(other than this Agreement, the other Financing Documents or as set
forth on Schedule 5.04(k) hereof) which in any way prohibits or
restricts the granting, conveying, creation or imposition of any Lien
on any Property of the Company or its Subsidiaries, or which requires
the consent of or notice to other Persons in connection therewith.
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<PAGE> 75
(l) Transactions with Affiliates. Enter into any
transaction or series of transactions, or permit any of its
Subsidiaries to enter into any transaction or series of transactions,
with Affiliates of the Company or its Subsidiaries which involve an
outflow of money or other Property from the Company or its
Subsidiaries to an Affiliate of the Company or its Subsidiaries,
including but not limited to repayment of Indebtedness, management
fees, compensation, salaries, asset purchase payments or any other
type of fees or payments similar in nature, other than on terms and
conditions substantially as favorable to the Company and its
Subsidiaries as would be obtainable by the Company and its
Subsidiaries in a reasonably comparable arm's-length transaction with
a Person other than such an Affiliate of the Company or its
Subsidiaries. Notwithstanding the foregoing, the restrictions set
forth in this Section 5.04(l) shall not apply to: (i) the payment of
reasonable and customary fees to directors of the Company who are not
employees of the Company, (ii) routine loans or advances to employees
made in the ordinary course of business not to exceed $25,000 at any
one time outstanding to any one employee, (iii) any other transaction
with any employee, officer or director of the Company or any of its
Subsidiaries pursuant to employee benefit plans and compensation
arrangements in amounts customary for corporations similarly situated
to the Company or any such Subsidiary and entered into the ordinary
course of business and approved by the Board of Directors of the
Company or any committee thereof or the Board of Directors of such
Subsidiary or (iv) the consummation of the E&P Restructuring.
(m) Unconditional Purchase Obligations. Enter into or be
a party to, or permit any of its Subsidiaries to enter into or be a
party to, any contract for the purchase of materials, supplies or
other property or services, if such contract requires that payment be
made by it regardless of whether or not delivery is ever made of such
materials, supplies or other property or services.
(n) Stock. Authorize or issue any preferred stock
(except for the issuance of non-redeemable preferred stock to replace
one or more of the Company's outstanding issues of preferred stock,
provided, that the issuance of such preferred stock does not otherwise
result in a Default under this Agreement) or permit any of its
Subsidiaries to authorize or issue any preferred or common stock to be
held by any Person other than the Company or any of its wholly-owned
Subsidiaries.
(o) Capital Expenditures.
(i) The Company. Make, or permit any of its
Subsidiaries to make Capital Expenditures (excluding Capital
Expenditures made (A) for the addition of the Vacuum Unit or
(B) by Tesoro E&P during such calendar year for the
acquisition, exploration or development of Oil and Gas
Properties) in any calendar year for the Company and its
Subsidiaries on a consolidated basis in excess of the
following amounts; provided, however, that the maximum amount
of Capital Expenditures for any calendar year ending after
December 31, 1994 shall be increased by an amount equal to the
difference between the maximum Capital Expenditures from the
prior calendar year less the actual Capital Expenditures for
such prior calendar year:
Year Ending Maximum Capital
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<TABLE>
<CAPTION>
December 31, Expenditures
------------ ------------
<S> <C>
1994 $22,000,000
1995 $15,000,000
1996 $20,000,000
</TABLE>
(ii) Tesoro Alaska. Permit Tesoro Alaska to make
Capital Expenditures (excluding Capital Expenditures made for
the addition of the Vacuum Unit) in any calendar year in
excess of the following amounts; provided, however, that the
maximum amount of Capital Expenditures for any calendar year
ending after December 31, 1994 shall be increased by an amount
equal to the difference between the maximum Capital
Expenditures for the prior calendar year less the actual
Capital Expenditures for such prior calendar year:
<TABLE>
<CAPTION>
Year Ending Maximum Capital
December 31, Expenditure
------------ -----------
<S> <C>
1994 $ 8,000,000
1995 $ 6,000,000
1996 $10,000,000
</TABLE>
(iii) Additional Capital Expenditures.
Notwithstanding the maximum capital expenditure amounts set
forth in clauses (i) and (ii) above, the maximum amount of
capital expenditures for the Company and its Subsidiaries on a
consolidated basis and for Tesoro Alaska may be increased by a
total of $10,000,000 in the aggregate spread, as the Company
may elect, among the calendar years of 1994, 1995 and 1996;
provided that after giving effect to any such increased
capital expenditures, the Company shall not be in Default.
ARTICLE VI
EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the following
specified events (each an "Event of Default"):
Section 6.01 Payments. (a) The Company shall fail to pay when due
(including, but not limited to, by mandatory prepayment) any principal of any
Loan or any Note, or any Reimbursement Obligation; or (b) the Company shall
fail to pay when due any interest on any Loan or Note, any fee or any other
amount payable hereunder, and such failure to pay shall continue unremedied for
a period of three Business Days;
Section 6.02 Covenants Without Notice. The Company shall fail to
observe or perform any covenant or agreement contained in Subsections 5.01(e),
(g) and (i), Sections 5.04 (excluding Subsections 5.04(a)(iii) and (viii), and
Subsection 5.04(l) hereof) or Section 5.03;
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Section 6.03 Other Covenants. The Company shall fail to observe
or perform any covenant or agreement contained in (a) Subsection 5.01(k),
Subsections 5.02(a), (b), (c), (d), (g), (h), (i), (j), (k) or (m), Subsections
5.04(a)(iii) or (viii) or Subsection 5.04(l), and, if capable of being
remedied, such failure shall remain unremedied for 10 days after the earlier of
(i) the Company's obtaining knowledge thereof, or (ii) written notice thereof
shall have been given to the Company by any Lender, any Issuing Bank or the
Agent; and (b) this Agreement, other than those referred to in Sections 6.01,
6.02, or clause (a) of this Section 6.03, and, if capable of being remedied,
such failure shall remain unremedied for 30 days after the earlier of (i) the
Company's obtaining knowledge thereof, or (ii) written notice thereof shall
have been given to the Company by any Lender, any Issuing Bank or the Agent;
Section 6.04 Other Financing Document Obligations. Default is
made in the due observance or performance by the Company or any Subsidiary of
the Company of any of the covenants or agreements contained in any Financing
Document other than this Agreement, and such default continues unremedied
beyond the expiration of any applicable grace period which may be expressly
allowed under such Financing Document;
Section 6.05 Representations. Any representation, warranty or
statement made or deemed to be made by the Company or any Subsidiary of the
Company or any of such Company's, or Subsidiary's officers herein or in any
other Financing Document, or in any certificate, request or other document
furnished pursuant to or under this Agreement or any other Financing Document,
shall have been incorrect in any material respect as of the date when made or
deemed to be made;
Section 6.06 Non-Payments of Other Indebtedness. The Company or
any of its Subsidiaries shall fail to make any payment or payments of principal
of or interest on any Indebtedness of the Company or such Subsidiary in excess
of $1,000,000 in the aggregate (other than (i) the Lender Indebtedness and (ii)
any trade account subject to a bona fide dispute and the trade creditor has
neither filed a lawsuit nor caused a Lien to be placed upon any Property of the
Company or such Subsidiary) when due (whether at stated maturity, by
acceleration, on demand or otherwise) after giving effect to any applicable
grace period;
Section 6.07 Defaults Under Other Agreements. The Company or any
of its Subsidiaries shall fail to observe or perform any covenant or agreement
contained in any agreement(s) or instrument(s) relating to Indebtedness of
$1,000,000 or more in the aggregate within any applicable grace period, or any
other event shall occur, if the effect of such failure or other event is to
accelerate, or to permit the holder of such Indebtedness or any other Person to
accelerate, the maturity of $1,000,000 or more in the aggregate of such
Indebtedness; or $1,000,000 or more in the aggregate of any such Indebtedness
shall be, or if as a result of such failure or other event may be, required to
be prepaid (other than by a regularly scheduled required prepayment) in whole
or in part prior to its stated maturity;
Section 6.08 Bankruptcy. The Company or any of its Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy" as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Company or any of its Subsidiaries and the petition is not
controverted within 10 days, or is not stayed or dismissed within 60 days,
after commencement of the case; or a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or any substantial part of the
property of the Company or any of its Subsidiaries; or the Company or any of
its Subsidiaries commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to
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the Company or such Subsidiary or there is commenced against the Company or any
of its Subsidiaries any such proceeding which remains unstayed or undismissed
for a period of 60 days; or the Company or any of its Subsidiaries is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company or any of its
Subsidiaries suffers any appointment of any custodian or the like for it or any
substantial part of its Property to continue undischarged or unstayed for a
period of 60 days; or the Company or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or the Company or any of its
Subsidiaries shall fail to pay, or shall state that it is unable to pay, or
shall be unable to pay, its debts generally as they become due; or the Company
or any of its Subsidiaries shall by any act or failure to act indicate its
consent to, approval of or acquiescence in any of the foregoing; or any
corporate action is taken by the Company or any of its Subsidiaries for the
purpose of effecting any of the foregoing;
Section 6.09 ERISA. A Plan shall fail to maintain the minimum
funding standard required by Section 412 of the Code for any plan year or a
waiver of such standard is sought or granted under Section 412(d), or a Plan
is, shall have been or is likely to be, terminated or the subject of
termination proceedings under ERISA, or the Company or an ERISA Affiliate has
incurred or is likely to incur a liability to or on account of a Plan under
Section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA, and there shall result
from any such event or events either a liability or a material risk of
incurring a liability to the PBGC or a Plan, which will have a Material Adverse
Effect;
Section 6.10 Money Judgment. A judgment or order for the payment
of money in excess of $1,000,000 or that would otherwise have a Material
Adverse Effect shall be rendered against the Company or any of it Subsidiaries
and such judgment or order shall continue unsatisfied in accordance with the
terms of such judgment or order (in the case of a money judgment) and in effect
for a period of 30 days during which execution shall not be effectively stayed
or deferred (whether by action of a court, by agreement or otherwise);
Section 6.11 Discontinuance of Business. The Company or any
Guarantor shall cease to carry on its business as currently conducted or as
contemplated to be conducted;
Section 6.12 Security Instruments. The material terms of the
Security Instruments after delivery thereof shall for any reason, except to the
extent permitted by the terms thereof, cease to be in full force and effect and
valid, binding and enforceable (except as enforceability may be limited as
stated in Section 4.03) in accordance with their terms, or cease to create a
valid and perfected Lien of the priority contemplated thereby on any of the
collateral purported to be covered thereby, or the Company or any of its
Subsidiaries (or any other Person who may have granted or purported to grant
such Lien) shall so state in writing;
Section 6.13 Change of Control. The occurrence of a Change of
Control;
Section 6.14 Mandatory Prepayments. The Company shall fail to
make any mandatory prepayment required by Section 2.10; or
Section 6.15 Material Adverse Event. The occurrence of any event
or condition that the Majority Lenders believe in good faith to have resulted
in a Material Adverse Effect;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent, upon the written or telex request
of the Majority Lenders, shall, by written notice to the
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Company, take any or all of the following actions, without prejudice to the
rights of the Agent, any Lender or the holder of any Note, to enforce its
claims against the Company: (i) declare the Revolving Credit Commitment, the
Unavailable Commitment and other lending obligations, if any, terminated,
whereupon the Revolving Credit Commitment, the Unavailable Commitment and other
lending obligations, if any, of each Lender shall terminate immediately; or
(ii) declare the entire principal amount of and all accrued interest on all
Lender Indebtedness then outstanding to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest, notice of
protest or dishonor, notice of acceleration, notice of intent to accelerate or
other notice of any kind, all of which are hereby expressly waived by the
Company, and thereupon take such action as it may deem desirable under and
pursuant to the Financing Documents; provided, that, if an Event of Default
specified in Section 6.08 shall occur, the result which would occur upon the
giving of written notice by the Agent to the Company, as specified in clauses
(i) and (ii) above, shall occur automatically without the giving of any such
notice.
ARTICLE VII
THE AGENT
Section 7.01 Appointment of Agent. Each Lender and the Issuing
Bank hereby designate Texas Commerce Bank National Association, as Agent to act
as herein specified. Each Lender and the Issuing Bank hereby irrevocably
authorizes the Agent to take such action on its behalf under the provisions of
this Agreement, the Notes, and the other Financing Documents and to exercise
such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The Agent
may perform any of its duties hereunder by or through its agents or employees.
Section 7.02 Nature of Duties of Agent and Co-Agent. The Agent
and the Co-Agent shall have no duties or responsibilities except those
expressly set forth with respect to each of the Agent or the Co-Agent in this
Agreement. Neither the Agent, the Co-Agent nor any of their respective
officers, directors, employees or agents shall be liable for any action taken
or omitted by it as such hereunder or in connection herewith, unless caused by
its or their gross negligence or willful misconduct. The duties of the Agent
and the Co-Agent shall be mechanical and administrative in nature; the Agent
and the Co-Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon the Agent
or the Co-Agent any obligations in respect of this Agreement except as
expressly set forth herein.
Section 7.03 Lack of Reliance on the Agent and the Co-Agent.
(a) Independent Investigation. Independently and without
reliance upon the Agent or the Co-Agent, each Lender, to the extent it
deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of
the Company in connection with the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the
creditworthiness of the Company, and, except as expressly provided in
this Agreement, the Agent and the Co-Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information with respect thereto,
whether coming into its possession before the consummation of the
transactions contemplated herein or at any time or times thereafter.
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(b) Agent Not Responsible. The Agent and the Co-Agent
shall not be responsible to any Lender or the Issuing Bank for any
recitals, statements, information, representations or warranties
herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness,
validity, enforceability, collectibility, priority or sufficiency of
this Agreement, the Notes, the Letters of Credit or the other
Financing Documents or the financial condition of the Company or be
required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this
Agreement, the Notes or the other Financing Documents, or the
financial condition of the Company, or the existence or possible
existence of any Default or Event of Default.
Section 7.04 Certain Rights of the Agent. If the Agent shall
request instructions from the Majority Lenders with respect to any act or
action (including the failure to act) in connection with this Agreement, the
Notes and the other Financing Documents, the Agent shall be entitled to refrain
from such act or taking such action unless and until the Agent shall have
received instructions from the Majority Lenders; and the Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting under this
Agreement, the Notes and the other Financing Documents in accordance with the
instructions of the Majority Lenders.
Section 7.05 Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other documentary, teletransmission or
telephone message believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person. The Agent may consult with legal
counsel (including counsel for the Company), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
Section 7.06 INDEMNIFICATION OF AGENT AND THE CO-AGENT. TO THE
EXTENT THE AGENT OR THE CO-AGENT IS NOT REIMBURSED AND INDEMNIFIED BY THE
COMPANY, EACH LENDER WILL REIMBURSE AND INDEMNIFY THE AGENT OR THE CO-AGENT, AS
APPLICABLE, IN PROPORTION TO ITS PERCENTAGE SHARE, FOR AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES (INCLUDING COUNSEL FEES AND DISBURSEMENTS) OR
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE AGENT OR THE CO-AGENT IN PERFORMING ITS
DUTIES HEREUNDER, IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT;
PROVIDED THAT NO LENDER SHALL BE LIABLE TO THE AGENT OR THE CO-AGENT FOR ANY
PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM, AS TO THE
AGENT, THE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR, AS TO THE
CO-AGENT, THE CO-AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
Section 7.07 The Agent and Co-Agent in their Individual Capacity.
With respect to their obligations under this Agreement, the Loans made by it
and the Note issued to it, the Agent and Co-Agent shall have the same rights
and powers hereunder as any other Lender or holder of a Note and may exercise
the same as though it were not performing the duties, if any, specified herein;
and the terms "Lenders," "Majority Lenders," "holders of Notes" or any similar
terms shall, unless the context clearly otherwise indicates, include the Agent
and Co- Agent in their individual capacity. The Agent and Co-Agent may accept
deposits from, lend money to, and generally engage in any kind of banking,
trust,
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financial advisory or other business with the Company or any affiliate of the
Company as if it were not performing the duties, if any, specified herein, and
may accept fees and other consideration from the Company for services in
connection with this Agreement and otherwise without having to account for the
same to the Lenders.
Section 7.08 May Treat Lender as Owner. The Agent and the
Co-Agent may deem and treat each Lender as the owner of such Lender's Note for
all purposes hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any request, authority
or consent of any Person who at the time of making such request or giving such
authority or consent is the owner of a Note shall be conclusive and binding on
any subsequent owner, transferee or assignee of such Note or any promissory
note or notes issued in exchange therefor.
Section 7.09 Successor Agent.
(a) Agent Resignation. The Agent may resign at any time
by giving written notice thereof to the Lenders, the Issuing Bank and
the Company and may be removed at any time with or without cause by
the Majority Lenders. Upon any such resignation or removal, the
Majority Lenders shall have the right, upon five days' notice to the
Company, to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Majority Lenders, and shall have
accepted such appointment, within 30 days after the retiring Agent's
giving of notice of resignation or the Majority Lenders' removal of
the retiring Agent, then, upon five days' notice to the Company, the
retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a bank which maintains an office in the United
States, or a commercial bank organized under the laws of the United
States of America or of any State thereof, or any Affiliate of such
bank, having a combined capital and surplus of at least $250,000,000.
(b) Rights, Powers, etc. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article VII shall
inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including, telecopy
or similar teletransmission or writing) and shall be given to such party at its
address or telecopy number set forth on the signature pages hereof or such
other address or telecopy number as such party may hereafter specify by notice
to the Agent and the Company; provided that a copy of all notices to the Agent
(a) which are Advance Notices shall also be sent to Texas Commerce Bank
National Association, 712 Main Street, Houston, Texas 77002, Telecopier No.
(713)216-6387, Attention: Stan Burge, (b) which are requests for the issuance
of a Letter of Credit by TCB shall also be sent to Texas Commerce Bank,
Documentary Services Division, 717 Travis, 3 TCBS-300, Houston, Texas 77002,
Telcopier No. (713)236-4222, and (c) which are requests for the issuance
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of a Letter of Credit by Banque Paribas shall also be sent to Banque Paribas,
1200 Smith Street, Suite 3100, Houston, Texas 77002, Telecopier No. (713)
659-3832, Attention: Cheryl Johnson, with a copy to Texas Commerce Bank
National Association, Loan Syndication Services, 1111 Fannin Street, 9th Floor
MS 46, Houston, Texas 77002, Telecopier No. (713)750-3810, Attention: Roy
Mendiola. Each such notice, request or other communication shall be effective
(i) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid, or (ii) if
given by any other means (including, but not limited to, by air courier), when
delivered at the address specified in this Section; provided that notices to
the Agent shall not be effective until received.
Section 8.02 Amendments, etc. Any provision of this Agreement or
any other Financing Document may be amended, modified or waived with the
Company's and the Majority Lenders' prior written consent; provided that (a) no
amendment, modification or waiver which extends the due date or maturity of the
Loans, the Term Loan Drawdown Termination Date, the Revolving Credit Maturity
Date or the Term Loan Maturity Date, releases all or substantially all of the
Collateral, reduces the interest rate applicable to the Loans or the fees
payable to the Lenders generally, releases the Company or any material
Guarantor from its respective obligation to pay principal or interest on the
Loans, affects this Section 8.02 or Section 8.04 or modifies the definition of
"Majority Lenders", shall be effective without consent of all Lenders; (b) no
amendment, modification or waiver which increases the Commitment of any Lender
shall be effective without the consent of such Lender; (c) no amendment,
modification or waiver which modifies the rights, duties or obligations of the
Agent shall be effective without the consent of the Agent; (d) no amendment,
modification or waiver which modifies the rights, duties or obligations of the
Co-Agent shall be effective without the consent of the Co-Agent; and (e) no
amendment, modification or waiver which modifies the rights, duties or
obligations of either Issuing Bank shall be effective without the consent of
the applicable Issuing Bank. Notwithstanding anything in this Section to the
contrary, unless instructed to the contrary by the Majority Lenders, the
applicable Issuing Bank shall extend each Letter of Credit prior to any
expiration date thereof pursuant to the terms of such Letter of Credit or its
related Application if a failure to so extend such Letter of Credit would
result in entitling the beneficiary thereof to draw thereon.
Section 8.03 No Waiver; Remedies Cumulative. No failure or delay
on the part of the Company or the Agent or any Lender or any holder of any Note
in exercising any right or remedy under this Agreement or any other Financing
Document and no course of dealing between the Company and the Agent or any
Lender or any holder of any Note shall operate as a waiver thereof, nor shall
any single or partial exercise of any right or remedy under the Notes, this
Agreement or any other Financing Document preclude any other or further
exercise thereof or the exercise of any other right or remedy under the Notes,
this Agreement or any other Financing Document. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or remedies
which the Company, the Agent or any Lender would otherwise have. No notice to
or demand on the Company not required under the Notes, this Agreement or any
other Financing Document in any case shall entitle the Company to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Agent or the Lenders to any other or further action
in any circumstances without notice or demand.
Section 8.04 Payment of Expenses, Indemnities, etc. The Company
agrees to (and shall be liable for):
(a) Expenses. Whether or not the transactions hereby
contemplated are consummated, pay all reasonable out-of-pocket costs
and expenses of the Agent and each Issuing Bank in the administration
(both before and after the execution hereof and including advice of
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counsel as to the rights and duties of the Agent and the Lenders with
respect thereto) of, and in connection with the preparation, execution
and delivery of, recording or filing of, preservation of rights under,
enforcement of, and, after a Default, refinancing, renegotiation or
restructuring of, this Agreement, the Notes, and the other Financing
Documents and any amendment, waiver or consent relating thereto
(including, but not limited to, the reasonable fees and disbursements
of counsel for the Agent and in the case of enforcement for any of the
Lenders) and promptly reimburse the Agent for all amounts expended,
advanced, or incurred by the Agent or the Lenders to satisfy any
obligation of the Company or the Guarantors under this Agreement or
any other Financing Document;
(B) INDEMNIFICATION. INDEMNIFY THE AGENT, THE CO-AGENT,
THE ISSUING BANKS AND EACH LENDER, EACH OF THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS AND AFFILIATES FROM,
HOLD EACH OF THEM HARMLESS AGAINST, AND PROMPTLY UPON DEMAND PAY OR
REIMBURSE EACH OF THEM FOR, ANY AND ALL ACTIONS, SUITS, PROCEEDINGS
(INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES), CLAIMS,
COSTS, LOSSES, LIABILITIES, DAMAGES OR EXPENSES OF ANY KIND OR NATURE
WHATSOEVER WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY
OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS
A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR
PROPOSED USE BY THE COMPANY OR ANY SUBSIDIARY OF THE COMPANY OF THE
PROCEEDS OF ANY OF THE LOANS; OR (II) ANY OTHER ASPECT OF THIS
AGREEMENT, THE NOTES, AND THE FINANCING DOCUMENTS, INCLUDING BUT NOT
LIMITED TO THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL (INCLUDING
ALLOCATED COSTS OF INTERNAL COUNSEL) AND ALL OTHER EXPENSES INCURRED
IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY
SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS,
LITIGATION OR INQUIRIES) OR CLAIM, AND INCLUDING ALL ACTIONS, SUITS,
PROCEEDINGS (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES),
CLAIMS, COSTS, LOSSES, LIABILITIES, DAMAGES OR EXPENSES ARISING BY
REASON OF ORDINARY NEGLIGENCE OF ANY OF THE AGENT, THE CO-AGENT, THE
ISSUING BANKS AND EACH LENDER, EACH OF THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS AND AFFILIATES;
PROVIDED, HOWEVER, THE PROVISIONS OF THIS SECTION 8.04(B) SHALL NOT
APPLY TO ANY ACTION, SUITS, PROCEEDINGS, CLAIMS, COSTS, LOSSES,
LIABILITIES, DAMAGES, OR EXPENSES TO THE EXTENT, BUT ONLY TO THE
EXTENT, CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
PARTY SEEKING INDEMNIFICATION;
(C) ENVIRONMENTAL INDEMNIFICATION. INDEMNIFY AND HOLD
HARMLESS FROM TIME TO TIME THE AGENT, THE CO-AGENT, THE ISSUING BANKS
AND THE LENDERS, EACH PERSON CLAIMING BY, THROUGH, UNDER OR ON ACCOUNT
OF ANY OF THE FOREGOING AND THE RESPECTIVE DIRECTORS, OFFICERS,
COUNSEL, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS OF EACH OF THE
FOREGOING FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY
ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES
(WHICH RELATE TO OR ARISE AS A RESULT OF THE LOANS, THE LETTERS OF
CREDIT OR ANY FINANCING DOCUMENT) TO WHICH ANY SUCH PERSON MAY BECOME
SUBJECT AND INCLUDING ANY AND ALL LOSSES, CLAIMS, COST RECOVERY
ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES
(WHICH RELATE TO OR ARISE AS A RESULT OF THE LOANS, THE LETTERS OF
CREDIT OR ANY FINANCING DOCUMENT) ARISING BY REASON OF THE ORDINARY
NEGLIGENCE OF THE AGENT, THE CO-AGENT AND THE LENDERS, EACH PERSON
CLAIMING BY, THROUGH, UNDER OR ON ACCOUNT OF ANY OF THE
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FOREGOING AND THE RESPECTIVE DIRECTORS, OFFICERS, COUNSEL, EMPLOYEES,
AGENTS, SUCCESSORS AND ASSIGNS OF EACH OF THE FOREGOING (1) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO THE COMPANY OR ANY OF ITS SUBSIDIARIES
OR ANY OF THEIR RESPECTIVE PROPERTIES, INCLUDING WITHOUT LIMITATION,
THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR
RESPECTIVE PROPERTIES, (2) AS A RESULT OF THE BREACH OR NON-COMPLIANCE
BY THE COMPANY OR ANY OF ITS SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (3) DUE TO PAST
OWNERSHIP BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF ANY OF THEIR
RESPECTIVE PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR RESPECTIVE
PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR RESPECTIVE PROPERTIES
WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT
IN PRESENT LIABILITY, (4) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE
PROPERTIES OWNED OR OPERATED BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES, OR (5) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY
CONDITION IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OTHER
FINANCING DOCUMENT; PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED
UNDER THIS SECTION 8.04(C) IN RESPECT OF ANY PROPERTY FOR ANY
OCCURRENCE ARISING SOLELY AND DIRECTLY FROM THE ACTS OR OMISSIONS OF
THE AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS
SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY
(WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS
MORTGAGEE-IN-POSSESSION OR OTHERWISE); AND
(D) ENVIRONMENTAL WAIVER. WITHOUT LIMITING THE FOREGOING
PROVISIONS, AND HEREBY DOES WAIVE, RELEASE AND COVENANT NOT TO BRING
AGAINST ANY OF THE PERSONS IDENTIFIED IN THIS SECTION 8.04 ANY DEMAND,
CLAIM, COST RECOVERY ACTION OR LAWSUIT THEY MAY NOW OR HEREAFTER HAVE
OR ACCRUE (WHICH RELATE TO OR ARISE AS A RESULT OF THE LOANS, THE
LETTERS OF CREDIT OR ANY FINANCING DOCUMENT) ARISING FROM (1) ANY
ENVIRONMENTAL LAW NOW OR HEREAFTER ENACTED (INCLUDING THOSE APPLICABLE
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES) UNLESS THE ACTS OR
OMISSIONS OF ANY SUCH PERSON OR THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS ARE THE SOLE AND DIRECT CAUSE OF THE CIRCUMSTANCES GIVING RISE
TO SUCH DEMAND, COST RECOVERY ACTION OR LAWSUIT, (2) THE PRESENCE,
USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES
ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE COMPANY OR ANY
OF ITS SUBSIDIARIES, OR (3) THE BREACH OR NON-COMPLIANCE BY THE
COMPANY WITH ANY ENVIRONMENTAL LAW OR ENVIRONMENTAL COVENANT
APPLICABLE TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, UNLESS THE ACTS
OR OMISSIONS OF SUCH PERSON, ITS SUCCESSORS AND ASSIGNS ARE THE SOLE
AND DIRECT CAUSE OF THE CIRCUMSTANCES GIVING RISE TO SUCH DEMAND,
CLAIM, COST RECOVERY ACTION OR LAWSUIT.
If and to the extent that the obligations of the Company under this Section are
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law. The Company's obligations under this Section
shall survive any termination of this Agreement and the payment of the Notes.
Section 8.05 Right of Setoff. In addition to and not in
limitation of all rights of offset that any Lender or either Issuing Bank may
have under applicable law, each Lender or other holder of a Note, or any other
Lender Indebtedness shall, upon the occurrence of any Event of Default and at
any time
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during the continuance thereof and whether or not such Lender, such Issuing
Bank or such holder has made any demand or the Company's obligations are
matured, have the right at any time and from time to time, without notice to
the Company (any such notice being expressly waived by the Company) to set-off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by any
Lender or such Issuing Bank to or for the credit or the account of the Company
against any and all of the Lender Indebtedness then outstanding.
Section 8.06 Benefit of Agreement.
(a) Benefit of Parties. The Notes, this Agreement and
the other Financing Documents shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns
of the parties hereto, provided that the Company may not assign or
transfer any of its interest hereunder or thereunder without the prior
written consent of the Lenders. In the event that any Lender sells
participations in the Notes or other Lender Indebtedness of the
Company incurred or to be incurred pursuant to this Agreement, to
other banks or entities, each of such other banks or entities shall
have the rights of set-off against such Lender Indebtedness and
similar rights or Liens to the same extent as may be available to the
Agent or the Lenders.
(b) Branch Offices, Affiliates. Any Lender may make,
carry or transfer Loans at, to or for the account of, any of its
branch offices or the office of an Affiliate of such Lender.
Section 8.07 Assignments and Participations.
(a) No Company Assignments. The Company may not assign
its rights and obligations hereunder or under the Notes.
(b) Assignment by Lenders. Each Lender may, upon the
written consent of the Agent and the Company (which consent shall not
be unreasonably withheld), assign to one or more Eligible Transferees
all or a portion of its rights and obligations under this Agreement
pursuant to an Assignment and Acceptance Agreement substantially in
the form of Exhibit F (an "Assignment and Acceptance") provided,
however, that (i) any such assignment shall be in the aggregate amount
of at least $5,000,000 or such lesser amount to which the Company has
consented (or if the aggregate amount of any Lender's Loans and
Commitments is less than $5,000,000, then the entire amount of such
Lender's Loans and Commitments), and (ii) the assignee shall pay to
the Agent a processing and recordation fee of $2,500. Any such
assignment will become effective upon the recording by the Agent of
such assignment in the Register of the resultant effects thereof on
the Commitment of the assignor and assignee, and the principal amount
outstanding of the Loans owed to the assignor and assignee, the Agent
hereby agreeing to effect such recordation no later than five Business
Days after its receipt of an Assignment and Acceptance executed by all
parties thereto. Promptly after receipt of an Assignment and
Acceptance executed by all parties thereto, the Agent shall send to
the Company a copy of such executed Assignment and Acceptance. Upon
receipt of such executed Assignment and Acceptance, the Company, will,
at its own expense, execute and deliver new Notes to the assignor
and/or assignee, as appropriate, in accordance with their respective
interests as they appear on the Register. Upon the effectiveness of
any assignment pursuant to this subsection, the assignee shall be
deemed automatically to have become a party hereto, if not already a
party hereto, and shall become a "Lender," if not already a "Lender,"
for all purposes of this
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Agreement and the other Financing Documents. The assignor shall be
relieved of its obligations hereunder to the extent of such assignment
(and if the assigning Lender no longer holds any rights or obligations
under this Agreement, such assigning Lender shall cease to be a
"Lender" hereunder). The Agent will prepare on the last Business Day
of each month during which an assignment has become effective pursuant
to this subsection a new schedule giving effect to all such
assignments effected during such month, and will promptly provide the
same to the Company, the Issuing Banks and each of the Lenders.
(c) Participations. Each Lender may transfer, grant or
assign participations in all or any part of such Lender's interests
hereunder pursuant to this subsection to any Person, provided that:
(i) such Lender shall remain a "Lender" for all purposes of this
Agreement and the transferee of such participation shall not
constitute a "Lender" hereunder; and (ii) no participant under any
such participation shall have rights to approve any amendment to or
waiver of this Agreement, the Notes or any Financing Document except
to the extent such amendment or waiver would (x) extend the Revolving
Credit Maturity Date or the Term Loan Maturity Date of any of the
Commitments or Loans in which such participant is participating, (y)
reduce the interest rate (other than as a result of waiving the
applicability of any post-default increases in interest rates) or fees
applicable to any of the Commitments or Loans in which such
participant is participating, or postpone the payment of any thereof,
or (z) release all or substantially all of the collateral or
guaranties (except as expressly provided in the Financing Documents)
supporting any of the Commitments or Loans in which such participant
is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of
the Financing Documents (the participant's rights against the granting
Lender in respect of such participation to be those set forth in the
agreement with such Lender creating such participation), and all
amounts payable by the Company hereunder shall be determined as if
such Lender had not sold such participation, provided that such
participant shall be entitled to receive additional amounts under
Sections 2.16 and 2.18 on the same basis as if it were a Lender. In
addition, each agreement creating any participation must include an
agreement by the participant to be bound by the provisions of Section
8.15. Notwithstanding anything in this Section 8.07(c) to the
contrary, the purchase by each Lender of a participation in the
Letters of Credit on the Effective Date and any subsequent assignment
of all or any part of any such Lender's Percentage Share in any Letter
of Credit and its related Letter of Credit Liabilities pursuant to
Section 8.07(b) shall not be considered a participation pursuant to
this Section 8.07(c).
(d) Registration Statements; Blue Sky Laws.
Notwithstanding any other provisions of this Section 8.07, no transfer
or assignment of the interests or obligations of any Lender hereunder
or any grant of participations therein shall be permitted if such
transfer, assignment or grant would require the Company or any
Guarantor to file a registration statement with the Securities and
Exchange Commission or to qualify the Loans under the "Blue Sky" laws
of any state.
(e) Certain Representations. Each Lender initially party
to this Agreement hereby represents, and each Person that becomes a
Lender pursuant to an assignment permitted by subsection (b) above
will, upon its becoming party to this Agreement, represent that it is
an Eligible Transferee, and that it will make or acquire Loans only
for its own account in the ordinary course of its business; provided,
however, that subject to the preceding Subsections (b) through (d),
the disposition of any promissory notes or other evidences of or
interests in Lender Indebtedness held by such Lender shall at all
times be within its exclusive control.
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(f) Assignees Treated as Lenders. The entries in the
Register shall be conclusive in the absence of manifest error and the
Company, the Agent, the Issuing Bank and the Lenders may treat each
person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement and
the other Financing Documents. The Register shall be available for
inspection by the Company and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.
Section 8.08 Governing Law; Submission to Jurisdiction; Etc.
(A) GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND UNDER THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE
OF TEXAS AND TO THE EXTENT CONTROLLING, LAWS OF THE UNITED STATES OF
AMERICA. TEX. REV. CIV. STAT. ANN. ART. 5069, CH. 15 (WHICH REGULATES
CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI- PARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE OTHER FINANCING
DOCUMENTS.
(B) SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE OTHER
FINANCING DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, BUT NOT
LIMITED TO, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
(c) Designation of Agent. The Company hereby irrevocably
designates its General Counsel, currently designated as James C.
Reed, Jr., as the designee, appointee and agent of the Company to
receive, for and on behalf of the Company, service of process in such
respective jurisdictions in any legal action or proceeding with
respect to this Agreement, the Notes, or the other Financing
Documents. It is understood that a copy of such process served on
such agent will be promptly forwarded by mail to the Company at its
address set forth opposite its signature below, but the failure of the
Company to receive such copy shall not affect in any way the service
of such process. The Company further irrevocably consents to the
service of process of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Company at its said address,
such service to become effective 30 days after such mailing.
(d) Service of Process. Nothing herein shall affect the
right of the Agent or any Lender or any holder of a Note to serve
process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any other
jurisdiction.
Section 8.09 Independent Nature of Lenders' Rights. The amounts
payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement, and it shall not be necessary for any
other Lender to be joined as an additional party in any proceeding for such
purpose.
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<PAGE> 88
Section 8.10 Invalidity. In the event that any one or more of the
provisions contained in the Notes, this Agreement or in any other Financing
Document shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of the Notes, this Agreement or any other Financing
Document.
Section 8.11 Survival of Agreements. All representations and warranties
of the Company or its Subsidiaries or any other Person herein or in the other
Financing Documents, and all covenants and agreements herein not fully
performed before the Effective Date, shall survive such date or dates.
Section 8.12 Renewal, Extension or Rearrangement. All provisions of
this Agreement and of any other Financing Documents relating to the Notes or
other Lender Indebtedness shall apply with equal force and effect to each and
all promissory notes hereafter executed which in whole or in part represent a
renewal, extension for any period, increase or rearrangement of any part of the
Lender Indebtedness originally represented by the Notes, or of any part of such
other Lender Indebtedness.
Section 8.13 Interest. It is the intention of the parties hereto to
conform strictly to usury laws applicable to the Agent, the Co-Agent, the
Issuing Banks and the Lenders (collectively, the "Financing Parties") and the
Transactions. Accordingly, if the Transactions would be usurious as to any
Financing Party under laws applicable to it, then, notwithstanding anything to
the contrary in the Notes, this Agreement or in any other Financing Document or
agreement entered into in connection with the Transactions or as security for
the Notes, it is agreed as follows: (i) the aggregate of all consideration
which constitutes interest under law applicable to any Financing Party that is
contracted for, taken, reserved, charged or received by such Financing Party
under the Notes, this Agreement or under any of such other Financing Documents
or agreements or otherwise in connection with the Transactions shall under no
circumstances exceed the maximum amount allowed by such applicable law, (ii) in
the event that the maturity of the Notes is accelerated for any reason, or in
the event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to any Financing Party may never
include more than the maximum amount allowed by such applicable law, and (iii)
excess interest, if any, provided for in this Agreement or otherwise in
connection with the Transactions shall be cancelled automatically by such
Financing Party and, if theretofore paid, shall be credited by such Financing
Party on the principal amount of such Financing Party's Indebtedness (or, to
the extent that the principal amount of such Financing Party's Indebtedness
shall have been or would thereby be paid in full, refunded by such Financing
Party to the Company). The right to accelerate the maturity of the Notes does
not include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and the Financing Parties do not
intend to collect any unearned interest in the event of acceleration. All sums
paid or agreed to be paid to the Financing Parties for the use, forbearance or
detention of sums included in the Lender Indebtedness shall, to the extent
permitted by law applicable to such Financing Party, be amortized, prorated,
allocated and spread throughout the full term of the Notes until payment in
full so that the rate or amount of interest on account of the Lender
Indebtedness does not exceed the applicable usury ceiling, if any. As used in
this Section, the terms "applicable law" or "laws applicable to any Financing
Party" shall mean the law of any jurisdiction whose laws may be mandatorily
applicable notwithstanding other provisions of this Agreement, or law of the
United States of America applicable to any Financing Party and the Transactions
which would permit such Financing Party to contract for, charge, take, reserve
or receive a greater amount of interest than under such jurisdiction's law. To
the extent that Article 5069-1.04 of the Texas Revised Civil Statutes is
relevant to any Financing Party for the purpose of determining the Highest
Lawful Rate, such Financing Party hereby elects to determine the applicable
rate ceiling under such Article by the indicated (weekly) rate
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<PAGE> 89
ceiling from time to time in effect, subject to such Financing Party's right
subsequently to change such method in accordance with applicable law.
Section 8.14 Taxes, etc. Any taxes (excluding income taxes) payable or
ruled payable by federal or state authority in respect of the Notes, this
Agreement or the other Financing Documents shall be paid by the Company,
together with interest and penalties, if any.
Section 8.15 Confidential Information. The Agent and each Lender agree
that all documentation and other information made available by the Company to
the Agent or such Lender under the terms of this Agreement shall (except to the
extent such documentation or other information is publicly available or
hereafter becomes publicly available other than by action of the Agent or such
Lender, or was theretofore known or hereinafter becomes known to the Agent or
such Lender independent of any disclosure thereto by the Company) be held in
the strictest confidence by the Agent or such Lender and used solely in the
administration and enforcement of the Loans from time to time outstanding from
such Lender to the Company and in the prosecution of defense of legal
proceedings arising in connection herewith; provided that (i) the Agent or such
Lender may disclose documentation and information to the Agent and/or to any
other Lender which is a party to this Agreement or any Affiliates thereof and
(ii) the Agent or such Lender may disclose such documentation or other
information to any other bank or other Person to which such Lender sells or
proposes to make an assignment or sell a participation in its Loans hereunder
if such other bank or Person, prior to such disclosure, agrees in writing to be
bound by the terms of the confidentiality statement customarily employed by the
Agent in connection with such potential transfers. Notwithstanding the
foregoing, nothing contained herein shall be construed to prevent the Agent or
a Lender from (a) making disclosure of any information (i) if required to do so
by applicable law or regulation or accepted banking practice, (ii) to any
governmental agency or regulatory body having or claiming to have authority to
regulate or oversee any aspect of such Lender's business or that of such
Lender's corporate parent or affiliates in connection with the exercise of such
authority or claimed authority, (iii) pursuant to any subpoena or if otherwise
compelled in connection with any litigation or administrative proceeding, (iv)
to correct any false or misleading information which may become public
concerning such Person's relationship to the Company, or (v) to the extent the
Agent or such Lender or its counsel deems necessary or appropriate to effect or
preserve its security for any Lender Indebtedness or to enforce any remedy
provided in the Financing Documents, the Notes or this Agreement or otherwise
available by law; or (b) making, on a confidential basis, such disclosures as
such Lender reasonably deems necessary or appropriate to its legal counsel or
accountants (including outside auditors). If the Agent or such Lender is
compelled to disclose such confidential information in a proceeding requesting
such disclosure, the Agent or such Lender shall seek to obtain assurance that
such confidential treatment will be accorded such information; provided,
however, that the Lender shall have no liability for the failure to obtain such
treatment.
Section 8.16 ENTIRE AGREEMENT. THE NOTES, THIS AGREEMENT AND THE OTHER
FINANCING DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE
AGENT, THE ISSUING BANK OR THE LENDERS AND THE OTHER RESPECTIVE PARTIES HERETO
AND THERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH
PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 8.17 Attachments. The exhibits, schedules and annexes attached
to this Agreement are incorporated herein and shall be considered a part of
this Agreement for the purposes stated herein,
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<PAGE> 90
except that in the event of any conflict between any of the provisions of such
exhibits and the provisions of this Agreement, the provisions of this Agreement
shall prevail.
Section 8.18 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original but all of
which shall together constitute one and the same instrument.
Section 8.19 Survival of Indemnities. The Company's obligations under
Sections 2.16, 2.18, 2.21 and 8.04 shall survive the payment in full of the
Loans and the Letter of Credit Liabilities.
Section 8.20 Headings Descriptive. The headings of the several sections
and subsections of this Agreement, and the Table of Contents, are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.
Section 8.21 Satisfaction Requirement. If any agreement, certificate,
instrument or other writing, or any action taken or to be taken, is by the
terms of this Agreement required to be satisfactory to any party, the
determination of such satisfaction shall be made by such party in its sole and
exclusive judgment exercised reasonably and in good faith.
Section 8.22 Effectiveness. This Agreement shall not be effective until
executed by all signatories hereto and delivered to the Agent in the State of
Texas and accepted by the Agent in such state.
Section 8.23 Conflict with E&P Mortgage. In the event of a conflict
between the terms of the E&P Mortgage and the terms of this Agreement, the
terms of this Agreement shall control.
SECTION 8.24 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER
FINANCING DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF
THE TERMS OF THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS; THAT IT HAS IN
FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND
KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS
BEEN REPRESENTED BY LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS
PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS;
AND HAS RECEIVED THE ADVICE OF ITS ATTORNEYS IN ENTERING INTO THIS AGREEMENT
AND THE OTHER FINANCING DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE
TERMS OF THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS RESULT IN ONE PARTY
ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND
RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY
HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER
FINANCING DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF
SUCH PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."
Section 8.25 Proposed Restructuring. The Company has indicated that it
intends to pursue the consummation of the E&P Restructuring. The Agent, the
Co-Agent, the Issuing Banks and the Lenders hereby approve, subject to
satisfactory documentation, including, but not limited to, any reasonably
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<PAGE> 91
required modification to this Agreement, the E&P Restructuring and the
transactions contemplated in connection therewith.
-84-
<PAGE> 92
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
COMPANY: TESORO PETROLEUM CORPORATION
By:/s/William T. VanKleef
-----------------------------------------
Address: William T. VanKleef
Vice President, Treasurer
8700 Tesoro Drive
San Antonio, Texas 78217
AGENT, CO-AGENT, ISSUING BANKS
AND THE LENDERS: TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
Individually, as an Issuing Bank and as Agent
By:/s/P. Stan Burge
-----------------------------------------
Address: P. Stan Burge
Vice President
712 Main Street
Houston, Texas 77002
Attention: Mr. P. Stan Burge
BANQUE PARIBAS
Individually, as an Issuing Bank
and as Co-Agent
By:/s/Brian Malone
-----------------------------------------
Address: Name:
Title:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Mr. Brian Malone By:/s/Patrick J. Milon
-----------------------------------------
Name:
Title:
-85-
<PAGE> 93
Address: BANK OF SCOTLAND
380 Madison Avenue
New York, New York 10017
Attention: Ms. Catherine Oniffrey By:/s/Elizabeth Wilson
--------------------------------------
Name:
Title:
With Copy To:
1200 Smith Street
1750 Two Allen Center
Houston, Texas 77002
Attention: Ms. Janna Blanter
CHRISTIANIA BANK
By:/s/Peter M. Dodge and
--------------------------------------
/s/Carl Petter Svendsen
--------------------------------------
Address: Name:
Title:
11 West 42nd Street, 7th Floor
New York, New York 10036
Attention: Mr. Peter Dodge
Address: THE BANK OF NOVA SCOTIA
600 Peachtree Street N.E.
Suite 2700
Atlanta, Georgia 30308 By:/s/F.C.H. Ashby
--------------------------------------
Attention: Ms. Lauren Bianchi Name:
Title:
With Copy To:
1100 Louisiana Street, Suite 3000
Houston, Texas 77002
Attention: Mr. Michael W. Nepveux
NBD BANK, N.A.
By:/s/James L. Caldwell IV
--------------------------------------
Address: Name:
Title:
611 Woodward Avenue
Detroit, Michigan 48226
Attention: Mr. Russell H. Liebetrau, Jr.
-86-
<PAGE> 94
CONTINENTAL BANK, N.A.
By:/s/Robert R. Ingersoll
--------------------------------------
Address: Name:
Title:
231 S. LaSalle Street
Chicago, Illinois 60697
Attention: Mr. Robert Ingersoll
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: FIRST UNION CORPORATION OF NORTH
CAROLINA, as agent
By:/s/Paul N. Riddle
--------------------------------------
Address: Name:
Title:
1001 Fannin Street, Suite 2255
Houston, Texas 77002
Attention: Mr. Paul N. Riddle
Address: NATIONAL BANK OF CANADA
125 West 55th Street
New York, New York 10019-5366 By:/s/Larry L. Sears
--------------------------------------
Name:
With Copy To: Title:
2121 San Jacinto, Suite 1850 By:/s/David L. Schreiber
---------------------------------------
Dallas, Texas 75201 Name:
Attention: Mr. David L. Schreiber Title:
-87-
<PAGE> 95
THE FROST NATIONAL BANK
By:/s/Jim Crosby
--------------------------------------
Address: Name:
Title:
100 W. Houston Street
San Antonio, Texas 78205
Attention: Mr. Phil Dudley
-88-
<PAGE> 96
ANNEX I
Commitments
<TABLE>
<CAPTION>
Revolving
Credit Unavailable Total Term Loan
Banks Commitment Commitment Commitments Commitment
- ----- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Texas Commerce Bank 12,800,000.00 3,200,000.00 16,000,000.00 1,920,000.00
Banque Paribas 12,800,000.00 3,200,000.00 16,000,000.00 1,920,000.00
Bank of Scotland 10,400,000.00 2,600,000.00 13,000,000.00 1,560,000.00
Christiania Bank 10,400,000.00 2,600,000.00 13,000,000.00 1,560,000.00
The Bank of Nova Scotia 10,400,000.00 2,600,000.00 13,000,000.00 1,560,000.00
NBD Bank, N.A. 10,400,000.00 2,600,000.00 13,000,000.00 1,560,000.00
Continental Bank, N.A. 8,800,000.00 2,200,000.00 11,000,000.00 1,320,000.00
First Union National
Bank of North Carolina 8,800,000.00 2,200,000.00 11,000,000.00 1,320,000.00
National Bank of Canada 8,800,000.00 2,200,000.00 11,000,000.00 1,320,000.00
The Frost National Bank 6,400,000.00 1,600,000.00 8,000,000.00 960,000.00
------------ ------------ ------------ ----------
Total 100,000,000.00 25,000,000.00 125,000,000.00 15,000,000.00
</TABLE>
Annex I-1
<PAGE> 97
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
$__________ April ___, 1994
TESORO PETROLEUM CORPORATION, a Delaware corporation (the "Company"), for
value received, promises and agrees to pay to (the "Lender"),
or order, at the Payment Office of TEXAS COMMERCE BANK NATIONAL ASSOCIATION
(the "Agent"), at 712 Main Street, Houston, Texas 77002, the principal sum
of ___________________________________ DOLLARS ($___________________), or such
lesser amount as shall equal the aggregate unpaid principal amount of the
Revolving Credit Loans made by Lender hereunder to the Company under the Credit
Agreement, as hereafter defined, in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement referred to below, and to pay interest
on the unpaid principal amount as provided in the Credit Agreement for such
Revolving Credit Loans made by the Lender to the Company under the Credit
Agreement, at such office, in like money and funds, for the period commencing
on the date of each such Revolving Credit Loan until such Revolving Credit Loan
shall be paid in full, at the rates per annum and on the dates provided in the
Credit Agreement.
In addition to and cumulative of any payments required to be made against
this note pursuant to the Credit Agreement, this note, including all principal
and accrued interest then unpaid, shall be due and payable on March 31, 1997,
its final maturity. All payments shall be applied first to accrued interest
and the balance to principal, except as otherwise expressly provided in the
Credit Agreement. Prepayments on this note shall be applied in the manner set
forth in the Credit Agreement.
This note is one of the Revolving Credit Notes referred to in the Credit
Agreement dated as of the 20th day of April, 1994, by and among the Company and
Texas Commerce Bank National Association, individually, as an Issuing Bank and
as Agent, Banque Paribas, individually, as Co-Agent and as Issuing Bank and
financial institutions parties thereto (including the Lender) (such Credit
Agreement, together with all amendments or supplements thereto, being the
"Credit Agreement"). This note evidences the Revolving Credit Loans made by
the Lender thereunder and shall be governed by the Credit Agreement.
Capitalized terms used in this note and not defined in this note, but which are
defined in the Credit Agreement, have the respective meanings herein as are
assigned to them in the Credit Agreement.
The Lender is hereby authorized by the Company to endorse on Schedule A
(or a continuation thereof) attached to this note, the Type of each Revolving
Credit Loan, the amount and date of each payment or prepayment of principal of
each such Revolving Credit Loan received by the Lender and the Interest Periods
and interest rates applicable to each Revolving Credit Loan, provided that any
failure by
A-1
<PAGE> 98
the Lender to make any such endorsement shall not affect the obligations of the
Company under the Credit Agreement or under this note in respect of such
Revolving Credit Loans.
Except only for any notices which are specifically required by the Credit
Agreement or the other Financing Documents, the Company and any and all
co-makers, endorsers, guarantors and sureties severally waive notice (including
but not limited to notice of intent to accelerate and notice of acceleration,
notice of protest and notice of dishonor), demand, presentment for payment,
protest, diligence in collecting and the filing of suit for the purpose of
fixing liability, and consent that the time of payment hereof may be extended
and re-extended from time to time without notice to any of them. Each such
person agrees that his, her or its liability on or with respect to this note
shall not be affected by any release of or change in any guaranty or security
at any time existing or by any failure to perfect or maintain perfection of any
lien against or security interest in any such security or the partial or
complete enforceability of any guaranty or other surety obligation, in each
case in whole or in part, with or without notice and before or after maturity.
The Credit Agreement provides for the acceleration of the maturity of this
note upon the occurrence of certain events and for prepayment of Revolving
Credit Loans upon the terms and conditions specified therein. Reference is
made to the Credit Agreement for all other pertinent purposes.
This note is issued pursuant to and is entitled to the benefits of the
Credit Agreement and is secured by the Security Instruments.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.
TESORO PETROLEUM CORPORATION
By:
------------------------------
Name:
Title:
A-2
<PAGE> 99
EXHIBIT B
FORM OF TERM NOTE
$__________ April ___, 1994
TESORO PETROLEUM CORPORATION, a Delaware corporation (the "Company"), for
value received, promises and agrees to pay to (the"Lender")
or order, at the Payment Office of TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, at 712 Main Street, Houston, Texas 77002, the principal sum of
___________________________________ DOLLARS ($___________________), in lawful
money of the United States of America and in immediately available funds, in
installments on the dates and in the principal amounts provided in the Credit
Agreement referred to below, and to pay interest on the unpaid principal amount
of the Term Loans made by the Lender to the Company under the Credit Agreement,
at such office, in like money and funds, for the period commencing on the date
of each such Term Loan until such Term Loan shall be paid in full, at the rates
per annum and on the dates provided in the Credit Agreement.
In addition to and cumulative of any payment required to be made against
this note pursuant to the Credit Agreement, this note, including all principal
and accrued interest then unpaid, shall be due and payable on March 31, 1998,
its final maturity. All payments shall be applied first to accrued interest
and the balance to principal, except as otherwise expressly provided in the
Credit Agreement. Prepayments on this note shall be applied in the manner set
forth in the Credit Agreement.
This note is one of the Term Notes referred to in the Credit Agreement
dated as of the 20th day of April, 1994, by and among the Company and Texas
Commerce Bank, individually, as an Issuing Bank, and as Agent, Banque Paribas
individually, as Co-Agent and as an Issuing Bank, and the financial
institutions parties thereto (including the Lender) (such Credit Agreement,
together with all amendments or supplements thereto, being the "Credit
Agreement"). This note evidences the Term Loans made by the Lender thereunder
and shall be governed by the Credit Agreement. Capitalized terms used in this
note and not defined in this note, but which are defined in the Credit
Agreement, have the respective meanings herein as are assigned to them in the
Credit Agreement.
The Lender is hereby authorized by the Company to endorse on Schedule A
(or a continuation thereof) attached to this note, the Type of each Term Loan,
the amount and date of each payment or prepayment of principal of each such
Term Loan received by the Lender and the Interest Periods and interest rates
applicable to each Term Loan, provided that any failure by the Lender to make
any such endorsement shall not affect the obligations of the Company under the
Credit Agreement or under this note in respect of such Term Loans.
Except only for any notices which are specifically required by the Credit
Agreement or the other Financing Documents, the Company and any and all
co-makers, endorsers, guarantors and sureties
B-1
<PAGE> 100
severally waive notice (including but not limited to notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting
and the filing of suit for the purpose of fixing liability, and consent that
the time of payment hereof may be extended and re-extended from time to time
without notice to any of them. Each such person agrees that his, her or its
liability on or with respect to this note shall not be affected by any release
of or change in any guaranty or security at any time existing or by any failure
to perfect or maintain perfection of any lien against or security interest in
any such security or the partial or complete enforceability of any guaranty or
other surety obligation, in each case in whole or in part, with or without
notice and before or after maturity.
The Credit Agreement provides for the acceleration of the maturity of this
note upon the occurrence of certain events and for prepayment of Term Loans
upon the terms and conditions specified therein. Reference is made to the
Credit Agreement for all other pertinent purposes.
This note is issued pursuant to and is entitled to the benefits of the
Credit Agreement and is secured by the Security Instruments.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW
OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.
TESORO PETROLEUM CORPORATION
By:
------------------------------
Name:
Title:
B-2
<PAGE> 1
EXHIBIT 10.2
GUARANTY AGREEMENT
(Subsidiaries)
GUARANTY AGREEMENT, dated as of April 20, 1994 (this "Guaranty
Agreement"), among TESORO ALASKA PETROLEUM COMPANY, a Delaware corporation,
TESORO EXPLORATION AND PRODUCTION COMPANY, a Delaware corporation, and TESORO
PETROLEUM COMPANIES, INC., a Delaware corporation, DIGICOMP, INC., a Delaware
corporation, TESORO TECHNOLOGY PARTNERS COMPANY, a Delaware corporation,
INTERIOR FUELS COMPANY, an Alaskan corporation, TESORO ALASKA PIPELINE COMPANY,
a Delaware corporation, TESORO NORTHSTORE COMPANY, an Alaskan corporation,
TESORO REFINING, MARKETING & SUPPLY COMPANY, a Delaware corporation, TESORO
NATURAL GAS COMPANY, a Delaware corporation, TESORO BOLIVIA PETROLEUM COMPANY,
a Texas corporation, TESORO PETROLEUM DISTRIBUTING COMPANY, a Louisiana
corporation, TESORO LOUISIANA DISTRIBUTING CORPORATION, a Louisiana
corporation, TESORO ENVIRONMENTAL RESOURCES COMPANY, a Delaware corporation,
TESORO GAS RESOURCES COMPANY, INC., a Delaware corporation and TESORO E&P
COMPANY, L.P., a Delaware limited partnership, (the "Guarantors"), in favor of
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, individually, as an Issuing Bank and
as Agent, BANQUE PARIBAS, individually, as Co-Agent and as an Issuing Bank, and
the other financial institutions now or hereafter parties to the Credit
Agreement (as such term is hereinafter defined).
RECITALS
A. On even date herewith, Tesoro Petroleum Corporation, a Delaware
corporation (the "Company"), Texas Commerce Bank National Association,
individually, as Agent and as an Issuing Bank and the other financial
institutions now or hereafter parties thereto entered into a Credit Agreement
(as amended from time to time, the "Credit Agreement").
B. The conditions precedent to the effectiveness of the Credit Agreement
and the obligations of the Lenders (as defined in the Credit Agreement) to make
the initial Loans thereunder, include the execution and delivery of this
Guaranty Agreement by each Subsidiary of the Company.
C. Therefore, in consideration of the premises contained herein, the
Guarantors agree, with and for the benefit of the Agent, the Issuing Banks and
the Lenders, as follows:
AGREEMENT
1. Defined Terms. As used in this Guaranty Agreement, capitalized terms
defined in the Credit Agreement are used herein as defined therein unless
otherwise noted herein, and the following additional capitalized terms shall
have the following meanings:
"Collateral" shall mean any Property in which the Agent is granted a
Lien from time to time as security for the Lender Indebtedness.
"Maximum Guaranteed Amount" shall mean, for each Guarantor, the
greater of (i) the "reasonably equivalent value" or "fair consideration"
(or equivalent concept) received by such Guarantor in exchange for the
obligation incurred hereunder by such Guarantor, within the
<PAGE> 2
meaning of any state or federal fraudulent conveyance or transfer laws
applicable to such Guarantor; or (ii) the lesser of (A) the maximum amount
that will not render such Guarantor insolvent, or (B) the maximum amount
that will not leave such Guarantor (after giving effect to this Guaranty
Agreement) with Property deemed an unreasonably small capital. Clauses
(A) and (B) are and shall be determined pursuant to and as of the
appropriate date mandated by such applicable state or federal fraudulent
conveyance or transfer laws.
"Obligations" shall mean (i) all Lender Indebtedness now or hereafter
owing, including, but not limited to, (A) the unpaid principal of and
accrued interest on (including interest accruing on or after the filing of
any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company, whether or not
a claim for post-filing or post-petition interest is allowed in such
proceeding) (1) the Term Notes and (2) the Revolving Credit Notes, and (B)
the obligation of the Company to otherwise reimburse the Lender, whether
on account of fees, indemnities, costs, taxes, expenses (including all
fees and disbursements set forth in Sections 2.21 or 8.04 of the Credit
Agreement) or otherwise, and (ii) any and all other sums payable by the
Company or any of its Subsidiaries under or in respect of any Financing
Document.
"Subrogation and Contribution Agreement" shall mean that certain
Subrogation and Contribution Agreement of even date herewith among each of
the Guarantors and the Company.
2. Guarantee. (a) Each of the Guarantors hereby unconditionally and
irrevocably and jointly and severally guarantees to the Agent, the Issuing
Banks and each Lender the prompt and complete payment when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations, and each of
the Guarantors further agrees, jointly and severally, to pay any and all
expenses which may be paid or incurred by the Agent, either Issuing Bank or any
Lender in enforcing any rights with respect to, or collecting, any or all of
the Obligations and/or enforcing any rights with respect to, or collecting
against, any Guarantor under this Guaranty Agreement; provided, however, that,
notwithstanding anything herein or in any other Financing Document to the
contrary, the maximum liability of each Guarantor hereunder and under the other
Financing Documents shall in no event exceed the Maximum Guaranteed Amount for
such Guarantor; provided, further, that to the extent that applicable state or
federal fraudulent conveyance or transfer laws would so permit or require, the
Maximum Guaranteed Amount for such Guarantor (to the extent not previously
adjusted for such amounts) shall be (a) increased by the aggregate fair value
of such Guarantor's rights to contribution, reimbursement or subrogation
pursuant to the Subrogation and Contribution Agreement or applicable laws
relating to contribution, reimbursement or subrogation rights and (b) decreased
by the aggregate amount of such Guarantor's liabilities with respect to
contribution rights pursuant to the Subrogation and Contribution Agreement or
applicable laws relating to contribution rights, and (c) multiplied by the
Probability Factor (as defined in subsection (d) below) to reflect the
likelihood of a demand being made hereunder or against such Collateral.
(b) Each Guarantor agrees that the Obligations may at any time and from
time to time exceed the Maximum Guaranteed Amount for such Guarantor without
impairing this Guaranty Agreement or affecting the rights and remedies of the
Agent, either Issuing Bank or any Lender.
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<PAGE> 3
(c) No payment or payments made by the Company, any Guarantor, any other
guarantor or any other Person or received or collected by the Agent, either
Issuing Bank or any Lender from the Company, any Guarantor, any other guarantor
or any other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of each Guarantor hereunder, which shall,
notwithstanding any such payment or payments, other than payments made by such
Guarantor in respect of the Obligations or payments received or collected from
such Guarantor in respect of the Obligations, remain liable for the Obligations
up to the Maximum Guaranteed Amount for such Guarantor until the Obligations
are paid in full.
(d) It is the intention of the parties hereto that the obligations and
transfers of each Guarantor under this Guaranty Agreement and the other
Financing Documents are not obligations or transfers that violate the
provisions of applicable federal and state fraudulent conveyance or transfer
laws resulting in such obligations or transfers being subject to avoidance
under any such laws. In that regard the parties hereto intend that such
obligations and transfers be in an amount that results in the Guarantors
guaranteeing the Obligations and securing such guaranty in an amount that is
equal to the maximum amount that is below the amount that such applicable
fraudulent conveyance or transfer laws establish as the threshold amount for
such Guarantor and for such obligations and transfers that would not be subject
to avoidance under such laws. Accordingly, due to uncertainties in calculation
and in the status of various judicial decisions and interpretations of such
laws, each Guarantor, the Agent, the Issuing Banks and each Lender have agreed
upon the limitation of each Guarantor's liability hereunder with the good faith
intention of complying with such laws. Under many interpretations of such
laws, contingent claims are deemed to be properly valued at the time of each
relevant determination based on a percentage (the "Probability Factor") that is
reasonably reflective of the probability at the time of determination that a
demand or call on or against a guaranty obligation or collateral will be made
in light of the financial conditions of the Company and other liable parties
and other relevant facts that were available at such time, all as subsequently
decided by the appropriate judicial authority enforcing the rights under this
Guaranty Agreement or the other Financing Documents. For purposes of the
limitations on the maximum liability of each Guarantor in Subparagraph (a)
above, if a court in enforcing the rights of the Agent, the Issuing Banks and
any Lender shall determine that the use of such a Probability Factor is
appropriate, then the Probability Factor determined by such court shall be used
to calculate the Maximum Guaranteed Amount, unless the Majority Lenders elect
to waive such benefit in writing. In light of the expense and difficulty in
determining the Maximum Guaranteed Amount at any particular time, the amount
equal to the product of the Obligations multiplied by each Guarantor's
Contribution Percentage as set forth on Annex I to the Subrogation and
Contribution Agreement shall be presumed to be the Maximum Guaranteed Amount
for such Guarantor for all purposes, including the filing of a proof of claim
in any bankruptcy proceeding with respect to such Guarantor, or any foreclosure
sale or any similar proceeding with respect to Property of such Guarantor,
unless and until either such Guarantor or the Agent shall have demonstrated to
the satisfaction of the relevant judicial authority the fact that the actual
calculation of the Maximum Guaranteed Amount for such Guarantor results in a
different amount.
(e) It is the intention of the parties hereto that all intercompany
indebtedness either owed to or by any Guarantor not be included as either an
asset or a liability, respectively, in determining the solvency or capital of
any Guarantor. Accordingly, each Guarantor agrees that in connection with any
determination of the Maximum Guaranteed Amount, such intercompany indebtedness
may be treated in the manner that would achieve the result intended by the
first sentence of this Subsection (e).
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<PAGE> 4
(f) Right to Collect on the Notes. The Company and the Guarantors are
personally obligated and fully liable for the amounts due under the Notes. The
Lenders have the right to sue on the Notes and obtain a personal judgment
against the Company and the Guarantors for satisfaction of the amounts due
under the Notes either before or after a judicial foreclosure of the Alaska
Deed of Trust under Alaska Statute 09.45.170 - 09.45.220.
(g) Senior Debt. Tesoro Alaska's guarantee of the payment of the
Obligations constitutes Senior Debt as such term is defined in that certain
Subordination Agreement dated December 15, 1993, among the Company, Tesoro
Alaska, and the State of Alaska, attached as Exhibit 7 to the Settlement
Agreement dated December 15, 1992, among the Company, Tesoro Alaska, and the
State of Alaska.
3. Right of Contribution. Each Guarantor hereby agrees that to the
extent that any Guarantor shall have paid more than its proportionate share of
any payments made under any of the Guaranty Agreements, such Guarantor shall be
entitled to seek and receive contribution from and against any other Guarantor
who has not paid its proportionate share of any such payments. Each
Guarantor's right of contribution shall be subject to the terms and conditions
of the Subrogation and Contribution Agreement and Paragraph 5 hereof. The
provisions of this Paragraph 3 shall in no respect limit the obligations and
liabilities of any Guarantor to the Agent, the Issuing Banks or any Lender, and
each Guarantor shall remain liable to the Agent, the Issuing Banks and each
Lender for the full amount guaranteed by such Guarantor hereunder.
4. Right of Set-off. The Agent, the Issuing Bank and each Lender is
hereby irrevocably authorized upon the occurrence of an Event of Default
without notice to the Guarantors, any such notice being expressly waived by
each Guarantor, to set-off and credit against any credits, indebtedness or
claims, in any currency, in each case whether direct or indirect or contingent
or matured or unmatured, at any time held or owing by the Agent, either Issuing
Bank or any Lender to or for the credit or the account of any Guarantor, or any
part thereof in such amounts as the Agent, such Issuing Bank or such Lender may
elect, against and on account of the obligations and liabilities of the
applicable Guarantor to the Agent, the Issuing Banks and the Lenders hereunder
and claims of every nature and description of the Agent, the Issuing Banks and
the Lenders against such Guarantor, in any currency, whether arising hereunder,
under the Credit Agreement, any other Financing Document or otherwise, as the
Agent, either Issuing Bank or any Lender may elect, whether or not the Agent,
such Issuing Bank or such Lender has made any demand for payment and although
such obligations, liabilities and claims may be contingent or unmatured. The
Agent agrees to notify (promptly after receipt of notice by the Agent) the
Company and the applicable Guarantor of any such set-off and the application
made by the Agent, such Issuing Bank or any such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Agent, either Issuing Bank and each Lender
under this paragraph are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which any such Person may have.
If foreign currency is exchanged for U.S. Dollars by the Agent, either Issuing
Bank or any Lender, such Person shall use the rate of exchange prevailing at
the time for customers exchanging a similar amount of currency.
5. No Subrogation. Notwithstanding any payment or payments made by any
Guarantor hereunder or any set-off or application of funds of any Guarantors by
the Agent, either Issuing Bank or any Lender, any such Guarantor shall not be
entitled to be subrogated to any of the rights of the Agent, either Issuing
Bank or any Lender against the Company or any collateral security or guaranty
or right
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<PAGE> 5
of offset held by any such Person for the payment of the Obligations, nor shall
any Guarantor seek or be entitled to seek any contribution or reimbursement
from the Company in respect of payments made by any such Guarantor hereunder,
until all Obligations are paid in full. If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Agent, the Issuing Banks and the Lenders, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Agent, if required), to be
applied against the Obligations, whether matured or unmatured in such order as
the Agent may determine.
6. Amendments, etc. with respect to the Obligations; Waiver of Rights.
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against the Guarantors and without notice to or
further assent by the Guarantors, any demand for payment of any of the
Obligations made by the Agent, either Issuing Bank or any Lender may be
rescinded and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guaranty therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived, surrendered or released by the
Agent, the Issuing Banks or the Lenders and the Credit Agreement, the Term
Notes, the Revolving Credit Notes and any collateral security document or other
guaranty or document in connection therewith (including, without limitation,
the other Financing Documents) may be amended, modified, supplemented or
terminated, in whole or in part, as the Agent, the Issuing Banks or the Lenders
may deem advisable from time to time, and any collateral security or guaranty
or right of offset at any time held by the Agent, the Issuing Banks or the
Lenders for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released, all without the necessity of any reservation of rights
against the Guarantors and without notice to or further assent by the
Guarantors which will remain bound hereunder, notwithstanding any such renewal,
extension, modification, acceleration, compromise, amendment, supplement,
termination, sale, exchange, waiver, surrender or release. Neither the Agent,
either Issuing Bank nor any Lender shall have an obligation to protect, secure,
perfect or insure any Lien at any time held as security for the Obligations or
this Guaranty Agreement or any Property subject thereto. When making any demand
hereunder against any Guarantor, the Agent may, but shall be under no
obligation to, make a similar demand on the Company or any other guarantor, and
any failure by the Agent to make any such demand or to collect any payments
from the Company or any such other guarantor, or any release of the Company or
other guarantor, shall not relieve any such Guarantor of its obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Agent, the Issuing Banks of
the Lenders against each Guarantor. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
7. Guaranty Absolute and Unconditional. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Agent, either Issuing
Bank or any Lender upon this Guaranty Agreement or acceptance of this Guaranty
Agreement, and the Obligations (and any of them) shall conclusively be deemed
to have been created, contracted or incurred and extended, amended and waived
in reliance upon this Guaranty Agreement, and all dealings between the Company
or the Guarantors and the Agent, either Issuing Bank or any Lender shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Guaranty Agreement. Each Guarantor waives diligence, presentment,
protest, demand for payment
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<PAGE> 6
and notice of default or nonpayment, notice of intention to accelerate maturity
and notice of acceleration of maturity to or upon the Company or the Guarantors
with respect to the Obligations. Each Guarantor understands and agrees that
this Guaranty Agreement shall be construed as a continuing, absolute,
completed, unconditional (except as expressly conditioned pursuant to the terms
hereof) and irrevocable guarantee of payment and not of collection without
regard to (a) the validity, regularity or enforceability of the Credit
Agreement, the other Financing Documents, any of the Obligations or any
collateral security or guaranty therefor or right of offset with respect
thereto at any time or from time to time held by the Agent, either Issuing Bank
or any Lender, (b) any defense, set-off or counterclaim which may at any time
be available to or be asserted by the Company or any other Person liable for
the Obligations against the Agent, either Issuing Bank or any Lender, or (c)
any other circumstance whatsoever (with or without notice to or knowledge of
the Company or any Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Company or any other Person
liable for the Obligations, or of any Guarantor under this Guaranty Agreement,
in bankruptcy or in any other instance. When pursuing its rights and remedies
hereunder against any Guarantor, the Agent, the Issuing Banks and the Lenders
may, but shall be under no obligation to, pursue such rights and remedies as
they may have against the Company or any other Person or against any collateral
security or guaranty for the Obligations or any right of offset with respect
thereto, and any failure by the Agent, the Issuing Banks or the Lenders to
pursue such other rights or remedies or to collect any payments from the
Company or any such other Person or to realize upon any such collateral
security or guaranty or to exercise any such right of offset, or any release of
the Company or any such other Person or any such collateral security, guaranty
or right of offset, shall not relieve any Guarantor of any liability hereunder,
and shall not impair or affect the rights and remedies, whether express,
implied or available as a matter of law, of the Agent, either Issuing Bank or
any Lender against any Guarantor. This Guaranty Agreement shall remain in full
force and effect and be binding in accordance with and to the extent of its
terms upon each Guarantor and the respective successors and assigns thereof,
and shall inure to the benefit of the Agent, Issuing Banks and the Lenders, and
the respective successors, indorsees, transferees and assigns thereof, until
all the Obligations and the obligations of the Guarantors under this Guaranty
Agreement shall have been satisfied by payment in full.
8. Reinstatement. This Guaranty Agreement shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Agent, either Issuing Bank or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Company or any Guarantor or any substantial part of such Person's property, or
otherwise, all as though such payments had not been made.
9. Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid, without set-off or counterclaim and in immediately available
funds and in lawful currency of the United States of America, to Agent in
Houston, Texas, at the Agent's Payment Office, not later than 11:00 A.M.,
Houston time.
10. Representations and Warranties. Each Guarantor hereby represents and
warrants that:
(a) Corporate Existence. Each Guarantor (other than Tesoro E&P
Company, L.P.) is a corporation duly organized, validly existing, and in
good standing under the laws of the
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<PAGE> 7
jurisdiction of its incorporation and has the corporate power and
authority and the legal right to own and lease its property and to conduct
its business.
(b) Corporate Power; Authorization. Each Guarantor (other than
Tesoro E&P Company, L.P.) has the corporate power and authority and the
legal right to make, deliver and perform this Guaranty Agreement. Each
Guarantor has taken all necessary corporate action to authorize the
execution, delivery and performance of this Guaranty Agreement.
(c) Partnership Existence and Authorization. Tesoro E&P Company,
L.P. is a limited partnership duly formed, validly existing and in good
standing under the laws of the State of Delaware and has the partnership
power and authority and the legal right to own and lease its property and
to conduct its business. Tesoro E&P Company, L.P. has the partnership
power and authority and the legal right to make, deliver and perform this
Guaranty Agreement and has taken all necessary partnership action to
authorize the execution, delivery and performance of this Guaranty
Agreement.
(d) Enforceable Obligations. This Guaranty Agreement has been duly
executed and delivered by each Guarantor and constitutes a legal, valid
and binding obligation of such Guarantor enforceable against such
Guarantor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles.
11. No Waiver: Cumulative Remedies. Neither the Agent, either Issuing
Bank nor any of the Lenders shall by any act, delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise and no delay in
exercising, on the part of the Agent, either Issuing Bank or any Lender, any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege preclude
any other or further exercise thereof, or the exercise of any other power,
privilege or right. A waiver by the Agent, either Issuing Bank or any Lender
of any right or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which any such Person would have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
12. Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including bank wire, telecopy or similar
teletransmission or writing) and, in the case of any Guarantor, shall be given
to such Guarantor at the address or telecopy number of the Company now or
hereafter provided for in the Credit Agreement and in the case of the Agent,
either Issuing Bank or any Lender, at the address or telecopy number for such
Person now or hereafter provided for in the Credit Agreement. Each such
notice, request or other communication shall be effective (i) if given by
telecopier during regular business hours, once such telecopy is transmitted to
the telecopy number specified in the Credit Agreement, (ii) if given by mail,
72 hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means
(including, without limitation, by air courier), when delivered at the address
specified in the Credit Agreement; provided that notices to the Agent shall not
be effective until received.
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<PAGE> 8
13. Entire Agreement. THIS GUARANTY AGREEMENT, THE CREDIT AGREEMENT, THE
NOTES, THE SECURITY INSTRUMENTS, THE OTHER FINANCING DOCUMENTS REFERRED TO IN
SECTIONS 3.02 THE CREDIT AGREEMENT, AND THE FEE LETTER EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE AGENT, THE ISSUING BANKS, THE LENDERS
AND THE OTHER RESPECTIVE PARTIES HERETO AND THERETO AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. ANY CONFLICT OR AMBIGUITY BETWEEN THE TERMS AND PROVISIONS OF THIS
AGREEMENT AND THE TERMS AND PROVISIONS IN ANY OTHER FINANCING DOCUMENT SHALL BE
CONTROLLED BY THE TERMS AND PROVISIONS HEREOF.
14. Governing Law; Submission to Jurisdiction, Etc.
(a) This Guaranty Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the law
(without giving effect to the conflict of law principles thereof) of the State
of Texas.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, MAY BE
BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING BUT NOT LIMITED TO ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(c) Each Guarantor that is not a Texas corporation hereby irrevocably
designates the General Counsel of the Company (as of the Closing Date, James C.
Reed, Jr.) located at 8700 Tesoro Drive, San Antonio, Texas 78217, as the
designee, appointee and agent of such Guarantor to receive, for and on behalf
of such Guarantor, service of process in such respective jurisdictions in any
legal action or proceeding with respect to this Agreement, the Notes, the
Security Instruments or the other Financing Documents. It is understood that a
copy of such process served on such agent will be promptly forwarded by mail to
such Guarantor at its address set forth opposite its signature below, but the
failure of such Guarantor to receive such copy shall not affect in any way the
service of such process. Each Guarantor further irrevocably consents to the
service of process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to such Guarantor at its said address, such service to become
effective 30 days after such mailing.
(d) Nothing herein shall affect the right of the Agent or any Lender or
any holder of a Note to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against any Guarantor in
Texas or any other jurisdiction in which assets of any Guarantor are located.
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<PAGE> 9
15. Severability. Any provision of this Guaranty Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
16. Paragraph Headings. The Paragraph headings used in this Guaranty
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
17. Interest. It is the intention of the parties hereto to conform
strictly to usury laws applicable to each Lender and the Transactions.
Accordingly, if the Transactions would be usurious as to any Lender under
applicable law, then, notwithstanding anything to the contrary in the Notes,
this Agreement or in any Financing Document or agreement entered into in
connection with the Transactions or as security for the Obligations, it is
agreed as follows: (i) the aggregate of all consideration which constitutes
interest as to any Lender under applicable law that is contracted for, taken,
reserved, charged or received by such Lender under the Notes, this Agreement or
under any of the Financing Documents or agreements or otherwise in connection
with the Transactions shall under no circumstances exceed the maximum amount
allowed by such applicable law, (ii) in the event that the maturity of the
Notes is accelerated for any reason, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest as to
any Lender under applicable law may never include more than the maximum amount
allowed by such applicable law, and (iii) excess interest, if any, provided for
in this Agreement or otherwise in connection with the Transactions shall be
cancelled automatically and, if theretofore paid, shall be credited by such
Lender on the principal amount of the Obligations (or, to the extent that the
principal amount of the Obligations shall have been or would thereby be paid in
full, refunded by such Lender to the Company). The right to accelerate the
maturity of the Notes does not include the right to accelerate any interest
which has not otherwise accrued on the date of such acceleration, and the
Lenders do not intend to collect any unearned interest in the event of
acceleration. All sums paid or agreed to be paid to each Lender for the use,
forbearance or detention of sums included in the Obligations shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Notes until payment in full so that the
rate or amount of interest on account of the Obligations does not exceed the
applicable usury ceiling, if any. As used in this Section, the term
"applicable law" shall mean the laws of the State of Texas (or of any other
jurisdiction whose laws may be mandatorily applicable notwithstanding other
provisions of this Agreement) or laws of the United States of America
applicable to any Lender and the Transactions, which would permit such Lender
to contract for, charge, take, reserve or receive a greater amount of interest
than under Texas (or such other jurisdiction's) law. To the extent that
Article 5069-1.04 of the Texas Revised Civil Statutes is relevant to the
Lenders for the purpose of determining the Highest Lawful Rate, the Lenders
hereby elect to determine the applicable rate ceiling under such Article by the
indicated (weekly) rate ceiling from time to time in effect, subject to the
Lenders' right subsequently to change such method in accordance with applicable
law. In no event shall the provisions of Tex. Rev. Civ. Stat. art. 5069-2.01
through 5069-8.06 or 5069-15.01 through 5069-15.11 be applicable to the Loans
evidenced hereby.
18. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original but all of which
shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned has caused this Guaranty Agreement to
be duly executed and delivered by its duly authorized officer on the day and
year first above written.
TESORO ALASKA PETROLEUM COMPANY
TESORO EXPLORATION AND PRODUCTION COMPANY
TESORO PETROLEUM COMPANIES, INC.
DIGICOMP, INC.
TESORO TECHNOLOGY PARTNERS COMPANY
INTERIOR FUELS COMPANY
TESORO ALASKA PIPELINE COMPANY
TESORO NORTHSTORE COMPANY
TESORO REFINING, MARKETING & SUPPLY COMPANY
TESORO NATURAL GAS COMPANY
TESORO BOLIVIA PETROLEUM COMPANY
TESORO PETROLEUM DISTRIBUTING COMPANY
TESORO LOUISIANA DISTRIBUTING COMPANY
TESORO ENVIRONMENTAL RESOURCES COMPANY
By:/s/William T. VanKleef
------------------------------------------
William T. VanKleef
Vice President and Treasurer
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<PAGE> 11
TESORO E&P COMPANY, L.P.
By: TESORO EXPLORATION AND PRODUCTION
COMPANY,
as its general partner
By: /s/William T. VanKleef
-----------------------------------
TESORO GAS RESOURCES COMPANY, INC
By:/s/Mark S. Necessary
------------------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10.3
WHEN RECORDED RETURN TO:
VINSON & ELKINS L.L.P.
First City Tower, Suite 2669
1001 Fannin Street
Houston, TX 77002-6760
Attn: Crystal L. Lightfield
(TEXAS OIL & GAS PROPERTIES)
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
FROM
TESORO EXPLORATION AND PRODUCTION COMPANY,
AS MORTGAGOR
TO
STEPHEN H. FIELD, AS TRUSTEE
FOR THE BENEFIT OF
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, AS AGENT,
AS MORTGAGEE
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
Grant of Lien and Indebtedness Secured
<TABLE>
<S> <C> <C>
Section 1.01 Grant of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.03 Indebtedness Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.04 Fixture Filing, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.05 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
</TABLE>
ARTICLE II
Assignment of Production
<TABLE>
<S> <C> <C>
Section 2.01 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.02 Rights Under Texas Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.03 No Modification of Payment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
ARTICLE III
Representations, Warranties and Covenants
<TABLE>
<S> <C> <C>
Section 3.01 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.02 Defend Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.03 Not a Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.04 Power to Create Lien and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.05 Revenue and Cost Bearing Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.06 Rentals Paid; Leases in Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.07 Operation of Mortgaged Property, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.08 Operation By Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.09 Abandon, Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.10 Failure to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
ARTICLE IV
Rights and Remedies
<TABLE>
<S> <C> <C>
Section 4.01 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.02 Foreclosure and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.03 Substitute Trustees and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.04 Judicial Foreclosure; Receivership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.05 Foreclosure for Installments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.06 Separate Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.07 Possession of Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.08 Occupancy After Foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.09 Remedies Cumulative, Concurrent and Nonexclusive . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.10 No Release of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.11 Release of and Resort to Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.12 Waiver of Redemption, Notice and Marshalling of Assets, Etc . . . . . . . . . . . . . . . . . . . . . 11
Section 4.13 Discontinuance of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.14 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.15 Resignation of Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.16 INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
ARTICLE V
The Trustee
<TABLE>
<S> <C> <C>
Section 5.01 Duties, Rights, and Powers of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.02 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.03 Retention of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
ARTICLE VI
Miscellaneous
<TABLE>
<S> <C> <C>
Section 6.01 Instrument Construed as Mortgage, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.02 Release of Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.03 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.04 Successors and Assigns of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.05 Satisfaction of Prior Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.06 Subrogation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.07 Nature of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.08 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.10 EXCULPATION PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
Exhibit A - Mortgaged Property
-ii-
<PAGE> 4
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
This MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT
AND FINANCING STATEMENT (this "Mortgage") is entered into as of the effective
time and date hereinafter stated (the "Effective Date") by TESORO EXPLORATION
AND PRODUCTION COMPANY, a Delaware corporation, whose address for notice
hereunder is 8700 Tesoro Drive, San Antonio, Texas 78217 ("Mortgagor"), for the
benefit of TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking
association, as Agent for the benefit of the Issuing Banks and the Lenders,
with offices and banking quarters at 712 Main Street, Houston, Texas 77002
("Mortgagee").
R E C I T A L S:
A. On even date herewith, Tesoro Petroleum Corporation (the
"Company"), Texas Commerce Bank National Association, individually, as Agent
and as an Issuing Bank, Banque Paribas, individually and as an Issuing Bank,
and the other financial institutions parties thereto are executing a Credit
Agreement (as amended from time to time, the "Credit Agreement").
B. The Lenders and Issuing Banks have conditioned their obligations
under the Credit Agreement upon the execution and delivery by Mortgagor of this
Mortgage, and Mortgagor has agreed to enter into this Mortgage.
C. Therefore, in order to comply with the terms and conditions of the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Mortgagor hereby agrees with
Mortgagee as follows:
ARTICLE I
Grant of Lien and Indebtedness Secured
Section 1.01 Grant of Liens. To secure payment of the Indebtedness
(as hereinafter defined) and the performance of the covenants and obligations
herein contained, Mortgagor does by these presents hereby GRANT, BARGAIN, SELL,
ASSIGN, MORTGAGE, TRANSFER and CONVEY unto Stephen H. Field of Houston, Texas,
as Trustee, whose address for notice hereunder is 712 Main Street, Houston,
Texas 77002 ("Trustee") and Trustee's successors and substitutes in trust
hereunder, for the use and benefit of Mortgagee, the real and personal
property, rights, titles, interests and estates described in the following
paragraphs (a) through (g) (collectively called the "Mortgaged Property"):
(a) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to the oil and gas leases and/or oil, gas and
other mineral leases and other interests and estates and the lands and premises
covered or affected thereby which are described on Exhibit A hereto
(collectively called the "Hydrocarbon Property") or which Hydrocarbon Property
is otherwise referred to herein, and specifically, but without limitation, the
undivided interests of Mortgagor which are more particularly described on
attached Exhibit A.
(b) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to (i) the properties now or hereafter pooled or
unitized with the Hydrocarbon Property; (ii) all presently existing or future
unitization, communitization, pooling agreements and declarations of pooled
units and the units created thereby (including, without limitation, all units
created under orders,
<PAGE> 5
regulations, rules or other official acts of any Federal, State or other
governmental body or agency having jurisdiction and any units created solely
among working interest owners pursuant to operating agreements or otherwise)
which may affect all or any portion of the Hydrocarbon Property including,
without limitation, those units which may be described or referred to on
attached Exhibit A; (iii) all operating agreements, production sales or other
contracts, farmout agreements, farm-in agreements, area of mutual interest
agreements, equipment leases and other agreements described or referred to in
this Mortgage or which relate to any of the Hydrocarbon Property or interests
in the Hydrocarbon Property described or referred to herein or on attached
Exhibit A or to the production, sale, purchase, exchange, processing, handling,
storage, transporting or marketing of the Hydrocarbons (hereinafter defined)
from or attributable to such Hydrocarbon Property or interests; (iv) all
geological, geophysical, engineering, accounting, title, legal, and other
technical or business data concerning the Mortgaged Property, the Hydrocarbons,
and all books, files, records, magnetic media, computer records, and other
forms of recording or obtaining access to such data; and (v) the Hydrocarbon
Property described on attached Exhibit A and covered by this Mortgage even
though Mortgagor's interests therein be incorrectly described or a description
of a part or all of such Hydrocarbon Property or Mortgagor's interests therein
be omitted; it being intended by Mortgagor and Mortgagee herein to cover and
affect hereby all interests which Mortgagor may now own or may hereafter
acquire in and to the Hydrocarbon Property notwithstanding that the interests
as specified on Exhibit A may be limited to particular lands, specified depths
or particular types of property interests, but specifically excluding other
Property outside of those described on Exhibit A hereto and not intended to be
part of the Hydrocarbon Property.
(c) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to all oil, gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
therefrom and all other minerals (collectively called the "Hydrocarbons") in
and under and which may be produced and saved from or attributable to the
Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's
interests therein, including all oil in tanks and all rents, issues, profits,
proceeds, products, revenues and other income from or attributable to the
Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's
interests therein which are subjected or required to be subjected to the liens
and security interests of this Mortgage and including specifically but without
limitation all liens and security interests in such Hydrocarbons securing
payment of proceeds resulting from the sale of Hydrocarbons.
(d) All tenements, hereditaments, appurtenances and properties in
anywise appertaining, belonging, affixed or incidental to the Hydrocarbon
Property, rights, titles, interests and estates described or referred to in
paragraphs (a) and (b) above, which are now owned or which may hereafter be
acquired by Mortgagor, including, without limitation, any and all property,
real or personal, now owned or hereafter acquired and situated upon, used, held
for use, or useful in connection with the operating, working or development of
any of such Hydrocarbon Property or the lands pooled or unitized therewith
(excluding drilling rigs, trucks, automotive equipment or other personal
property which may be taken to the premises for the purpose of drilling a well
or for other similar temporary uses) and including any and all oil wells, gas
wells, injection wells or other wells, buildings, structures, field separators,
liquid extraction plants, plant compressors, pumps, pumping units, pipelines,
sales and flow lines, gathering systems, field gathering systems, salt water
disposal facilities, tanks and tank batteries, fixtures, valves, fittings,
machinery and parts, engines, boilers, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, towers, casing, tubing and rods,
surface leases, rights-of-way, easements, servitudes, licenses and other
surface and subsurface rights together with all additions, substitutions,
replacements, accessions and attachments to any and all of the foregoing
properties.
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<PAGE> 6
(e) Any property that may from time to time hereafter, by delivery or
by writing of any kind, be subjected to the lien and security interest hereof
by Mortgagor; and the Trustee is hereby authorized to receive the same at any
time as additional security hereunder.
(f) All of the rights, titles and interests of every nature whatsoever
now owned or hereafter acquired by Mortgagor in and to the Hydrocarbon Property
rights, titles, interests and estates and every part and parcel thereof,
including, without limitation, the Hydrocarbon Property rights, titles,
interests and estates as the same may be enlarged by the discharge of any
payments out of production or by the removal of any charges or Permitted
Encumbrances (as hereinafter defined in Section 3.01) to which any of the
Hydrocarbon Property rights, titles, interests or estates are subject, or
otherwise; all rights of Mortgagor to liens and security interests securing
payment of proceeds from the sale of production from the Mortgaged Property,
including, but not limited to, those liens and security interests provided in
Tex. Bus. & Com. Code Ann. Section 9.319 (Tex. UCC) (Vernon Supp. 1989)
("Section 9.319 Tex. UCC"), as amended from time to time; together with any and
all renewals and extensions of any of the Hydrocarbon Property rights, titles,
interests or estates; all contracts and agreements supplemental to or
amendatory of or in substitution for the contracts and agreements described or
mentioned above; and any and all additional interests of any kind hereafter
acquired by Mortgagor in and to the Hydrocarbon Property rights, titles,
interests or estates.
(g) All accounts, contract rights, inventory, general intangibles,
insurance contracts and insurance proceeds constituting a part of, relating to
or arising out of those portions of the Mortgaged Property which are described
in paragraphs (a) through (f) above and all proceeds and products of all such
portions of the Mortgaged Property and payments in lieu of production (such as
"take or pay" payments), whether such proceeds or payments are goods, money,
documents, instruments, chattel paper, securities, accounts, general
intangibles, fixtures, real property, or other assets.
Any fractions or percentages specified on attached Exhibit A in referring
to Mortgagor's interests are solely for purposes of the warranties made by
Mortgagor pursuant to Section 3.01 hereof and shall in no manner limit the
quantum of interest affected by this Section 1.01 with respect to any
Hydrocarbon Property or with respect to any unit or well identified on said
Exhibit A.
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to his
successors and assigns forever to secure the payment of the Indebtedness
(hereinafter defined) and to secure the performance of the covenants,
agreements, and obligations of the Mortgagor herein contained.
Section 1.02 Grant of Security Interest. To further secure the
Indebtedness, Mortgagor hereby grants to Mortgagee a security interest in and
to the Mortgaged Property (whether now or hereafter acquired by operation of
law or otherwise) insofar as the Mortgaged Property consists of equipment,
accounts, contract rights, general intangibles, insurance contracts, insurance
proceeds, inventory, Hydrocarbons, fixtures and any and all other personal
property of any kind or character defined in and subject to the provisions of
the Texas Business and Commerce Code, Chapters 1 through 9, as presently in
effect (the "Texas UCC"), including the proceeds and products from any and all
of such personal property. Upon the happening of any of the Events of Default,
Mortgagee is and shall be entitled to all of the rights, powers and remedies
afforded a secured party by the Texas UCC with reference to the personal
property and fixtures in which Mortgagee has been granted a security interest
herein, or the Trustee or Mortgagee may proceed as to both the real and
personal property covered hereby in accordance with the rights and remedies
granted under this Mortgage in respect of the real property covered hereby.
Such rights, powers and remedies shall be cumulative and in addition to those
granted to the Trustee or Mortgagee under any other provision of this Mortgage
or under any other Security
-3-
<PAGE> 7
Instrument. Written notice mailed to Mortgagor as provided herein at least
fifteen (15) days prior to the date of public sale of any part of the Mortgaged
Property which is personal property subject to the provisions of the Texas UCC,
or prior to the date after which private sale of any such part of the Mortgaged
Property will be made, shall constitute reasonable notice.
Section 1.03 Indebtedness Secured. This Mortgage is executed and
delivered by Mortgagor to secure and enforce the following (the
"Indebtedness"):
(a) The payment of and performance of any and all indebtedness,
obligations and liabilities of Mortgagor pursuant to that certain Guaranty
Agreement of even date herewith executed by the Mortgagor, among others, in
favor of the Agent, the Issuing Banks and the Lenders (as the same may from
time to time be amended, supplemented or otherwise modified, the "Guaranty
Agreement"), guaranteeing the prompt and complete payment when due (whether at
the stated maturity, by acceleration or otherwise) of the Obligations (as
defined in the Guaranty Agreement) including, without limitation, the Notes
with final maturity on or before March 31, 1998.
(b) Any sums which may be advanced or paid by Mortgagee or any Lender
under the terms hereof on account of the failure of Mortgagor to comply with
the covenants of the Mortgagor contained herein or in the Credit Agreement; and
all other indebtedness of Mortgagor arising pursuant to the provisions of this
Mortgage.
Section 1.04 Fixture Filing, Etc. Without in any manner limiting
the generality of any of the other provisions of this Mortgage: (i) some
portions of the goods described or to which reference is made herein are or are
to become fixtures on the land described or to which reference is made herein
or on attached Exhibit A; (ii) the security interests created hereby under
applicable provisions of the Texas UCC will attach to Hydrocarbons (minerals
including oil and gas) or the accounts resulting from the sale thereof at the
wellhead or minehead located on the land described or to which reference is
made herein; (iii) this Mortgage is to be filed of record in the real estate
records as a financing statement, and (iv) Mortgagor is the record owner of the
real estate or interests in the real estate comprised of the Mortgaged
Property.
Section 1.05 Defined Terms. Any capitalized term used in this
Mortgage and not defined in this Mortgage shall have the meaning assigned to
such term in the Credit Agreement.
ARTICLE II
Assignment of Production
Section 2.01 Assignment. Mortgagor has absolutely and
unconditionally assigned, transferred, and conveyed, and does hereby absolutely
and unconditionally assign, transfer and convey unto Mortgagee, its successors
and assigns, all of the Hydrocarbons and all products obtained or processed
therefrom, and the revenues and proceeds now and hereafter attributable to the
Hydrocarbons and said products and all payments in lieu of the Hydrocarbons
such as "take or pay" payments or settlements. The Hydrocarbons and products
are to be delivered into pipe lines connected with the Mortgaged Property, or
to the purchaser thereof, to the credit of Mortgagee, free and clear of all
taxes, charges, costs, and expenses; and all such revenues and proceeds shall
be paid directly to Mortgagee, at its banking quarters in Houston, Harris
County, Texas with no duty or obligation of any party paying the same to
inquire into the rights of Mortgagee to receive the same, what application is
made thereof, or as to any other matter. Mortgagor agrees to perform all such
acts, and to execute all such further
-4-
<PAGE> 8
assignments, transfers and division orders, and other instruments as may be
required or desired by Mortgagee or any party in order to have said proceeds
and revenues so paid to Mortgagee. Mortgagee is fully authorized to receive
and receipt for said revenues and proceeds; to endorse and cash any and all
checks and drafts payable to the order of Mortgagor or Mortgagee for the
account of Mortgagor received from or in connection with said revenues or
proceeds and to hold the proceeds thereof in a bank account as additional
collateral securing the Indebtedness; and to execute transfer and division
orders in the name of Mortgagor, or otherwise, with warranties binding
Mortgagor. All proceeds received by the Mortgagee pursuant to this assignment
shall be applied as provided in the Credit Agreement, or after the occurrence
and during the continuance of an Event of Default, the Mortgagee may in its
sole discretion apply the proceeds as provided in Section 4.13 hereof.
Mortgagee shall not be liable for any delay, neglect, or failure to effect
collection of any proceeds or to take any other action in connection therewith
or hereunder; but Mortgagee shall have the right, at its election, in the name
of Mortgagor or otherwise, to prosecute and defend any and all actions or legal
proceedings deemed advisable by Mortgagee in order to collect such funds and to
protect the interests of Mortgagee, and/or Mortgagor, with all costs, expenses
and attorneys' fees incurred in connection therewith being paid by Mortgagor.
Mortgagor hereby appoints Mortgagee as its attorney-in-fact to pursue any and
all rights of Mortgagor to liens on and security interests in the Hydrocarbons
securing payment of proceeds of runs attributable to the Hydrocarbons. In
addition to the rights granted to Trustee and/or Mortgagee in Section 1.01 (c)
of this Mortgage, Mortgagor hereby further transfers and assigns to Mortgagee
any and all such liens, security interests, financing statements or similar
interests of Mortgagor attributable to its interest in the Hydrocarbons and
proceeds of runs therefrom arising under or created by said statutory
provision, judicial decision or otherwise. The power of attorney granted to
Mortgagee in this paragraph, being coupled with an interest, shall be
irrevocable so long as the Indebtedness or any part thereof remains unpaid.
Section 2.02 Rights Under Texas Act. Mortgagor hereby grants,
sells, assigns, sets over and mortgages unto Mortgagee during the term hereof,
all of Mortgagor's rights and interests pursuant to the provisions of Section
9.319 Tex. UCC, hereby vesting in Mortgagee all of Mortgagor's rights as an
interest owner to the continuing security interest in and lien upon the
Mortgaged Property.
Section 2.03 No Modification of Payment Obligations. Nothing herein
contained shall modify or otherwise alter the obligation of Mortgagor to make
prompt payment of all principal and interest owing on the Indebtedness when and
as the same become due regardless of whether the proceeds of the Hydrocarbons
are sufficient to pay the same and the rights provided in accordance with the
foregoing assignment provision shall be cumulative of all other security of any
and every character now or hereafter existing to secure payment of the
Indebtedness.
ARTICLE III
Representations, Warranties and Covenants
Mortgagor hereby represents, warrants and covenants as follows:
Section 3.01 Title. To the extent of the undivided interests
specified on attached Exhibit A, Mortgagor has good and indefeasible title to
and is possessed of the Mortgaged Property. The Mortgaged Property is free of
any and all Liens (as defined in the Credit Agreement) except Liens allowed by
Section 5.04(b) of the Credit Agreement and Liens described on Exhibit A hereto
(collectively, the "Permitted Encumbrances").
-5-
<PAGE> 9
Section 3.02 Defend Title. This Mortgage is, and always will be
kept, a direct first lien and security interest upon the Mortgaged Property
subject only to the Permitted Encumbrances and Mortgagor will not create or
suffer to be created or permit to exist any lien, security interest or charge
prior or junior to or on a parity with the lien and security interest of this
Mortgage upon the Mortgaged Property or any part thereof or upon the rents,
issues, revenues, profits and other income therefrom. Mortgagor will warrant
and defend the title to the Mortgaged Property against the claims and demands
of all other persons whomsoever and will maintain and preserve the lien created
hereby so long as any of the Indebtedness secured hereby remains unpaid.
Should an adverse claim be made against or a cloud develop upon the title to
any part of the Mortgaged Property, Mortgagor agrees it will immediately defend
against such adverse claim or take appropriate action to remove such cloud at
Mortgagor's cost and expense, and Mortgagor further agrees that the Trustee
and/or Mortgagee may take such other action as they deem advisable to protect
and preserve their interests in the Mortgaged Property, and in such event
Mortgagor will indemnify the Trustee and Mortgagee against any and all cost,
attorney's fees and other expenses which they may incur in defending against
any such adverse claim or taking action to remove any such cloud.
Section 3.03 Not a Foreign Person. Mortgagor is not a "foreign
person" within the meaning of the Internal Revenue Code of 1986, as amended
(hereinafter called the "Code"), Sections 1445 and 7701 (i.e. Mortgagor is not
a non-resident alien, foreign corporation, foreign partnership, foreign trust
or foreign estate as those terms are defined in the Code and any regulations
promulgated thereunder).
Section 3.04 Power to Create Lien and Security. The Mortgagor has
full power and lawful authority to grant, bargain, sell, assign, transfer,
mortgage, and convey a security interest in all of the Mortgaged Property in
the manner and form herein provided and without obtaining the authorization,
approval, consent or waiver of any lessor, sublessor, Governmental Authority or
other party or parties whomsoever.
Section 3.05 Revenue and Cost Bearing Interest. Mortgagor's
ownership of the Hydrocarbon Property and the undivided interests therein as
specified on attached Exhibit A will, after giving full effect to all Permitted
Encumbrances, afford Mortgagor not less than those net interests in the
production from or which is allocated to such Hydrocarbon Property specified as
"Net Revenue Interest" on attached Exhibit A (expressed as a fraction,
percentage or decimal) and will cause Mortgagor to bear not more than that
portion, specified as "Working Interest" on attached Exhibit A (expressed as a
fraction, percentage or decimal), of the costs of drilling, developing and
operating the wells identified on Exhibit A.
Section 3.06 Rentals Paid; Leases in Effect. All rentals and
royalties due and payable in accordance with the terms of any leases or
subleases comprising a part of the Hydrocarbon Property have been duly paid or
provided for and all leases or subleases comprising a part of the Hydrocarbon
Property are in full force and effect.
Section 3.07 Operation of Mortgaged Property, Etc. Except as
provided in Section 3.08 Mortgagor will promptly pay and discharge all rentals,
delay rentals, royalties and indebtedness accruing under, and perform or cause
to be performed each and every act, matter or thing required by, each and all
of the assignments, deeds, leases, sub-leases, contracts and agreements
described or referred to herein or affecting Mortgagor's interests in the
Mortgaged Property, and will do all other things necessary to keep unimpaired
Mortgagor's rights with respect thereto and prevent any forfeiture thereof or
default thereunder. The Mortgaged Property (and properties unitized therewith)
has been maintained, operated and developed in a good and workmanlike manner
and in conformity with all applicable laws and all
-6-
<PAGE> 10
rules, regulations and orders of all duly constituted authorities having
jurisdiction and in conformity with the provisions of all leases, subleases or
other contracts comprising a part of the Hydrocarbon Property and other
contracts and agreements forming a part of the Mortgaged Property; specifically
in this connection, (i) after the Effective Date no Mortgaged Property is
subject to having allowable production reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) prior to
the Effective Date and (ii) none of the wells comprising a part of the
Mortgaged Property (or properties unitized therewith) are deviated from the
vertical more than the maximum permitted by applicable laws, regulations, rules
and orders, and such wells are, in fact, bottomed under and are producing from,
and the well bores are wholly within, the Mortgaged Property (or, in the case
of wells located on properties unitized therewith, such unitized properties).
Mortgagor will operate the Mortgaged Property in a careful and efficient manner
in accordance with the practices of the industry and in compliance with all
applicable contracts and agreements and in compliance with all applicable
proration and conservation laws of the jurisdiction in which the Mortgaged
Property is situated, and all applicable laws, rules and regulations of every
other agency and authority from time to time constituted to regulate the
development and operation of the Mortgaged Property and the production and sale
of Hydrocarbons and other minerals therefrom. Mortgagor will do or cause to be
done such development work as may be reasonably necessary to the prudent and
economical operation of the Mortgaged Property in accordance with the most
approved practices of operators in the industry, including all to be done that
may be appropriate to protect from diminution the productive capacity of the
Mortgaged Property and each producing well thereon including, without
limitation, cleaning out and reconditioning each well from time to time,
plugging and completing at a different level each such well, drilling a
substitute well to conform to changed spacing regulations and to protect the
Mortgaged Property against drainage whenever and as often as is necessary.
Section 3.08 Operation By Third Parties. All or portions of the
Mortgaged Property may be comprised of interests in the Hydrocarbon Property
which are other than working interests or which may be operated by a party or
parties other than Mortgagor and with respect to all or any such interests and
properties as may be comprised of interests other than working interests or
which may be operated by parties other than Mortgagor, Mortgagor's covenants as
expressed in this Article III are modified to require that Mortgagor use its
best efforts to obtain compliance with such covenants by the working interest
owners or the operator or operators of such leases or properties.
Section 3.09 Abandon, Sales. The Mortgagor will not sell, lease,
assign, transfer or otherwise dispose or abandon any of the Mortgaged Property
except as permitted by the Credit Agreement.
Section 3.10 Failure to Perform. The Mortgagor agrees that if the
Mortgagor fails to perform any act or to take any action which the Mortgagor is
required to perform or take hereunder or pay any money which the Mortgagor is
required to pay hereunder, each of the Mortgagee and the Trustee in the
Mortgagor's name or its or their own name may, but shall not be obligated to,
perform or cause to perform such act or take such action or pay such money, and
any expenses so incurred by either of them and any money so paid by either of
them shall be a demand obligation owing by the Mortgagor to the Mortgagee or
the Trustee, as the case may be, and each of the Mortgagee and the Trustee,
upon making such payment, shall be subrogated to all of the rights of the
Person receiving such payment. Each amount due and owing by Mortgagor to each
of the Mortgagee and the Trustee pursuant to this Mortgage shall bear interest
from the date of such expenditure or payment or other occurrence which gives
rise to such amount being owed to such Person until paid at the rate for
overdue principal and interest set forth in Section 2.06(c) of the Credit
Agreement (the "Post-Default Rate"), and all such amounts together with such
interest thereon shall be a part of the Indebtedness described in Section 1.03
hereof.
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ARTICLE IV
Rights and Remedies
Section 4.01 Event of Default. An "Event of Default" under the
Credit Agreement shall be an Event of Default under this Mortgage.
Section 4.02 Foreclosure and Sale. If an Event of Default shall
occur and be continuing after any applicable notice and cure period provided
for in the Credit Agreement, Mortgagee shall have the right and option to
proceed with foreclosure by directing the Trustee, or his successors or
substitutes in trust, to proceed with foreclosure and to sell, to the extent
permitted by law, all or any portion of the Mortgaged Property at one or more
sales, as an entirety or in parcels, at such place or places in otherwise such
manner and upon such notice as may be required by law, or, in the absence of
any such requirement, as the Mortgagee may deem appropriate, and to make
conveyance to the purchaser or purchasers. Where the Mortgaged Property is
situated in more than one county, notice as above provided shall be posted and
filed in all such counties (if such notices are required by law), and all such
Mortgaged Property may be sold in any such county and any such notice shall
designate the county where such Mortgaged Property is to be sold. Nothing
contained in this Section 4.02 shall be construed so as to limit in any way the
Trustee's rights to sell the Mortgaged Property, or any portion thereof, by
private sale if, and to the extent that, such private sale is permitted under
the laws of the applicable jurisdiction or by public or private sale after
entry of a judgment by any court of competent jurisdiction so ordering.
Mortgagor hereby irrevocably appoints the Trustee to be the attorney of
Mortgagor and in the name and on behalf of Mortgagor to execute and deliver any
deeds, transfers, conveyances, assignments, assurances and notices which
Mortgagor ought to execute and deliver and do and perform any and all such acts
and things which Mortgagor ought to do and perform under the covenants herein
contained and generally, to use the name of Mortgagor in the exercise of all or
any of the powers hereby conferred on the Trustee. At any such sale: (i)
whether made under the power herein contained or any other legal enactment, or
by virtue of any judicial proceedings or any other legal right, remedy or
recourse, it shall not be necessary for Trustee to have physically present, or
to have constructive possession of, the Mortgaged Property (Mortgagor hereby
covenanting and agreeing to deliver to Trustee any portion of the Mortgaged
Property not actually or constructively possessed by Trustee immediately upon
demand by Trustee) and the title to and right of possession of any such
property shall pass to the purchaser thereof as completely as if the same had
been actually present and delivered to purchaser at such sale, (ii) each
instrument of conveyance executed by Trustee shall contain a general warranty
of title, binding upon Mortgagor and its successors and assigns, (iii) each and
every recital contained in any instrument of conveyance made by Trustee shall
conclusively establish the truth and accuracy of the matters recited therein,
including, without limitation, nonpayment of the Indebtedness, advertisement
and conduct of such sale in the manner provided herein and otherwise by law and
appointment of any successor Trustee hereunder, (iv) any and all prerequisites
to the validity thereof shall be conclusively presumed to have been performed,
(v) the receipt of Trustee or of such other party or officer making the sale
shall be a sufficient discharge to the purchaser or purchasers for its purchase
money and no such purchaser or purchasers, or its assigns or personal
representatives, shall thereafter be obligated to see to the application of
such purchase money, or be in any way answerable for any loss, misapplication
or nonapplication thereof, (vi) to the fullest extent permitted by law,
Mortgagor shall be completely and irrevocably divested of all of its right,
title, interest, claim and demand whatsoever, either at law or in equity, in
and to the property sold and such sale shall be a perpetual bar both at law and
in equity against Mortgagor, and against any and all other persons claiming or
to claim the property sold or any part thereof, by, through or under Mortgagor,
and (vii) to the extent and under such circumstances as are permitted by law,
Mortgagee may be a purchaser at any such sale, and shall have the right, after
paying or accounting for all costs of said sale or sales,
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to credit the amount of the bid upon the amount of the Indebtedness (in the
order of priority set forth in Section 4.13 hereof) in lieu of cash payment.
Section 4.03 Substitute Trustees and Agents. The Trustee or his
successor or substitute may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Trustee, including the posting of notices and the conduct of sale, but in the
name and on behalf of Trustee, his successor or substitute. If Trustee or his
successor or substitute shall have given notice of sale hereunder, any
successor or substitute trustee thereafter appointed may complete the sale and
the conveyance of the property pursuant thereto as if such notice had been
given by the successor or substitute trustee conducting the sale.
Section 4.04 Judicial Foreclosure; Receivership. If any of the
Indebtedness shall become due and payable and shall not be promptly paid, the
Trustee or Mortgagee shall have the right and power to proceed by a suit or
suits in equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of any power herein
granted, or for any foreclosure hereunder or for the sale of the Mortgaged
Property under the judgment or decree of any court or courts of competent
jurisdiction, or for the appointment of a receiver pending any foreclosure
hereunder or the sale of the Mortgaged Property under the order of a court or
courts of competent jurisdiction or under executory or other legal process, or
for the enforcement of any other appropriate legal or equitable remedy. Any
money advanced by the Trustee and/or Mortgagee in connection with any such
receivership shall be a demand obligation (which obligation Mortgagor hereby
expressly promises to pay) owing by Mortgagor to the Trustee and/or Mortgagee
and shall bear interest from the date of making such advance by the Trustee
and/or Mortgagee until paid at the Post Default Rate.
Section 4.05 Foreclosure for Installments. Mortgagee shall also
have the option to proceed with foreclosure in satisfaction of any installments
of the Indebtedness which have not been paid when due either through the courts
or by directing the Trustee or his successors in trust to proceed with
foreclosure in satisfaction of the matured but unpaid portion of the
Indebtedness as if under a full foreclosure, conducting the sale as herein
provided and without declaring the entire principal balance and accrued
interest due; such sale may be made subject to the unmatured portion of the
Indebtedness, and any such sale shall not in any manner affect the unmatured
portion of the Indebtedness, but as to such unmatured portion of the
Indebtedness this Mortgage shall remain in full force and effect just as though
no sale had been made hereunder. It is further agreed that several sales may
be made hereunder without exhausting the right of sale for any unmatured part
of the Indebtedness, it being the purpose hereof to provide for a foreclosure
and sale of the security for any matured portion of the Indebtedness without
exhausting the power to foreclose and sell the Mortgaged Property for any
subsequently maturing portion of the Indebtedness.
Section 4.06 Separate Sales The Mortgaged Property may be sold in
one or more parcels and in such manner and order as Mortgagee, in its sole
discretion, may elect, it being expressly understood and agreed that the right
of sale arising out of any Event of Default shall not be exhausted by any one
or more sales.
Section 4.07 Possession of Mortgaged Property. Mortgagor agrees to
the full extent that it lawfully may, that, in case one or more of the Events
of Default shall have occurred and shall not have been remedied, then, and in
every such case, the Trustee or Mortgagee shall have the right and power to
enter into and upon and take possession of all or any part of the Mortgaged
Property in the possession of Mortgagor, its successors or assigns, or its or
their agents or servants, and may exclude Mortgagor, its successors or assigns,
and all persons claiming under Mortgagor, and its or their agents or servants
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wholly or partly therefrom; and, holding the same, the Trustee may use,
administer, manage, operate and control the Mortgaged Property and conduct the
business thereof to the same extent as Mortgagor, its successors or assigns,
might at the time do and may exercise all rights and powers of Mortgagor, in
the name, place and stead of Mortgagor, or otherwise as the Trustee shall deem
best. All costs, expenses and liabilities of every character incurred by the
Trustee and/or Mortgagee in administering, managing, operating, and controlling
the Mortgaged Property shall constitute a demand obligation (which obligation
Mortgagor hereby expressly promises to pay) owing by Mortgagor to the Trustee
and/or Mortgagee and shall bear interest from date of expenditure until paid at
the Post Default Rate, all of which shall constitute a portion of the
Indebtedness and shall be secured by this Mortgage and all other Security
Instruments.
Section 4.08 Occupancy After Foreclosure. In the event there is a
foreclosure sale hereunder and at the time of such sale Mortgagor or
Mortgagor's heirs, devisees, representatives, successors or assigns or any
other person claiming any interest in the Mortgaged Property by, through or
under Mortgagor, are occupying or using the Mortgaged Property or any part
thereof, each and all shall immediately become the tenant of the purchaser at
such sale, which tenancy shall be a tenancy from day to day, terminable at the
will of either the landlord or tenant, or at a reasonable rental per day based
upon the value of the property occupied, such rental to be due daily to the
purchaser; to the extent permitted by applicable law, the purchaser at such
sale shall, notwithstanding any language herein apparently to the contrary,
have the sole option to demand immediate possession following the sale or to
permit the occupants to remain as tenants at will. In the event the tenant
fails to surrender possession of said property upon demand, the purchaser shall
be entitled to institute and maintain a summary action for possession of the
Mortgaged Property (such as an action for forcible entry and detainer) in any
court having jurisdiction.
Section 4.09 Remedies Cumulative, Concurrent and Nonexclusive.
Every right, power and remedy herein given to the Trustee or Mortgagee shall be
cumulative and in addition to every other right, power and remedy herein
specifically given or now or hereafter existing in equity, at law or by statute
(including specifically those granted by the Texas UCC and applicable to the
Mortgage Property or any portion thereof) each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and so often and in such order as may be deemed expedient by
the Trustee or Mortgagee, and the exercise, or the beginning of the exercise,
of any such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter any other right, power or remedy. No
delay or omission by the Trustee or Mortgagee in the exercise of any right,
power or remedy shall impair any such right, power or remedy or operate as a
waiver thereof or of any other right, power or remedy then or thereafter
existing.
Section 4.10 No Release of Obligations. Neither Mortgagor, any
guarantor nor any other person hereafter obligated for payment of all or any
part of the Indebtedness shall be relieved of such obligation by reason of (a)
the failure of Trustee to comply with any request of Mortgagor, or any
guarantor or any other person so obligated to foreclose the lien of this
Mortgage or to enforce any provision hereunder or under the Credit Agreement;
(b) the release, regardless of consideration, of the Mortgaged Property or any
portion thereof or interest therein or the addition of any other property to
the Mortgaged Property; (c) any agreement or stipulation between any subsequent
owner of the Mortgaged Property and Mortgagee extending, renewing, rearranging
or in any other way modifying the terms of this Mortgage without first having
obtained the consent of, given notice to or paid any consideration to
Mortgagor, any guarantor or such other person, and in such event Mortgagor,
guarantor and all such other persons shall continue to be liable to make
payment according to the terms of any such extension or modification agreement
unless expressly released and discharged in writing by Mortgagee; or (d) by
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any other act or occurrence save and except the complete payment of the
Indebtedness and the complete fulfillment of all obligations hereunder or under
the Credit Agreement.
Section 4.11 Release of and Resort to Collateral. Mortgagee may
release, regardless of consideration, any part of the Mortgaged Property
without, as to the remainder, in any way impairing, affecting, subordinating or
releasing the lien or security interest created in or evidenced by this
Mortgage or its stature as a first and prior lien and security interest in and
to the Mortgaged Property, and without in any way releasing or diminishing the
liability of any person or entity liable for the repayment of the Indebtedness.
For payment of the Indebtedness, Mortgagee may resort to any other security
therefor held by Mortgagee or Trustee in such order and manner as Mortgagee may
elect.
Section 4.12 Waiver of Redemption, Notice and Marshalling of Assets,
Etc. To the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to
Mortgagor by virtue of any present or future moratorium law or other law
exempting the Mortgaged Property from attachment, levy or sale on execution or
providing for any appraisement, valuation, stay of execution, exemption from
civil process, redemption or extension of time for payment; (b) except as
provided in the Credit Agreement, all notices of any Event of Default or of
Mortgagee's intention to accelerate maturity of the Indebtedness or of
Trustee's election to exercise or his actual exercise of any right, remedy or
recourse provided for hereunder or under the Credit Agreement; and (c) any
right to a marshalling of assets or a sale in inverse order of alienation. If
any law referred to in this Mortgage and now in force, of which Mortgagor or
its successor or successors might take advantage despite the provisions hereof,
shall hereafter be repealed or cease to be in force, such law shall thereafter
be deemed not to constitute any part of the contract herein contained or to
preclude the operation or application of the provisions hereof.
Section 4.13 Discontinuance of Proceedings In case Mortgagee shall
have proceeded to invoke any right, remedy or recourse permitted hereunder or
under the Credit Agreement and shall thereafter elect to discontinue or abandon
same for any reason, Mortgagee shall have the unqualified right so to do and,
in such an event, Mortgagor and Mortgagee shall be restored to their former
positions with respect to the Indebtedness this Mortgage, the Credit Agreement,
the Mortgaged Property and otherwise, and the rights, remedies, recourses and
powers of Mortgagee shall continue as if same had never been invoked.
Section 4.14 Application of Proceeds. The proceeds of any sale of
the Mortgaged Property or any part thereof and all other monies received by the
Trustee in any proceedings for the enforcement hereof, whose application has
not elsewhere herein been specifically provided for, shall be applied:
(a) first, to the payment of all expenses incurred by the Trustee or
Mortgagee incident to the enforcement of this Mortgage, the Credit Agreement or
any of the Indebtedness (including, without limiting the generality of the
foregoing, expenses of any entry or taking of possession, of any sale, of
advertisement thereof, and of conveyances, and court costs, compensation of
agents and employees, and legal fees), and to the payment of all other charges,
expenses, liabilities and advances incurred or made by the Trustee or Mortgagee
under this Mortgage or in executing any trust or power hereunder;
(b) second to payment of the Indebtedness in such order and manner as
Mortgagee may elect; and
(c) third, to Mortgagor; or as otherwise required by any Governmental
Requirement.
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<PAGE> 15
Section 4.15 Resignation of Operator. In addition to all rights and
remedies under this Mortgage, at law and in equity, if any Event of Default
shall occur and Trustee or the Mortgagee shall exercise any remedies under this
Mortgage with respect to any portion of the Mortgaged Property (or Mortgagor
shall transfer any Mortgaged Property "in lieu of" foreclosure), the Mortgagee
or the Trustee shall have the right to request that any operator of any
Mortgaged Property, to the extent such operator is either Mortgagor or any
Affiliate of Mortgagor, resign as operator under the joint operating agreement
applicable thereto, and no later than 60 days after receipt by Mortgagor of any
such request, Mortgagor shall resign (or cause such other party to resign) as
operator of such Mortgaged Property.
Section 4.16 INDEMNITY. IN CONNECTION WITH ANY ACTION TAKEN BY THE
TRUSTEE AND/OR MORTGAGEE PURSUANT TO THIS MORTGAGE, THE TRUSTEE AND/OR
MORTGAGEE AND THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS,
ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") SHALL NOT BE LIABLE
FOR ANY LOSS SUSTAINED BY MORTGAGOR RESULTING FROM AN ASSERTION THAT MORTGAGEE
HAS RECEIVED FUNDS FROM THE PRODUCTION OF HYDROCARBONS CLAIMED BY THIRD PERSONS
OR ANY ACT OR OMISSION OF ANY INDEMNIFIED PARTY IN ADMINISTERING, MANAGING,
OPERATING OR CONTROLLING THE MORTGAGED PROPERTY INCLUDING SUCH LOSS WHICH MAY
RESULT FROM THE ORDINARY NEGLIGENCE OF AN INDEMNIFIED PARTY UNLESS SUCH LOSS IS
CAUSED BY THE WILLFUL MISCONDUCT OR BAD FAITH OF AN INDEMNIFIED PARTY, NOR
SHALL THE TRUSTEE AND/OR MORTGAGEE BE OBLIGATED TO PERFORM OR DISCHARGE ANY
OBLIGATION, DUTY OR LIABILITY OF MORTGAGOR. MORTGAGOR SHALL AND DOES HEREBY
AGREE TO INDEMNIFY EACH INDEMNIFIED PARTY FOR, AND TO HOLD EACH INDEMNIFIED
PARTY HARMLESS FROM, ANY AND ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT
BE INCURRED BY ANY INDEMNIFIED PARTY BY REASON OF THIS MORTGAGE OR THE EXERCISE
OF RIGHTS OR REMEDIES HEREUNDER; SHOULD THE TRUSTEE AND/OR MORTGAGEE MAKE ANY
EXPENDITURE ON ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT
THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, SHALL BE A
DEMAND OBLIGATION (WHICH OBLIGATION MORTGAGOR HEREBY EXPRESSLY PROMISES TO PAY)
OWING BY MORTGAGOR TO THE TRUSTEE AND/OR MORTGAGEE AND SHALL BEAR INTEREST FROM
THE DATE EXPENDED UNTIL PAID AT THE POST-DEFAULT RATE, SHALL BE A PART OF THE
INDEBTEDNESS AND SHALL BE SECURED BY THIS MORTGAGE AND ANY OTHER SECURITY
INSTRUMENT. THE LIABILITIES OF THE MORTGAGOR AS SET FORTH IN THIS SECTION 4.15
SHALL SURVIVE THE TERMINATION OF THIS MORTGAGE.
ARTICLE V
The Trustee
Section 5.01 Duties, Rights, and Powers of Trustee. It shall be no
part of the duty of the Trustee to see to any recording, filing or registration
of this Mortgage or any other instrument in addition or supplemental thereto,
or to give any notice thereof, or to see to the payment of or be under any duty
in respect of any tax or assessment or other governmental charge which may be
levied or assessed on the Mortgaged Property, or any part thereof, or against
Mortgagor, or to see to the performance or observance by Mortgagor of any of
the covenants and agreements contained herein. The Trustee shall not be
responsible for the execution, acknowledgment or validity of this Mortgage or
of any instrument in addition or supplemental hereto or for the sufficiency of
the security purported to be created hereby, and makes no representation in
respect thereof or in respect of the rights of Mortgagee. The Trustee shall
have the right to advise with counsel upon any matters arising hereunder and
shall be fully protected in relying as to legal matters on the advice of
counsel. The Trustee shall not incur any personal liability hereunder except
for Trustee's own willful misconduct; and the Trustee shall have the right to
rely on
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<PAGE> 16
any instrument, document or signature authorizing or supporting any action
taken or proposed to be taken by him hereunder, believed by him in good faith
to be genuine.
Section 5.02 Successor Trustee. The Trustee may resign by written
notice addressed to Mortgagee or be removed at any time with or without cause
by an instrument in writing duly executed on behalf of Mortgagee. In case of
the death, resignation or removal of the Trustee, a successor trustee may be
appointed by Mortgagee by instrument of substitution complying with any
applicable requirements of law, or, in the absence of any such requirement,
without other formality than appointment and designation in writing. Written
notice of such appointment and designation shall be given by Mortgagee to
Mortgagor, but the validity of any such appointment shall not be impaired or
affected by failure to give such notice or by any defect therein. Such
appointment and designation shall be full evidence of the right and authority
to make the same and of all the facts therein recited, and, upon the making of
any such appointment and designation, this Mortgage shall vest in the successor
trustee all the estate and title in and to all of the Mortgaged Property, and
the successor trustee shall thereupon succeed to all of the rights, powers,
privileges, immunities and duties hereby conferred upon the Trustee named
herein, and one such appointment and designation shall not exhaust the right to
appoint and designate a successor trustee hereunder but such right may be
exercised repeatedly as long as any Indebtedness remains unpaid hereunder. To
facilitate the administration of the duties hereunder, Mortgagee may appoint
multiple trustees to serve in such capacity or in such jurisdictions as
Mortgagee may designate.
Section 5.03 Retention of Moneys. All moneys received by 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 in any manner
from any other moneys (except to the extent required by law), and Trustee shall
be under no liability for interest on any moneys received by him hereunder.
ARTICLE VI
Miscellaneous
Section 6.01 Instrument Construed as Mortgage, Etc. With respect to
any portions of the Mortgaged Property located in any state or other
jurisdiction the laws of which do not provide for the use or enforcement of a
deed of trust or the office, rights and authority of the Trustee as herein
provided, the general language of conveyance hereof to the Trustee is intended
and the same shall be construed as words of mortgage unto and in favor of
Mortgagee and the rights and authority granted to the Trustee herein may be
enforced and asserted by Mortgagee in accordance with the laws of the
jurisdiction in which such portion of the Mortgaged Property is located and the
same may be foreclosed at the option of Mortgagee as to any or all such
portions of the Mortgaged Property in any manner permitted by the laws of the
jurisdiction in which such portions of the Mortgaged Property is situated.
This Mortgage may be construed as a mortgage, deed of trust, chattel mortgage,
conveyance, assignment, security agreement, pledge, financing statement,
hypothecation or contract, or any one or more of them, in order fully to
effectuate the lien hereof and the purposes and agreements herein set forth.
Section 6.02 Release of Mortgage. If all Indebtedness secured
hereby shall be paid and the Credit Agreement terminated, Mortgagee shall
forthwith cause satisfaction and discharge of this Mortgage to be entered upon
the record at the expense of Mortgagor and shall execute and deliver or cause
to be executed and delivered such instruments of satisfaction and reassignment
as may be appropriate. Otherwise, this Mortgage shall remain and continue in
full force and effect.
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<PAGE> 17
Section 6.03 Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of the Trustee and Mortgagee in order to
effectuate the provisions hereof, and the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
Section 6.04 Successors and Assigns of Parties. The term
"Mortgagee" as used herein shall mean and include any legal owner, holder,
assignee or pledgee of any of the Indebtedness secured hereby. The terms used
to designate Trustee, Mortgagee and Mortgagor shall be deemed to include the
respective heirs, legal representatives, successors and assigns of such
parties.
Section 6.05 Satisfaction of Prior Encumbrance. To the extent that
proceeds of the Credit Agreement are used to pay indebtedness secured by any
outstanding lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced by Mortgagee at
Mortgagor's request, and Mortgagee shall be subrogated to any and all rights,
security interests and liens owned by any owner or holder of such outstanding
liens, security interests, charges or encumbrances, irrespective of whether
said liens, security interests, charges or encumbrances are released, and it is
expressly understood that, in consideration of the payment of such other
indebtedness by Mortgagee, Mortgagor hereby waives and releases all demands and
causes of action for offsets and payments to, upon and in connection with the
said indebtedness.
Section 6.06 Subrogation of Trustee. This Mortgage is made with
full substitution and subrogation of the Trustee and his successors in this
trust and his and their assigns in and to all covenants and warranties by
others heretofore given or made in respect of the Mortgaged Property or any
part thereof.
Section 6.07 Nature of Covenants. The covenants and agreements
herein contained shall constitute covenants running with the land and interests
covered or affected hereby and shall be binding upon the heirs, legal
representatives, successors and assigns of the parties hereto.
Section 6.08 Notices. All notices, requests, consents, demands and
other communications required or permitted hereunder shall be in writing and
shall be deemed sufficiently given or furnished if delivered by registered or
certified United States mail, postage prepaid, or by personal service
(including express or courier service) at the addresses specified at the end of
this Mortgage (unless changed by similar notice in writing given by the
particular party whose address is to be changed). Any such notice or
communication shall be deemed to have been given either at the time of personal
delivery or, in the case of delivery at the address and in the manner provided
herein, upon receipt; provided that, service of notice as required by the laws
of any state in which portions of the Mortgaged Property may be situated shall
for all purposes be deemed appropriate and sufficient with the giving of such
notice.
Section 6.09 Counterparts. This Mortgage is being executed in
several counterparts, all of which are identical, except that to facilitate
recordation, if the Mortgaged Property is situated in more than one county,
only those portions of the description of the Mortgaged Property attached
hereto as Exhibit A located in the county in which a particular counterpart is
recorded shall be attached hereto. A complete Exhibit A will be attached to
that certain counterpart to be attached to a Financing Statement and filed with
the Secretary of State of Texas in the Uniform Commercial Code Records. Each
of such counterparts shall for all purposes be deemed to be an original and all
such counterparts shall together constitute but one and the same instrument.
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SECTION 6.10 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS MORTGAGE; AND AGREES THAT
IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS MORTGAGE; THAT IT
HAS IN FACT READ THIS MORTGAGE AND IS FULLY INFORMED AND HAS FULL NOTICE AND
KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS MORTGAGE; THAT IT HAS
BEEN REPRESENTED BY LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS
PRECEDING ITS EXECUTION OF THIS MORTGAGE; AND HAS RECEIVED THE ADVICE OF ITS
ATTORNEY IN ENTERING INTO THIS MORTGAGE; AND THAT IT RECOGNIZES THAT CERTAIN OF
THE TERMS OF THIS MORTGAGE RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS MORTGAGE ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."
WITNESS THE EXECUTION HEREOF, this 19th day of April, 1994, to be
effective as of the 20th day of April, 1994 (the "Effective Date").
MORTGAGOR:
TESORO EXPLORATION AND PRODUCTION COMPANY
By: /s/ William T. VanKleef
-------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
The name and address of the Debtor/Mortgagor is:
TESORO EXPLORATION AND
PRODUCTION COMPANY
8700 Tesoro Drive
San Antonio, Texas 78217
The name and address of the Secured Party/Mortgagee is:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, AS AGENT
712 Main Street
Houston, Texas 77002
-15-
<PAGE> 19
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
THIS INSTRUMENT was acknowledged before me on April 19, 1994 by William T.
VanKleef, Vice President and Treasurer of Tesoro Exploration and Production
Company, a Delaware corporation, on behalf of such corporation.
/s/ Anne A. Griffin
--------------------
Notary Public in and for the
State of TEXAS
<PAGE> 20
FINANCING STATEMENT
This Financing Statement is presented to a Filing Officer for filing pursuant
to the Uniform Commercial Code.
1. The name and address of the Debtor is:
TESORO EXPLORATION AND PRODUCTION COMPANY
8700 Tesoro Drive
San Antonio, Texas 78217
2. The name and address of Secured Party is:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Agent
712 Main Street
Houston, Texas 77002
3. This Financing Statement covers the following Collateral:
All of Debtor's rights, titles and interests in and to the accounts,
equipment, goods, fixtures, general intangibles, inventory and any and all
other personal property of any kind or character described in and covered
by the Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement from Debtor to the Trustee named therein
and Secured Party, a copy of which instrument is attached hereto as
Exhibit "A" and made a part hereof for all purposes, and the proceeds and
products of such personal property.
DEBTOR:
TESORO EXPLORATION AND
PRODUCTION COMPANY
By: /s/ William T. VanKleef
-------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
-16-
<PAGE> 1
EXHIBIT 10.4
WHEN RECORDED RETURN TO:
VINSON & ELKINS L.L.P.
First City Tower, Suite 2669
1001 Fannin Street
Houston, TX 77002-6760
Attn: Crystal L. Lightfield
(Kenai Refinery)
DEED OF TRUST,
SECURITY AGREEMENT AND FINANCING STATEMENT
AMONG
TESORO ALASKA PETROLEUM COMPANY,
AS TRUSTOR
AND
TRANSALASKA TITLE INSURANCE AGENCY, INC., AS TRUSTEE
AND
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, AS AGENT,
AS BENEFICIARY
DATED AS OF APRIL 20, 1994
THIS INSTRUMENT COVERS, AMONG OTHER PROPERTY, GOODS WHICH ARE OR MAY BECOME
FIXTURES ON REAL PROPERTY DESCRIBED ON EXHIBIT A HERETO, AND IS TO BE FILED FOR
RECORD IN THE REAL ESTATE RECORDS AS BOTH A MORTGAGE OF REAL PROPERTY AND AS A
FIXTURES FINANCING STATEMENT UNDER THE UNIFORM COMMERCIAL CODE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
Definitions
<S> <C> <C>
Section 1.01 Terms Defined Above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.03 Other Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
Grant of Lien and Indebtedness Secured
Section 2.01 Grant of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.02 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.03 Indebtedness Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.04 Fixture Filing, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
Representations, Warranties and Covenants
Section 3.01 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.02 Defend Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.03 Not a Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.04 Power to Create Lien and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.05 Abandon, Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.06 Failure to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.07 Maintenance of Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
Rights and Remedies
Section 4.01 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.02 Foreclosure and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.03 Substitute Trustees and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.04 Judicial Foreclosure; Receivership . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.05 Foreclosure for Installments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.06 Separate Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.07 Possession of Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.08 Occupancy After Foreclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.09 Remedies Cumulative, Concurrent and Nonexclusive . . . . . . . . . . . . . . . . . . . . 8
Section 4.10 No Release of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.11 Release of and Resort to Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.12 Waiver of Redemption, Notice and Marshalling of Assets, Etc . . . . . . . . . . . . . . 9
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.13 Discontinuance of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.14 Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.15 INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V
The Trustee
Section 5.01 Duties, Rights, and Powers of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.02 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.03 Retention of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI
Miscellaneous
Section 6.01 Instrument Construed as Deed of Trust, Etc. . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.02 Release of Deed of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.03 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.04 Successors and Assigns of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.05 Satisfaction of Prior Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.06 Subrogation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.07 Nature of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.08 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.11 EXCULPATION PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit A - Mortgaged Property
</TABLE>
-ii-
<PAGE> 4
DEED OF TRUST,
SECURITY AGREEMENT AND FINANCING STATEMENT
This DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT is entered
into as of the effective time and date hereinafter stated (the "Effective
Date") among TESORO ALASKA PETROLEUM COMPANY, a Delaware corporation, whose
address for notice hereunder is 8700 Tesoro Drive, San Antonio, Texas 78217
("Trustor"), TRANSALASKA TITLE INSURANCE AGENCY, INC., an Alaska corporation,
whose address is 400 W. Tudor Road, Anchorage, Alaska 99503 (including any
successor trustee at the time acting as such hereunder, "Trustee") and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, as Agent
for the benefit of the Issuing Banks and the Lenders, with offices and banking
quarters at 712 Main Street, Houston, Texas 77002 ("Beneficiary").
R E C I T A L S:
A. On even date herewith, Tesoro Petroleum Corporation (the "Company"),
Texas Commerce Bank National Association, individually, as Agent and as an
Issuing Bank, Banque Paribas, individually, as Co-Agent and as an Issuing Bank,
and the other financial institutions parties thereto are executing a Credit
Agreement (as amended from time to time, the "Credit Agreement").
B. The Lenders and the Issuing Banks have conditioned their obligations
under the Credit Agreement upon the execution and delivery by Trustor of this
Deed of Trust, and Trustor has agreed to enter into this Deed of Trust.
C. Therefore, in order to comply with the terms and conditions of the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Trustor hereby agrees with
Beneficiary as follows:
ARTICLE I
Definitions
Section 1.01 Terms Defined Above. As used in this Deed of Trust, the
terms "Beneficiary," "Company," "Credit Agreement," "Effective Date," "Trustee"
and "Trustor" shall have the meanings respectively assigned to them.
Section 1.02 Definitions. As used in this Deed of Trust, the following
terms shall have the meanings herein specified (to be equally applicable to
both the singular and plural forms of the terms defined):
"Alaska UCC" shall mean the Uniform Commercial Code as presently in
effect in the state of Alaska.
"Deed of Trust" shall mean this Deed of Trust, Security Agreement and
Financing Statement as the same may from time to time be amended,
supplemented or otherwise modified.
"Improvements" shall mean all improvements owned by Trustor now or
hereafter attached to or placed, erected, constructed or developed on the
Kenai Refinery Premises (excluding the Property leased pursuant to the
Solar Turbine Lease).
<PAGE> 5
"Indebtedness" shall have the meaning assigned to such term in
Section 2.03.
"Kenai Refinery Premises" shall mean the real property owned by
Trustor described on Exhibit A attached hereto.
"Kenai Refinery Related Property" shall mean (i) all Improvements;
(ii) all Refinery Personal Property; (iii) all water and water rights
pertaining to the Kenai Refinery Premises; (iv) all building materials and
equipment now or hereafter delivered to and intended to be installed in or
on the Kenai Refinery Premises or on the Improvements; (v) all plans and
specifications for the Improvements; (vi) all rights of Trustor (but not
its obligations) under any contracts relating to the Kenai Refinery
Premises, the Improvements or the Refinery Personal Property, including
without limitation, the Solar Turbine Lease, but excluding contract rights
under contracts containing prohibitions against assignment of or the
granting of a security interest in the rights of a party thereunder; (vii)
all rights of Trustor (but not its obligations) under any accounts,
construction contracts, architectural agreements and general intangibles,
other than contract rights under contracts containing prohibitions against
assignment of or the granting of a security interest in the rights of a
party thereunder, (but excluding trademarks, trade names and symbols)
arising from or by virtue of any transactions related to the Kenai
Refinery Premises, Improvements or Refinery Personal Property; (viii) all
permits, licenses, franchises, certificates, and other rights and
privileges obtained in connection with the Kenai Refinery Premises, the
Improvements and the Refinery Personal Property; (ix) all proceeds arising
from or by virtue of the sale, lease or other disposition of the Kenai
Refinery Premises, the Improvements or the Refinery Personal Property; (x)
all proceeds of each policy of insurance relating to the Kenai Refinery
Premises, the Improvements or the Refinery Personal Property; (xi) all
proceeds from the taking of any of the Kenai Refinery Premises, the
Improvements, the Refinery Personal Property or any rights appurtenant
thereto by right of eminent domain or by private or other purchase in lieu
thereof, including change of grade of streets, curb cuts or other rights
of access, for any public or quasi-public use under any Governmental
Requirement; (xii) all right, title and interest of Trustor in and to all
streets, roads, public places, easements and rights-of-way, existing or
proposed, public or private, adjacent to or used in connection with,
belonging or pertaining to the Kenai Refinery Premises; (xiii) all of the
leases, rents, royalties, bonuses, issues, profits, revenues or other
benefits of the Kenai Refinery Premises, the Improvements or the Refinery
Personal Property, including without limitation, cash or securities
deposited pursuant to leases to secure performance by the lessees of their
obligations thereunder; (xiv) all consumer goods located in, on or about
the Kenai Refinery Premises or the Improvements or used in connection with
the use or operation thereof; (xv) all rights, hereditaments and
appurtenances pertaining to the foregoing; and (xvi) all other interests
of every kind and character that Trustor now has or at any time hereafter
acquires in and to the Kenai Refinery Premises, Improvements and Refinery
Personal Property described herein and all Property that is used or useful
in connection therewith, including, without limitation, rights of ingress
and egress and all reversionary rights or interests of Trustor with
respect to such Kenai Refinery Premises, Improvements or Refinery Personal
Property.
"Mortgaged Property" shall mean the Kenai Refinery Premises and the
Kenai Refinery Related Property.
"Permitted Encumbrances" shall have the meaning assigned to such term
in Section 3.01.
"Post-Default Rate" shall have the meaning assigned to such term in
Section 3.06.
-2-
<PAGE> 6
"Refinery Personal Property" shall mean all equipment, fixtures,
furnishings, inventory and articles of personal property of Trustor
(excluding from the foregoing the Property leased pursuant to the Solar
Turbine Lease) now or hereafter attached to or used in or about the
Improvements or that are necessary or useful for the complete and
comfortable use and occupancy of the Improvements for the purposes for
which they were or are to be attached, placed, erected, constructed or
developed, or which are or may be used in or related to the planning,
development, financing or operation of the Improvements, and all renewals
of or replacements or substitutions for any of the foregoing, whether or
not the same are or shall be attached to the Kenai Refinery Premises or
the Improvements.
Section 1.03 Other Defined Terms. Any capitalized term used in this
Deed of Trust and not defined in this Deed of Trust shall have the meaning
assigned to such term in the Credit Agreement.
ARTICLE II
Grant of Lien and Indebtedness Secured
Section 2.01 Grant of Liens. To secure payment of the Indebtedness and
the performance of the covenants and obligations herein contained, Trustor does
by these presents hereby GRANT, BARGAIN, SELL, ASSIGN, MORTGAGE, TRANSFER and
CONVEY unto Trustee and Trustee's successors and substitutes in trust
hereunder, with power of sale, for the use and benefit of Beneficiary, all of
Trustor's rights, titles, interests and estates in and to the Mortgaged
Property.
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to
Trustee's successors and assigns forever to secure the payment of the
Indebtedness (hereinafter defined) and to secure the performance of the
covenants, agreements, and obligations of the Trustor herein contained.
Section 2.02 Grant of Security Interest. To further secure the
Indebtedness, Trustor hereby grants to Beneficiary a security interest in and
to the Mortgaged Property (whether now or hereafter acquired by operation of
law or otherwise) insofar as the Mortgaged Property consists of equipment,
accounts, contract rights, general intangibles, insurance contracts, insurance
proceeds, inventory, Hydrocarbons, fixtures and any and all other personal
property of any kind or character defined in and subject to the provisions of
the Alaska UCC, including the proceeds and products from any and all of such
personal property. Upon the happening of any of the Events of Default,
Beneficiary is and shall be entitled to all of the rights, powers and remedies
afforded a secured party by the Alaska UCC with reference to the personal
property and fixtures in which Beneficiary has been granted a security interest
herein, or the Trustee or Beneficiary may proceed as to both the real and
personal property covered hereby in accordance with the rights and remedies
granted under this Deed of Trust in respect of the real property covered
hereby. Such rights, powers and remedies shall be cumulative and in addition
to those granted to the Trustee or Beneficiary under any other provision of
this Deed of Trust or under any other Security Instrument. Written notice
mailed to Trustor as provided herein at least fifteen (15) days prior to the
date of public sale of any part of the Mortgaged Property which is personal
property subject to the provisions of the Alaska UCC, or prior to the date
after which private sale of any such part of the Mortgaged Property will be
made, shall constitute reasonable notice.
Section 2.03 Indebtedness Secured. This Deed of Trust is executed and
delivered by Trustor to secure and enforce the following (the "Indebtedness"):
-3-
<PAGE> 7
(a) Payment of and performance of any and all indebtedness, obligations
and liabilities of Trustor pursuant to that certain Guaranty Agreement of even
date herewith executed by the Trustor, among others, in favor of the Agent, the
Issuing Banks and the Lenders (as the same may from time to time be amended,
supplemented or otherwise modified, the "Guaranty Agreement"), guaranteeing the
prompt and complete payment when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations (as defined in the Guaranty
Agreement) including, without limitation, the Letters of Credit and the Notes
evidencing Revolving Credit Loans and Term Loans the proceeds of which may be
disbursed over time, then satisfied in whole or in part, and then disbursed
again over time, which indebtedness, obligations and liabilities will have a
total principal balance from time to time of not more than $125,000,000.
(b) Any sums which may be advanced or paid by Beneficiary or any Lender
under the terms hereof on account of the failure of Trustor to comply with the
covenants of the Trustor contained herein or in the Credit Agreement; and all
other indebtedness of Trustor arising pursuant to the provisions of this Deed
of Trust.
The Indebtedness which is secured by this Deed of Trust, if not sooner
paid, is all due and payable on the 31st day of March, 1998. For the purpose
of AS 34.20.150, the period of this Deed of Trust and the date when this Deed
of Trust matures is six (6) years after said date.
THE INDEBTEDNESS IS SENIOR DEBT AS SUCH TERM IS DEFINED IN THAT CERTAIN
SUBORDINATION AGREEMENT DATED DECEMBER 15, 1992 AMONG TRUSTOR, THE COMPANY AND
THE STATE OF ALASKA ATTACHED AS EXHIBIT 7 TO THE SETTLEMENT AGREEMENT DATED
DECEMBER 15, 1992 AMONG TRUSTOR, THE COMPANY AND THE STATE OF ALASKA.
Section 2.04 Fixture Filing, Etc. Without in any manner limiting the
generality of any of the other provisions of this Deed of Trust: (i) some
portions of the goods described or to which reference is made herein are or are
to become fixtures on the land described or to which reference is made herein
or on attached Exhibit A; (ii) this Deed of Trust is to be filed of record in
the real estate records as a financing statement, and (iii) Trustor is the
record owner of the real estate or interests in the real estate comprised of
the Mortgaged Property.
ARTICLE III
Representations, Warranties and Covenants
Trustor hereby represents, warrants and covenants as follows:
Section 3.01 Title. To the extent of the undivided interests specified
on attached Exhibit A, Trustor has good and indefeasible title to and is
possessed of the Mortgaged Property. The Mortgaged Property is free of any and
all Liens, except Liens allowed by Section 5.04(b) of the Credit Agreement and
Liens described on Exhibit B hereto (collectively, the "Permitted
Encumbrances").
Section 3.02 Defend Title. Subject only to the Permitted Encumbrances,
this Deed of Trust is, and always will be kept, a direct first lien and
security interest upon the Mortgaged Property and Trustor will not create or
suffer to be created or permit to exist any lien, security interest or charge
prior or junior to or on a parity with the lien and security interest of this
Deed of Trust upon the Mortgaged Property or any part thereof or upon the
rents, issues, revenues, profits and other income therefrom,
-4-
<PAGE> 8
except as permitted by Section 5.04(b)(xv) of the Credit Agreement. Trustor
will warrant and defend the title to the Mortgaged Property against the claims
and demands of all other persons whomsoever and will maintain and preserve the
lien created hereby so long as any of the Indebtedness secured hereby remains
unpaid. Should an adverse claim be made against or a cloud develop upon the
title to any part of the Mortgaged Property, Trustor agrees it will immediately
defend against such adverse claim or take appropriate action to remove such
cloud at Trustor's cost and expense, and Trustor further agrees that the
Trustee and/or Beneficiary may take such other action as they deem advisable to
protect and preserve their interests in the Mortgaged Property, and in such
event Trustor will indemnify the Trustee and Beneficiary against any and all
cost, attorney's fees and other expenses which they may incur in defending
against any such adverse claim or taking action to remove any such cloud.
Section 3.03 Not a Foreign Person. Trustor is not a "foreign person"
within the meaning of the Internal Revenue Code of 1986, as amended
(hereinafter called the "Code"), Sections 1445 and 7701 (i.e. Trustor is not a
non-resident alien, foreign corporation, foreign partnership, foreign trust or
foreign estate as those terms are defined in the Code and any regulations
promulgated thereunder).
Section 3.04 Power to Create Lien and Security. The Trustor has full
power and lawful authority to grant, bargain, sell, assign, transfer, mortgage,
and convey a lien and security interest in all of the Mortgaged Property in the
manner and form herein provided and without obtaining the authorization,
approval, consent or waiver of any lessor, sublessor, Governmental Authority or
other party or parties whomsoever.
Section 3.05 Abandon, Sales. The Trustor will not sell, lease, assign,
transfer or otherwise dispose or abandon any of the Mortgaged Property except
as permitted by the Credit Agreement.
Section 3.06 Failure to Perform. The Trustor agrees that if the Trustor
or the Company fails to perform any act or to take any action which the Trustor
or the Company is required to perform or take hereunder or under the Credit
Agreement or pay any money which the Trustor or the Company is required to pay
hereunder or under the Credit Agreement, each of the Beneficiary and the
Trustee in the Trustor's name or its or their own name may, but shall not be
obligated to, perform or cause to perform such act or take such action or pay
such money, and any expenses so incurred by either of them and any money so
paid by either of them shall be a demand obligation owing by the Trustor and
the Company, jointly and severally, to the Beneficiary or the Trustee, as the
case may be, and each of the Beneficiary and the Trustee, upon making such
payment, shall be subrogated to all of the rights of the Person receiving such
payment. Each amount due and owing by Trustor and the Company to each of the
Beneficiary and the Trustee pursuant to this Deed of Trust shall bear interest
from the date of such expenditure or payment or other occurrence which gives
rise to such amount being owed to such Person until paid at the rate for
overdue principal and interest set forth in Section 2.06(c) of the Credit
Agreement (the "Post-Default Rate"), and all such amounts together with such
interest thereon shall be a part of the Indebtedness described in Section 1.03
hereof.
Section 3.07 Maintenance of Mortgaged Property. Trustor will keep the
Mortgaged Property in good condition and repair and will not commit or permit
any waste, impairment or deterioration of the same and generally will not do
any act by which the value of the Mortgaged Property may become impaired. Nor
shall any Improvements or Refinery Personal Property be destroyed or removed
from the Kenai Refinery Premises without the written consent of Beneficiary.
-5-
<PAGE> 9
ARTICLE IV
Rights and Remedies
Section 4.01 Event of Default. An "Event of Default" under the Credit
Agreement shall be an Event of Default under this Deed of Trust.
Section 4.02 Foreclosure and Sale. If an Event of Default shall occur
and be continuing, Beneficiary shall have the right and option to proceed with
foreclosure by directing the Trustee, or his successors or substitutes in
trust, to proceed with foreclosure and to sell, to the extent permitted by law,
all or any portion of the Mortgaged Property at one or more sales, as an
entirety or in parcels, at such place or places in otherwise such manner and
upon such notice as may be required by law, or, in the absence of any such
requirement, as the Beneficiary may deem appropriate, and to make conveyance to
the purchaser or purchasers. Where the Mortgaged Property is situated in more
than one judicial district, notice as above provided shall be posted and filed
in all such judicial districts (if such notices are required by law), and all
such Mortgaged Property may be sold in any such judicial district and any such
notice shall designate the judicial district where such Mortgaged Property is
to be sold. Nothing contained in this Section 4.02 shall be construed so as to
limit in any way the Trustee's rights to sell the Mortgaged Property, or any
portion thereof, by private sale if, and to the extent that, such private sale
is permitted under the laws of the applicable jurisdiction or by public or
private sale after entry of a judgment by any court of competent jurisdiction
so ordering. Trustor hereby irrevocably appoints the Trustee to be the
attorney of Trustor and in the name and on behalf of Trustor to execute and
deliver any deeds, transfers, conveyances, assignments, assurances and notices
which Trustor ought to execute and deliver and do and perform any and all such
acts and things which Trustor ought to do and perform under the covenants
herein contained and generally, to use the name of Trustor in the exercise of
all or any of the powers hereby conferred on the Trustee. At any such sale:
(i) whether made under the power of sale herein contained or any other legal
enactment, or by virtue of any judicial proceedings or any other legal right,
remedy or recourse, it shall not be necessary for Trustee to have physically
present, or to have constructive possession of, the Mortgaged Property (Trustor
hereby covenanting and agreeing to deliver to Trustee any portion of the
Mortgaged Property not actually or constructively possessed by Trustee
immediately upon demand by Trustee) and the title to and right of possession of
any such property shall pass to the purchaser thereof as completely as if the
same had been actually present and delivered to purchaser at such sale, (ii)
each instrument of conveyance executed by Trustee shall contain a general
warranty of title, binding upon Trustor and its successors and assigns, (iii)
each and every recital contained in any instrument of conveyance made by
Trustee shall conclusively establish the truth and accuracy of the matters
recited therein, including, without limitation, nonpayment of the Indebtedness,
advertisement and conduct of such sale in the manner provided herein and
otherwise by law and appointment of any successor Trustee hereunder, (iv) any
and all prerequisites to the validity thereof shall be conclusively presumed to
have been performed, (v) the receipt of Trustee or of such other party or
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers for its purchase money and no such purchaser or purchasers, or its
assigns or personal representatives, shall thereafter be obligated to see to
the application of such purchase money, or be in any way answerable for any
loss, misapplication or nonapplication thereof, (vi) to the fullest extent
permitted by law, Trustor shall be completely and irrevocably divested of all
of its right, title, interest, claim and demand whatsoever, either at law or in
equity, in and to the property sold and such sale shall be a perpetual bar both
at law and in equity against Trustor, and against any and all other persons
claiming or to claim the property sold or any part thereof, by, through or
under Trustor, and (vii) to the extent and under such circumstances as are
permitted by law, Beneficiary may be a purchaser at any such sale, and shall
have the right, after
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paying or accounting for all costs of said sale or sales, to credit the amount
of the bid upon the amount of the Indebtedness (in the order of priority set
forth in Section 4.13 hereof) in lieu of cash payment.
Section 4.03 Substitute Trustees and Agents. The Trustee or his
successor or substitute may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Trustee, including the posting of notices and the conduct of sale, but in the
name and on behalf of Trustee, his successor or substitute. If Trustee or his
successor or substitute shall have given notice of sale hereunder, any
successor or substitute trustee thereafter appointed may complete the sale and
the conveyance of the property pursuant thereto as if such notice had been
given by the successor or substitute trustee conducting the sale.
Section 4.04 Judicial Foreclosure; Receivership. If any of the
Indebtedness shall become due and payable and shall not be promptly paid, the
Trustee or Beneficiary shall have the right and power to proceed by a suit or
suits in equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of any power herein
granted, or for any foreclosure hereunder or for the sale of the Mortgaged
Property under the judgment or decree of any court or courts of competent
jurisdiction, or for the appointment of a receiver pending any foreclosure
hereunder or the sale of the Mortgaged Property under the order of a court or
courts of competent jurisdiction or under executory or other legal process, or
for the enforcement of any other appropriate legal or equitable remedy. Any
money advanced by the Trustee and/or Beneficiary in connection with any such
receivership shall be a demand obligation (which obligation Trustor hereby
expressly promises to pay) owing by Trustor to the Trustee and/or Beneficiary
and shall bear interest from the date of making such advance by the Trustee
and/or Beneficiary until paid at the Post Default Rate.
Section 4.05 Foreclosure for Installments. To the fullest extent
permitted by law, Beneficiary shall also have the option to proceed with
foreclosure in satisfaction of any installments of the Indebtedness which have
not been paid when due either through the courts or by directing the Trustee or
his successors in trust to proceed with foreclosure in satisfaction of the
matured but unpaid portion of the Indebtedness as if under a full foreclosure,
conducting the sale as herein provided and without declaring the entire
principal balance and accrued interest due; such sale may be made subject to
the unmatured portion of the Indebtedness, and any such sale shall not in any
manner affect the unmatured portion of the Indebtedness, but as to such
unmatured portion of the Indebtedness this Deed of Trust shall remain in full
force and effect just as though no sale had been made hereunder. It is further
agreed that, to the fullest extent permitted by law, several sales may be made
hereunder without exhausting the right of sale for any unmatured part of the
Indebtedness, it being the purpose hereof to provide for a foreclosure and sale
of the security for any matured portion of the Indebtedness without exhausting
the power to foreclose and sell the Mortgaged Property for any subsequently
maturing portion of the Indebtedness.
Section 4.06 Separate Sales The Mortgaged Property may be sold in one
or more parcels and in such manner and order as Beneficiary, in its sole
discretion, may elect, it being expressly understood and agreed that the right
of sale arising out of any Event of Default shall not be exhausted by any one
or more sales.
Section 4.07 Possession of Mortgaged Property. Trustor agrees to the
full extent that it lawfully may, that, in case one or more of the Events of
Default shall have occurred and shall not have been remedied, then, and in
every such case, the Trustee or Beneficiary shall have the right and power to
enter into and upon and take possession of all or any part of the Mortgaged
Property in the possession of Trustor, its successors or assigns, or its or
their agents or servants, and may exclude Trustor, its
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successors or assigns, and all persons claiming under Trustor, and its or their
agents or servants wholly or partly therefrom; and, holding the same, the
Trustee may use, administer, manage, operate and control the Mortgaged Property
and conduct the business thereof to the same extent as Trustor, its successors
or assigns, might at the time do and may exercise all rights and powers of
Trustor, in the name, place and stead of Trustor, or otherwise as the Trustee
shall deem best. All costs, expenses and liabilities of every character
incurred by the Trustee and/or Beneficiary in administering, managing,
operating, and controlling the Mortgaged Property shall constitute a demand
obligation (which obligation Trustor hereby expressly promises to pay) owing by
Trustor to the Trustee and/or Beneficiary and shall bear interest from date of
expenditure until paid at the Post Default Rate, all of which shall constitute
a portion of the Indebtedness and shall be secured by this Deed of Trust and
all other Security Instruments.
Section 4.08 Occupancy After Foreclosure. In the event there is a
foreclosure sale hereunder and at the time of such sale Trustor or Trustor's
heirs, devisees, representatives, successors or assigns or any other person
claiming any interest in the Mortgaged Property by, through or under Trustor,
are occupying or using the Mortgaged Property or any part thereof, each and all
shall immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day to day, terminable at the will of either
the landlord or tenant, or at a reasonable rental per day based upon the value
of the property occupied, such rental to be due daily to the purchaser; to the
extent permitted by applicable law, the purchaser at such sale shall,
notwithstanding any language herein apparently to the contrary, have the sole
option to demand immediate possession following the sale or to permit the
occupants to remain as tenants at will. In the event the tenant fails to
surrender possession of said property upon demand, the purchaser shall be
entitled to institute and maintain a summary action for possession of the
Mortgaged Property (such as an action for forcible entry and detainer) in any
court having jurisdiction.
Section 4.09 Remedies Cumulative, Concurrent and Nonexclusive. Every
right, power and remedy herein given to the Trustee or Beneficiary shall be
cumulative and in addition to every other right, power and remedy herein
specifically given or now or hereafter existing in equity, at law or by statute
(including specifically those granted by the Alaska UCC and applicable to the
Deed of Trust Property or any portion thereof) each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and so often and in such order as may be deemed expedient by
the Trustee or Beneficiary, and the exercise, or the beginning of the exercise,
of any such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter any other right, power or remedy. No
delay or omission by the Trustee or Beneficiary in the exercise of any right,
power or remedy shall impair any such right, power or remedy or operate as a
waiver thereof or of any other right, power or remedy then or thereafter
existing.
Section 4.10 No Release of Obligations. Neither Trustor, any guarantor
nor any other person hereafter obligated for payment of all or any part of the
Indebtedness shall be relieved of such obligation by reason of (a) the failure
of Trustee to comply with any request of Trustor, or any guarantor or any other
person so obligated to foreclose the lien of this Deed of Trust or to enforce
any provision hereunder or under the Credit Agreement; (b) the release,
regardless of consideration, of the Mortgaged Property or any portion thereof
or interest therein or the addition of any other property to the Mortgaged
Property; (c) any agreement or stipulation between any subsequent owner of the
Mortgaged Property and Beneficiary extending, renewing, rearranging or in any
other way modifying the terms of this Deed of Trust without first having
obtained the consent of, given notice to or paid any consideration to Trustor,
any guarantor or such other person, and in such event Trustor, guarantor and
all such other persons shall continue to be liable to make payment according to
the terms of any such extension or modification agreement unless expressly
released and discharged in writing by Beneficiary; or (d) by any other act or
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occurrence save and except the complete payment of the Indebtedness and the
complete fulfillment of all obligations hereunder or under the Credit
Agreement.
Section 4.11 Release of and Resort to Collateral. Beneficiary may
release, regardless of consideration, any part of the Mortgaged Property
without, as to the remainder, in any way impairing, affecting, subordinating or
releasing the lien or security interest created in or evidenced by this Deed of
Trust or its stature as a first and prior lien and security interest in and to
the Mortgaged Property, and without in any way releasing or diminishing the
liability of any person or entity liable for the repayment of the Indebtedness.
For payment of the Indebtedness, Beneficiary may resort to any other security
therefor held by Beneficiary or Trustee in such order and manner as Beneficiary
may elect.
Section 4.12 Waiver of Redemption, Notice and Marshalling of Assets,
Etc. To the fullest extent permitted by law, Trustor hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to
Trustor by virtue of any present or future moratorium law or other law
exempting the Mortgaged Property from attachment, levy or sale on execution or
providing for any appraisement, valuation, stay of execution, exemption from
civil process, redemption or extension of time for payment; (b) except for such
notice as provided for in the Credit Agreement, all notices of any Event of
Default or of Beneficiary's intention to accelerate maturity of the
Indebtedness or of Trustee's election to exercise or his actual exercise of any
right, remedy or recourse provided for hereunder or under the Credit Agreement;
and (c) any right to a marshalling of assets or a sale in inverse order of
alienation. If any law referred to in this Deed of Trust and now in force, of
which Trustor or its successor or successors might take advantage despite the
provisions hereof, shall hereafter be repealed or cease to be in force, such
law shall thereafter be deemed not to constitute any part of the contract
herein contained or to preclude the operation or application of the provisions
hereof.
Section 4.13 Discontinuance of Proceedings In case Beneficiary shall
have proceeded to invoke any right, remedy or recourse permitted hereunder or
under the Credit Agreement and shall thereafter elect to discontinue or abandon
same for any reason, Beneficiary shall have the unqualified right so to do and,
in such an event, Trustor and Beneficiary shall be restored to their former
positions with respect to the Indebtedness, this Deed of Trust, the Credit
Agreement, the Mortgaged Property and otherwise, and the rights, remedies,
recourses and powers of Beneficiary shall continue as if same had never been
invoked.
Section 4.14 Application of Proceeds. The proceeds of any sale of the
Mortgaged Property or any part thereof and all other monies received by the
Trustee in any proceedings for the enforcement hereof, whose application has
not elsewhere herein been specifically provided for, shall be applied:
(a) first, to the payment of all expenses incurred by the Trustee or
Beneficiary incident to the enforcement of this Deed of Trust, the Credit
Agreement or any of the Indebtedness (including, without limiting the
generality of the foregoing, expenses of any entry or taking of possession, of
any sale, of advertisement thereof, and of conveyances, and court costs,
compensation of agents and employees and legal fees), and to the payment of all
other charges, expenses, liabilities and advances incurred or made by the
Trustee or Beneficiary under this Deed of Trust or in executing any trust or
power hereunder;
(b) second to payment of the Indebtedness in such order and manner as
Beneficiary may elect; and
(c) third, to Trustor; or as otherwise required by any Governmental
Requirement.
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Section 4.15 INDEMNITY. IN CONNECTION WITH ANY ACTION TAKEN BY THE
TRUSTEE AND/OR BENEFICIARY PURSUANT TO THIS DEED OF TRUST, THE TRUSTEE AND/OR
BENEFICIARY AND THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS,
ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") SHALL NOT BE LIABLE
FOR ANY LOSS SUSTAINED BY TRUSTOR RESULTING FROM AN ASSERTION THAT BENEFICIARY
HAS RECEIVED FUNDS FROM THE PRODUCTION OF HYDROCARBONS CLAIMED BY THIRD PERSONS
OR ANY ACT OR OMISSION OF ANY INDEMNIFIED PARTY IN ADMINISTERING, MANAGING,
OPERATING OR CONTROLLING THE MORTGAGED PROPERTY INCLUDING SUCH LOSS WHICH MAY
RESULT FROM THE ORDINARY NEGLIGENCE OF AN INDEMNIFIED PARTY UNLESS SUCH LOSS IS
CAUSED BY THE WILLFUL MISCONDUCT OR BAD FAITH OF AN INDEMNIFIED PARTY, NOR
SHALL THE TRUSTEE AND/OR BENEFICIARY BE OBLIGATED TO PERFORM OR DISCHARGE ANY
OBLIGATION, DUTY OR LIABILITY OF TRUSTOR. TRUSTOR SHALL AND DOES HEREBY AGREE
TO INDEMNIFY EACH INDEMNIFIED PARTY FOR, AND TO HOLD EACH INDEMNIFIED PARTY
HARMLESS FROM, ANY AND ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT BE
INCURRED BY ANY INDEMNIFIED PARTY BY REASON OF THIS DEED OF TRUST OR THE
EXERCISE OF RIGHTS OR REMEDIES HEREUNDER; SHOULD THE TRUSTEE AND/OR BENEFICIARY
MAKE ANY EXPENDITURE ON ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE
AMOUNT THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, SHALL
BE A DEMAND OBLIGATION (WHICH OBLIGATION TRUSTOR HEREBY EXPRESSLY PROMISES TO
PAY) OWING BY TRUSTOR TO THE TRUSTEE AND/OR BENEFICIARY AND SHALL BEAR INTEREST
FROM THE DATE EXPENDED UNTIL PAID AT THE POST-DEFAULT RATE, SHALL BE A PART OF
THE INDEBTEDNESS AND SHALL BE SECURED BY THIS DEED OF TRUST AND ANY OTHER
SECURITY INSTRUMENT. THE LIABILITIES OF THE TRUSTOR AS SET FORTH IN THIS
SECTION 4.15 SHALL SURVIVE THE TERMINATION OF THIS DEED OF TRUST.
ARTICLE V
The Trustee
Section 5.01 Duties, Rights, and Powers of Trustee. It shall be no part
of the duty of the Trustee to see to any recording, filing or registration of
this Deed of Trust or any other instrument in addition or supplemental thereto,
or to give any notice thereof, or to see to the payment of or be under any duty
in respect of any tax or assessment or other governmental charge which may be
levied or assessed on the Mortgaged Property, or any part thereof, or against
Trustor, or to see to the performance or observance by Trustor of any of the
covenants and agreements contained herein. The Trustee shall not be
responsible for the execution, acknowledgment or validity of this Deed of Trust
or of any instrument in addition or supplemental hereto or for the sufficiency
of the security purported to be created hereby, and makes no representation in
respect thereof or in respect of the rights of Beneficiary. The Trustee shall
have the right to advise with counsel upon any matters arising hereunder and
shall be fully protected in relying as to legal matters on the advice of
counsel. The Trustee shall not incur any personal liability hereunder except
for Trustee's own willful misconduct; and the Trustee shall have the right to
rely on any instrument, document or signature authorizing or supporting any
action taken or proposed to be taken by him hereunder, believed by him in good
faith to be genuine.
Section 5.02 Successor Trustee. The Trustee may resign by written
notice addressed to Beneficiary or be removed at any time with or without cause
by an instrument in writing duly executed on behalf of Beneficiary. In case of
the death, resignation or removal of the Trustee, a successor trustee may be
appointed by Beneficiary by instrument of substitution complying with any
applicable requirements of law, or, in the absence of any such requirement,
without other formality than appointment and designation in writing. Written
notice of such appointment and designation shall be
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given by Beneficiary to Trustor, but the validity of any such appointment shall
not be impaired or affected by failure to give such notice or by any defect
therein. Such appointment and designation shall be full evidence of the right
and authority to make the same and of all the facts therein recited, and, upon
the making of any such appointment and designation, this Deed of Trust shall
vest in the successor trustee all the estate and title in and to all of the
Mortgaged Property, and the successor trustee shall thereupon succeed to all of
the rights, powers, privileges, immunities and duties hereby conferred upon the
Trustee named herein, and one such appointment and designation shall not
exhaust the right to appoint and designate a successor trustee hereunder but
such right may be exercised repeatedly as long as any Indebtedness remains
unpaid hereunder. To facilitate the administration of the duties hereunder,
Beneficiary may appoint multiple trustees to serve in such capacity or in such
jurisdictions as Beneficiary may designate.
Section 5.03 Retention of Moneys. All moneys received by 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 in any manner from any
other moneys (except to the extent required by law), and Trustee shall be under
no liability for interest on any moneys received by him hereunder.
ARTICLE VI
Miscellaneous
Section 6.01 Instrument Construed as Deed of Trust, Etc. With respect
to any portions of the Mortgaged Property located in any state or other
jurisdiction the laws of which do not provide for the use or enforcement of a
deed of trust or the office, rights and authority of the Trustee as herein
provided, the general language of conveyance hereof to the Trustee is intended
and the same shall be construed as words of mortgage unto and in favor of
Beneficiary and the rights and authority granted to the Trustee herein may be
enforced and asserted by Beneficiary in accordance with the laws of the
jurisdiction in which such portion of the Mortgaged Property is located and the
same may be foreclosed at the option of Beneficiary as to any or all such
portions of the Mortgaged Property in any manner permitted by the laws of the
jurisdiction in which such portions of the Mortgaged Property is situated.
This Deed of Trust may be construed as a mortgage, deed of trust, chattel
mortgage, conveyance, assignment, security agreement, pledge, financing
statement, hypothecation or contract, or any one or more of them, in order
fully to effectuate the lien hereof and the purposes and agreements herein set
forth.
Section 6.02 Release of Deed of Trust. If all Indebtedness secured
hereby shall be paid and the Credit Agreement terminated, Beneficiary shall
forthwith cause satisfaction and discharge of this Deed of Trust to be entered
upon the record at the expense of Trustor and shall execute and deliver or
cause to be executed and delivered such instruments of satisfaction and
reassignment as may be appropriate. Otherwise, this Deed of Trust shall remain
and continue in full force and effect.
Section 6.03 Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of the Trustee and Beneficiary in order
to effectuate the provisions hereof, and the invalidity or unenforceability of
any provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
Section 6.04 Successors and Assigns of Parties. The term "Beneficiary"
as used herein shall mean and include any legal owner, holder, assignee or
pledgee of any of the Indebtedness secured hereby.
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<PAGE> 15
The terms used to designate Trustee, Beneficiary and Trustor shall be deemed to
include the respective heirs, legal representatives, successors and assigns of
such parties.
Section 6.05 Satisfaction of Prior Encumbrance. To the extent that
proceeds of the Credit Agreement are used to pay indebtedness secured by any
outstanding lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced by Beneficiary at
Trustor's request, and Beneficiary shall be subrogated to any and all rights,
security interests and liens owned by any owner or holder of such outstanding
liens, security interests, charges or encumbrances, irrespective of whether
said liens, security interests, charges or encumbrances are released, and it is
expressly understood that, in consideration of the payment of such other
indebtedness by Beneficiary, Trustor hereby waives and releases all demands and
causes of action for offsets and payments to, upon and in connection with the
said indebtedness.
Section 6.06 Subrogation of Trustee. This Deed of Trust is made with
full substitution and subrogation of the Trustee and his successors in this
trust and his and their assigns in and to all covenants and warranties by
others heretofore given or made in respect of the Mortgaged Property or any
part thereof.
Section 6.07 Nature of Covenants. The covenants and agreements herein
contained shall constitute covenants running with the land and interests
covered or affected hereby and shall be binding upon the heirs, legal
representatives, successors and assigns of the parties hereto.
Section 6.08 Notices. All notices, requests, consents, demands and
other communications required or permitted hereunder shall be in writing and
shall be deemed sufficiently given or furnished if delivered by registered or
certified United States mail, postage prepaid, or by personal service
(including express or courier service) at the addresses specified at the end of
this Deed of Trust (unless changed by similar notice in writing given by the
particular party whose address is to be changed). Any such notice or
communication shall be deemed to have been given either at the time of personal
delivery or, in the case of delivery at the address and in the manner provided
herein, upon receipt; provided that, service of notice as required by the laws
of any state in which portions of the Mortgaged Property may be situated shall
for all purposes be deemed appropriate and sufficient with the giving of such
notice.
Section 6.09 Counterparts. This Deed of Trust is being executed in
several counterparts, all of which are identical. Each of such counterparts
shall for all purposes be deemed to be an original and all such counterparts
shall together constitute but one and the same instrument.
Section 6.10 Headings Descriptive. All titles or headings to articles,
sections, subsections or other divisions of this Deed of Trust or the exhibits
hereto are only for the convenience of the parties and shall not be construed
to have any effect or meaning with respect to the other content of such
articles, sections, subsections or other divisions, such other content being
controlling as to the agreement between the parties hereto.
SECTION 6.11 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS DEED OF TRUST; AND AGREES
THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS DEED OF
TRUST; THAT IT HAS IN FACT READ THIS DEED OF TRUST AND IS FULLY INFORMED AND
HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS DEED
OF TRUST; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS
CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS
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<PAGE> 16
EXECUTION OF THIS DEED OF TRUST; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN
ENTERING INTO THIS DEED OF TRUST; AND THAT IT RECOGNIZES THAT CERTAIN OF THE
TERMS OF THIS DEED OF TRUST RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS DEED OF TRUST ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF
SUCH PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."
WITNESS THE EXECUTION HEREOF, this 19th day of April, 1994, to be
effective as of the 20th day of April, 1994 (the "Effective Date").
Trustor:
TESORO ALASKA PETROLEUM COMPANY
By: /s/ William T. VanKleef
------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
The name and address of the Debtor/Trustor is:
TESORO ALASKA PETROLEUM COMPANY
8700 Tesoro Drive
San Antonio, Texas 78217
The name and address of the Secured Party/Beneficiary is:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, AS AGENT
712 Main Street
Houston, Texas 77002
THE STATE OF TEXAS )
)
COUNTY OF HARRIS )
THIS INSTRUMENT was acknowledged before me on April 19, 1994 by William T.
VanKleef, Vice President and Treasurer of TESORO ALASKA PETROLEUM COMPANY, a
Delaware corporation, on behalf of such corporation.
/s/ Anne A. Griffin
--------------------
Notary Public in and for
The State of TEXAS
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<PAGE> 17
EXHIBIT A
PARCEL I:
That portion of Section 22 and the Northeast 1/4 of Section 21, Township 7
North, Range 12 West, Seward Meridian, records of the Kenai Recording District,
Third Judicial District, State of Alaska, described as follows:
Commencing at the 1/4 corner common to Section 22 and Section 27, Township
7 North, Range 12 West, Seward Meridian, Alaska, marked by an Alaska
Department of Highways survey monument found; proceed East 2640.92 feet
along the section line, Basis of Bearing for this description, according to
General Land Office datum for the Section corner common to Sections 22, 23,
26 and 27 marked by an Alaska Department of Highways monument found; thence
N 00 degree 07'44" W 1982.23 feet along the section line common to Section
22 and Section 23 to the northeast corner of the Seaman property, the true
Point of Beginning for this description, marked by a 5/8" X 30" rebar with
2" aluminum cap attached, set; thence S 89 degree 58'52" W 330.15 feet
along the north boundary line of the Seaman property to the northwest
corner of said property, marked by a 5/8" X 30" rebar with 2" aluminum cap
attached, set; thence S 00 degree 07'59" E 660.69 feet along the western
boundary of the Seaman property to the southwest corner of said property,
marked by a 5/8" X 30" rebar with 2" aluminum cap attached, set; thence S
89 degree 59'26" W 2310.72 feet to the CS 1/16 corner of Section 22, marked
by a 3 1/4" aluminum monument 4928-S, found; thence N 00 degree 08'43" W
1320.75 feet to the C 1/4 of Section 22, marked by a brass cap G. L. O.
monument 610-S, found; thence S 89 degree 58'28" W 1320.53 feet to the CW
1/16 corner, marked by a brass cap monument 610-S, found; thence S 89
degree 56'49" W 991.57 feet to a property corner which is situated in a
small pond; thence North 00 degree 05'58" W 1170.92 feet to a property
corner marked by a 5/8" X 30" rebar, set; thence N 89 degree 59'53" W
330.64 feet to the section line common to Section 21, Section 22 and HES
74, marked by a brass capped monument, found; thence N 89 degree 59'53" W
659.87 feet to a property corner situated along the easterly right-of-way
line of the North Kenai Road; thence N 20 degree 33'50" W 19.36 feet along
said right-of-way to a point of curvature; thence along a curve of said
right-of-way whose radius point bears northeasterly 1357.50 feet, delta of
1 degree 25'49", arc length 33.89 feet to a property corner marked by a
5/8" X 30" rebar with 2" aluminum cap attached, set; thence S 89 degree
59'53" E 678.10 feet to a property corner situated on the east line of
Section 21, marked by a 5/8" X 30" rebar with 2" aluminum cap attached,
set; thence N 00 degree 05'14" W 100.68 feet to the N 1/16 corner common to
Section 21 and Section 22, marked by a brass cap monument 610-S, found;
thence S 89 degree 59'34" E 1320.96 feet to the NW 1/16 corner Section 22,
marked by a 3-1/4" aluminum monument 4928-S, found; thence S 89 degree
57'03" E 322.87 feet to the Southwest corner of Tract A, K.R.D. 86-135,
marked by a 5/8" rebar with aluminum cap attached, found; thence N 00
degree 10'25" W 131.00 feet to the northwest corner of said tract, marked
by a 5/8" rebar with aluminum cap attached, found; thence S 89 degree
59'05" E 997.56 feet to the northeast corner of said tract, marked by a
5/8" rebar with aluminum cap attached, found; thence N 00 degree 10'25" W
413.73 feet along the N-S centerline of Section 22 to a property corner,
marked by a 5/8" X 30" rebar with 2" aluminum cap attached, set; thence N
85 degree 16'01" E 1324.75 feet to a property corner, marked by a 5/8" X
30" rebar with 2" aluminum cap attached, set; thence N 00 degree 09'47" W
668.93 feet to the E 1/16 corner common to Section 15 and Section 22,
marked by a 3 1/4" aluminum cap monument 4928-S set; thence N 89 degree
58'44" E 1320.69 feet along the section line to the section corner common
to Sections 15, 14, 22 and 23, marked by a brass cap monument 631-S, found;
thence
<PAGE> 18
S 00 degree 06'52" E 1320.60 feet to the N 1/16 corner common to Section
22 and Section 23, marked by a survey monument 3808-S, found; thence S 00
degree 15'44" E 780.99 feet to the W. C. 1/4 corner common to Section 22
and Section 23, marked by a brass cap monument G. L. O., found; thence S
00 degree 07'44" E 1200.83 feet to the northeast corner of the Seaman
property and the true Point of Beginning.
PARCEL II:
That certain portion of the U.S. Government Lot Sixty (60) of Section 23,
Township 6 North, Range 12 West, Seward Meridian, that lies West of existing
Westerly right-of-way line of the North Kenai Highway, in the Kenai Recording
District, Third Judicial District, State of Alaska.
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<PAGE> 19
FINANCING STATEMENT
(Central Filing)
This Financing Statement is presented to a Filing Officer for filing
pursuant to the Uniform Commercial Code.
1. The name and address of the Debtor is:
TESORO ALASKA PETROLEUM COMPANY
8700 Tesoro Drive
San Antonio, Texas 78217
2. The name and address of Secured Party is:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Agent
712 Main Street
Houston, Texas 77002
3. This Financing Statement covers the following Collateral:
All of Debtor's rights, titles and interests in and to the accounts,
equipment, goods, fixtures, general intangibles, inventory and any and all
other personal property of any kind or character described in and covered
by the Deed of Trust, Security Agreement and Financing Statement from
Debtor to the Trustee named therein and Secured Party, a copy of which
instrument is attached hereto as Exhibit A and made a part hereof for all
purposes, and the proceeds and products of such personal property.
4. This Financing Statement covers goods which are or are to become fixtures
to the real estate described in Exhibit A hereto.
DEBTOR:
TESORO ALASKA PETROLEUM COMPANY
By: /s/ William T. VanKleef
------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
<PAGE> 1
Exhibit 10.5
PLEDGE AGREEMENT
BY
TESORO PETROLEUM CORPORATION
IN FAVOR OF
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS AGENT,
APRIL 20, 1994
<PAGE> 2
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of April 20, 1994, by TESORO
PETROLEUM CORPORATION, a Delaware corporation, with principal offices at 8700
Tesoro Drive, San Antonio, Texas 78217 ("Pledgor"); in favor of TEXAS COMMERCE
BANK NATIONAL ASSOCIATION, a national banking association, with offices at 712
Main Street, Houston, Texas 77002, as Agent ("Secured Party") for itself, the
Issuing Banks and the Lenders parties to the Credit Agreement referred to
below.
RECITALS
A. On even date herewith, the Pledgor, Texas Commerce Bank
National Association, individually, as Agent and as an Issuing Bank, Banque
Paribas, individually, as Co-Agent and as an Issuing Bank, and the other
financial institutions parties thereto entered into a Credit Agreement (as
amended from time to time, the "Credit Agreement").
B. The conditions precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make the initial Loans and the
Issuing Bank to issue Letters of Credit thereunder, include the execution and
delivery by Pledgor of this Security Agreement, and Debtor has agreed to enter
into this Security Agreement.
C. Therefore, in order to comply with the terms and conditions of
the Credit Agreement and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Pledgor hereby agrees with
Secured Party as follows:
ARTICLE I
Definitions
Section 1.01 Terms Defined Above or in the Credit Agreement. As
used in this Security Agreement, the terms defined above shall have the
meanings respectively assigned to them. Other capitalized terms which are
defined in the Credit Agreement, but which are not defined herein shall have
the same meanings as defined in the Credit Agreement.
Section 1.02 Certain Definitions. As used in this Security
Agreement, the following terms shall have the following meanings, unless the
context otherwise requires:
"Code" shall mean the Uniform Commercial Code as presently in
effect in the State of Texas. Unless otherwise indicated by the
context herein, all uncapitalized terms which are defined in the Code
shall have their respective meanings as used in Articles 8 and 9 of
the Code.
"Collateral" shall mean the following types or items of
property:
(a) The securities described or referred to in Exhibit A
attached hereto and made a part hereof; and
(b) (i) all shares of, all securities convertible or
exchangeable into, and all warrants, options or other rights to
purchase shares of, stock of any of the Issuers; (ii) all certificates
or instruments representing such additional shares, convertible or
exchangeable securities, warrants, and other rights and all proceeds,
income and profits thereon, and all interest, dividends and other
payments, property and distributions with respect thereto; (iii) all
proceeds received or receivable by the Pledgor in cash, stock or
otherwise, from any sale of substantially all the assets
<PAGE> 3
of any Issuer; (iv) all proceeds received or receivable by the
Pledgor, in cash, stock or otherwise, from any recapitalization,
reclassification, merger, dissolution, liquidation or other
termination of the existence of any Issuer; (v) all other proceeds
or assets received or receivable by the Pledgor in respect of its
status as a shareholder of any Issuer; and (vi) any proceeds of any of
the foregoing. The inclusion of proceeds in this Agreement does not
authorize the Pledgor to sell, dispose of or otherwise use the
Collateral in any manner not specifically authorized hereby.
Contemporaneously with the execution and delivery hereof, the Pledgor
is delivering to Secured Party in pledge hereunder the certificates
and other instruments evidencing all Pledged Securities owned by the
Pledgor as of the date hereof.
(c) It is expressly contemplated that additional
securities or other property may from time to time be pledged,
assigned or granted to Secured Party as additional security for the
Obligations, and the term "Collateral" as used herein shall be deemed
for all purposes hereof to include all such additional securities and
property, together with all other property of the types described
above related thereto.
"Event of Default" shall mean any event specified in Section
6.01.
"Issuer" shall mean those entities listed on Schedule 1.02
hereto and any other direct Subsidiary of Pledgor whether now owned or
hereafter acquired by Pledgor which is an issuer of Pledged Securities
pursuant to this Security Agreement.
"Obligations" shall mean: (i) the Lender Indebtedness
described in the Credit Agreement, including without limitation, the
Letter of Credit Liabilities and the Notes, and any and all renewals,
extensions for any period, rearrangements or enlargements thereof and
any interest accrued thereon, whether prepetition or post-petition;
(ii) the performance of all obligations and agreements under the
Financing Documents, including this Security Agreement; and (iii) all
interest accrued and earned, charges, expenses, attorneys' or other
fees and any other sums payable to or incurred by Secured Party, any
Issuing Bank or any Lender in connection with the execution,
administration or enforcement of their rights and remedies hereunder
or any other Financing Document.
"Obligor" shall mean any Person, other than Pledgor, liable
(whether directly or indirectly, primarily or secondarily) for the
payment or performance of any of the Obligations whether as maker,
co-maker, endorser, guarantor, accommodation party, general partner or
otherwise.
"Pledged Securities" shall mean all of the securities and
other property (whether or not the same constitutes a "security" under
the Code) referred to in Section 1.02 and all additional securities
(as that term is defined in the Code), if any, constituting Collateral
under this Security Agreement.
"Security Agreement" shall mean this Pledge Agreement, as the
same may from time to time be amended or supplemented.
ARTICLE II
Security Interest
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<PAGE> 4
Section 2.01 Pledge. Pledgor hereby pledges, assigns and grants
to Secured Party, for its benefit and the benefit of the Lenders and the
Issuing Banks, a security interest in the Collateral to secure the prompt
payment and performance of the Obligations. This security interest is granted
as security only and shall not subject Secured Party, any Issuing Bank or any
Lender to, or transfer or in any way affect or modify, any obligation or
liability of the Pledgor or any Obligor with respect to any of the Collateral,
the Obligations or any transaction in connection therewith.
Section 2.02 Transfer of Collateral. All certificates or
instruments representing or evidencing the Pledged Securities shall be
delivered to and held pursuant hereto by Secured Party or a Person designated
by Secured Party and shall be in suitable form for transfer by delivery, or
shall be accompanied by duly executed instruments of transfer or assignment in
blank, and accompanied by any required transfer tax stamps, or (in the case of
either certificated or uncertificated securities) Secured Party shall have been
provided with (i) evidence that entries have been made on the books of a
clearing corporation (as defined in Section 8-102 of the Code) to effect the
pledge of the Pledged Securities to Secured Party, as provided in, and in
accordance with, Section 8-320 of the Code, or (ii) evidence that a financial
intermediary has identified the Pledged Securities as having been pledged to
Secured Party, as provided in, and in accordance with, Section 8-313(1)(4) of
the Code, or (iii) evidence that the Pledged Securities have been otherwise
transferred to Secured Party in accordance with Section 8-313(1) of the Code,
all in form and substance satisfactory to Secured Party. Notwithstanding the
preceding sentence, at Secured Party's discretion, all Pledged Securities must
be delivered or transferred in such manner as to permit Secured Party to be a
"bona fide purchaser" to the extent of its security interest as provided in
Sections 8-302(1) and 8-320(3) of the Code (if Secured Party otherwise
qualifies as a bona fide purchaser). Upon the occurrence and continuance of an
Event of Default and after any notice and cure periods provided for in the
Credit Agreement, Secured Party shall have the right, at any time in its
discretion and without notice to Pledgor, to transfer to or to register in the
name of Secured Party or any of its nominees any or all of the Pledged
Securities, subject only to the revocable rights specified in Section 6.06. In
addition, upon the occurrence and continuance of an Event of Default and after
any notice and cure periods provided for in the Credit Agreement, Secured Party
shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Securities for certificates or instruments
of smaller or larger denominations.
ARTICLE III
Representations and Warranties
In order to induce Secured Party, the Issuing Banks and the Lenders to
accept this Security Agreement, Pledgor represents and warrants to Secured
Party, the Issuing Banks and the Lenders (which representations and warranties
will survive the creation and payment of the Obligations) that:
Section 3.01 Ownership of Collateral; Encumbrances. Pledgor is
the legal and beneficial owner of the Collateral free and clear of any adverse
claim, lien, security interest, option or other charge or encumbrance except
for the security interest created by this Security Agreement, and Pledgor has
full right, power and authority to pledge, assign and grant a security interest
in the Collateral to Secured Party.
Section 3.02 No Required Consent. No authorization, consent,
approval or other action by, and no notice to or registration, recordation or
filing with, any governmental authority or regulatory body is required for (i)
the due execution, delivery and performance by Pledgor of this Security
Agreement,
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<PAGE> 5
(ii) the grant by Pledgor of the security interest granted by this Security
Agreement, (iii) the perfection of such security interest or (iv) the exercise
by Secured Party of its rights and remedies under this Security Agreement.
Neither the Pledgor nor any of its Subsidiaries has performed or will perform
any acts which might prevent Secured Party from enforcing any of the terms and
conditions of this Security Agreement or which would limit Secured Party in any
such enforcement.
Section 3.03 Pledged Securities. The Pledged Securities have been
duly authorized and validly issued, are fully paid and non-assessable and
constitute 100% of the issued and outstanding shares of capital stock of the
Issuer thereof.
Section 3.04 First Priority Security Interest. The pledge of
Pledged Securities pursuant to this Security Agreement creates a valid and
perfected first priority security interest in the Collateral, enforceable
against Pledgor and all third parties and securing payment of the Obligations.
ARTICLE IV
Covenants and Agreements
Pledgor will at all times comply with the covenants and agreements
contained in this Article IV, from the date hereof and for so long as any part
of the Obligations are outstanding.
Section 4.01 Sale, Disposition or Encumbrance of Collateral.
Pledgor will not in any way encumber any of the Collateral (or permit or suffer
any of the Collateral to be encumbered) or sell, pledge, assign, lend or
otherwise dispose of or transfer any of the Collateral to or in favor of any
Person other than Secured Party. The Pledgor is not and will not become a
party to or otherwise be bound by any agreement, other than this Agreement,
which restricts in any manner the rights of any present or future holder of any
of the Pledged Securities with respect thereto.
Section 4.02 Dividends or Distributions. So long as no Event of
Default shall have occurred and be continuing, Pledgor shall be entitled to
receive and retain any and all dividends and interest paid in respect of the
Collateral, provided, however, that any and all:
(a) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange for
(including, without limitation, any certificate or share purchased or
exchanged in connection with a tender offer or merger agreement), any
Collateral,
(b) dividends and other distributions paid or payable in
cash in respect of any Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, or reclassification, and
(c) cash paid, payable or otherwise distributed in
respect of principal of, or in redemption of, or in exchange for, any
Collateral,
shall be, and shall be forthwith delivered to Secured Party to hold
as, Collateral and shall, if received by Pledgor, be received in trust
for the benefit of Secured Party, be segregated from the other
property or funds of Pledgor, and be forthwith delivered to Secured
Party as Collateral in the same form as so received (with any
necessary indorsement).
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<PAGE> 6
Section 4.03 Records and Information. Pledgor shall keep accurate
and complete records of the Collateral (including proceeds, payments,
distributions, income and profits). Upon reasonable notice and without undue
interference with the Pledgor's business, Secured Party may at any time during
normal business hours have access to, examine, audit, make extracts from and
inspect without hindrance or delay Pledgor's records, files and the Collateral.
Section 4.04 Further Assurances. Upon the request of Secured
Party, Pledgor shall (at Pledgor's expense) execute and deliver all such
assignments, certificates, instruments, securities, financing statements,
notifications to financial intermediaries, clearing corporations, Issuers of
securities or other third parties or other documents and give further
assurances and do all other acts and things as Secured Party may reasonably
request to perfect Secured Party's interest in the Collateral or which is
necessary to protect, enforce or otherwise effect Secured Party's rights and
remedies hereunder.
Section 4.05 Stock Powers. Pledgor shall furnish to Secured Party
such stock powers and other instruments as may be required by Secured Party to
assure the transferability of the Collateral when and as often as may be
requested by Secured Party.
Section 4.06 Rights to Sell.
(a) If Secured Party shall determine to exercise its
rights to sell all or any of the Collateral pursuant to its rights
hereunder, Pledgor agrees that, upon request of Secured Party, Pledgor
will, at its own expense:
(i) use its best efforts to qualify the
Collateral under the state securities or "Blue Sky" laws and
to obtain all necessary governmental approvals for the sale of
the Collateral, as requested by Secured Party; and
(ii) use its best efforts to do or cause to be
done all such others acts and things as may be necessary to
make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
(b) Pledgor further acknowledges the impossibility of
ascertaining the amount of damages which would be suffered by Secured
Party, the Issuing Banks and the Lenders by reason of the failure by
Pledgor to perform any of the covenants contained in this Section 4.06
and consequently agrees that if Pledgor shall fail to perform any of
such covenants, it shall pay, as liquidated damages, and not as
penalty, an amount equal to the value of the Collateral on the date
the Secured Party shall demand compliance with this Section 4.06.
Section 4.07 Voting and Other Consensual Rights. Except to the
extent otherwise provided in subsection 6.06(d), Pledgor shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
Collateral or any part thereof for any purpose not inconsistent with the terms
of this Security Agreement; provided however, that Pledgor shall not exercise
or refrain from exercising any such right if such action would have a material
adverse effect on the value of the Collateral or any part thereof, and,
provided, further, that upon request of Secured Party at any time or from time
to time, Pledgor shall give Secured Party prompt written notice of the manner
in which Pledgor has exercised, or the reasons for refraining from exercising,
any such right.
Section 4.08 Pledged Securities Percentage. The Pledged
Securities will at all times constitute at least 100% of the issued and
outstanding shares of capital stock of the Issuer thereof. Pledgor will not,
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<PAGE> 7
to the extent it may legally do so, (a) permit any Issuer to issue any
additional or substitute shares of stock of any class, or (b) amend any
Issuer's charter or by-laws or other constitutional documents in any way which
would reasonably be expected to materially and adversely affect the rights of
Secured Party, the Issuing Banks or the Lenders, without the prior written
consent of the Majority Lenders.
ARTICLE V
Rights, Duties, and Powers of Secured Party
The following rights, duties and powers of Secured Party are
applicable irrespective of whether an Event of Default occurs and is
continuing:
Section 5.01 Discharge Encumbrances. Secured Party may, at its
option, after giving Pledgor three (3) days prior notice, discharge any taxes,
liens, security interests or other encumbrances at any time levied or placed on
the Collateral. Pledgor agrees to reimburse Secured Party within 30 days of
demand for any payment so made, plus interest on the portion thereof from time
to time remaining unpaid from the date of Secured Party's demand at the rate
for overdue principal and interest set forth in Section 2.06(c) of the Credit
Agreement.
Section 5.02 Transfer of Collateral. Secured Party may, at its
option, after giving Pledgor three (3) days prior notice, transfer any or all
of the Obligations, and upon any such transfer Secured Party may transfer its
interest in any or all of the Collateral and shall be fully discharged
thereafter from all liability therefor. Any transferee of the Collateral shall
be vested with all rights, powers and remedies of Secured Party hereunder.
Section 5.03 Cumulative and Other Rights. The rights, powers and
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party of any one
or more of the rights, powers and remedies herein shall not be construed as a
waiver of any other rights, powers and remedies, including, without limitation,
any other rights of set-off. If any of the Obligations are given in renewal,
extension for any period or rearrangement, or applied toward the payment of
debt secured by any lien, Secured Party shall be, and is hereby, subrogated to
all the rights, titles, interests and liens securing the debt so renewed,
extended, rearranged or paid.
Section 5.04 Disclaimer of Certain Duties.
(a) The powers conferred upon Secured Party by this
Agreement are to protect its interest in the Collateral and shall not
impose any duty upon Secured Party, any Issuing Bank or any Lender to
exercise any such powers. Pledgor hereby agrees that Secured Party
shall not be liable for, nor shall the indebtedness evidenced by the
Obligations be diminished by, Secured Party's delay or failure to
collect upon, foreclose, sell, take possession of or otherwise obtain
value for the Collateral.
(b) To the fullest extent permitted by applicable law,
Secured Party shall be under no duty whatsoever (except as may be
required under the Credit Agreement) to make or give any presentment,
notice of dishonor, protest, demand for performance, notice of
non-performance, notice of intent to accelerate, notice of
acceleration, or other notice or demand in connection with any
Collateral or the Obligations, or to take any steps necessary to
preserve any rights against any Obligor or other Person. Pledgor
waives any right of marshaling in respect of any and all
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<PAGE> 8
Collateral, and waives any right to require Secured Party, any Issuing
Bank or any Lender to proceed against any Obligor or other Person,
exhaust any Collateral or enforce any other remedy which Secured
Party, any Issuing Bank or any Lender now has or may hereafter have
against any Obligor or other Person.
Section 5.05 Modification of Obligations; Other Security. Pledgor
waives (i) any and all notice of acceptance, creation, modification,
rearrangement, renewal or extension for any period of any instrument executed
by any Obligor in connection with the Obligations and (ii) to the fullest
extent permitted by applicable law, any defense of any Obligor by reason of
disability, lack of authorization, cessation of the liability of any Obligor or
for any other reason. Pledgor authorizes Secured Party, without notice or
demand and without any reservation of rights against Pledgor and without
affecting Pledgor's liability hereunder or on the Obligations, from time to
time to (x) take and hold other property, other than the Collateral, as
security for the Obligations, and exchange, enforce, waive and release any or
all of the Collateral, (y) apply the Collateral in the manner permitted by this
Security Agreement and (z) renew, extend for any period, accelerate, amend or
modify, supplement, enforce, compromise, settle, waive or release the
obligations of any Obligor or any instrument or agreement of such other Person
with respect to any or all of the Obligations or Collateral.
Section 5.06 Custody and Preservation of the Collateral. Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which comparable secured parties accord
comparable collateral, it being understood and agreed, however, that neither
Secured Party, any Issuing Bank nor any Lender shall have responsibility for
(i) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Collateral,
whether or not Secured Party has or is deemed to have knowledge of such
matters, or (ii) taking any necessary steps to preserve rights against Persons
or entities with respect to any Collateral.
ARTICLE VI
Events of Default
Section 6.01 Events. It shall constitute an Event of Default
under this Security Agreement if an Event of Default occurs and is continuing
under the Credit Agreement.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Secured Party may take any or all of the
following actions without notice (except where expressly required below or in
the Credit Agreement) or demand to Pledgor:
(a) Declare all or part of the indebtedness pursuant to
the Obligations immediately due and payable and enforce payment of the
same by Pledgor or any Obligor.
(b) Sell, in one or more sales and in one or more
parcels, or otherwise dispose of any or all of the Collateral in any
commercially reasonable manner as Secured Party may elect, in a public
or private transaction, at any location as deemed reasonable by
Secured Party either for cash or credit or for future delivery at such
price as Secured Party may deem fair, and (unless prohibited by the
Code, as adopted in any applicable jurisdiction) Secured Party, any
Issuing Bank or any Lender may be the purchaser of any or all
Collateral so sold and may apply upon the purchase price therefor any
Obligations secured hereby. Any such sale or transfer by Secured
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<PAGE> 9
Party either to itself or to any other Person shall be absolutely free
from any claim of right by Pledgor, including any equity or right of
redemption, stay or appraisal which Pledgor has or may have under any
rule of law, regulation or statute now existing or hereafter adopted.
Upon any such sale or transfer, Secured Party shall have the right to
deliver, assign and transfer to the purchaser or transferee thereof
the Collateral so sold or transferred. If Secured Party deems it
advisable to do so, it may restrict the bidders or purchasers of any
such sale or transfer to Persons or entities who will represent and
agree that they are purchasing the Collateral for their own account
and not with the view to the distribution or resale of any of the
Collateral. Secured Party may, at its discretion, provide for a
public sale, and any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as
Secured Party may fix in the notice of such sale. Secured Party shall
not be obligated to make any sale pursuant to any such notice.
Secured Party may, without notice or publication, adjourn any public
or private sale by announcement at any time and place fixed for such
sale, and such sale may be made at any time or place to which the same
may be so adjourned. In the event any sale or transfer hereunder is
not completed or is defective in the opinion of Secured Party, such
sale or transfer shall not exhaust the rights of Secured Party
hereunder, and Secured Party shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. If only part of
the Collateral is sold or transferred such that the Obligations remain
outstanding (in whole or in part), Secured Party's rights and remedies
hereunder shall not be exhausted, waived or modified, and Secured
Party is specifically empowered to make one or more successive sales
or transfers until all the Collateral shall be sold or transferred and
all the Obligations are paid. In the event that Secured Party elects
not to sell the Collateral, Secured Party retains its rights to
dispose of or utilize the Collateral or any part or parts thereof in
any manner authorized or permitted by law or in equity, and to apply
the proceeds of the same towards payment of the Obligations. Each and
every method of disposition of the Collateral described in this
subsection or in subsection (d) shall constitute disposition in a
commercially reasonable manner.
(c) Apply proceeds of the disposition of the Collateral
to the Obligations in any manner elected by Secured Party and
permitted by the Code or otherwise permitted by law or in equity.
Such application may include, without limitation, the reasonable
attorneys' fees and legal expenses incurred by Secured Party, the
Issuing Banks and the Lenders.
(d) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by Secured Party of
the Collateral.
(e) Execute, assign and endorse negotiable and other
instruments for the payment of money, documents of title or other
evidences of payment, shipment or storage for any form of Collateral
on behalf of and in the name of Pledgor.
Section 6.03 Attorney-in-Fact. Pledgor hereby irrevocably
appoints Secured Party as Pledgor's attorney-in-fact, with full authority in
the place and stead of Pledgor and in the name of Pledgor or otherwise, from
time to time in Secured Party's reasonable discretion upon the occurrence and
during the continuance of an Event of Default and after any applicable notice
and cure period provided for in the Credit Agreement, but at Pledgor's cost and
expense, to take any action and to execute any assignment, certificate,
financing statement, stock power, notification, document or instrument which
Secured Party may deem necessary or advisable to accomplish the purposes of
this Security Agreement, including, without limitation, to receive, endorse and
collect all instruments made payable to Pledgor representing any dividend,
interest payment or other distribution in respect of the Collateral or any part
thereof and to give full discharge for the same.
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<PAGE> 10
Section 6.04 Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any other action of Secured
Party, any Issuing Bank or any Lender hereunder results in reduction of the
Obligations, such action will not release Pledgor from its liability to Secured
Party, the Issuing Banks and the Lenders for any unpaid Obligations, including
reasonable costs, charges and expenses incurred in the liquidation of
Collateral, together with interest thereon, and the same shall be immediately
due and payable to Secured Party at Secured Party's address set forth in the
opening paragraph hereof.
Section 6.05 Reasonable Notice. If any applicable provision of
any law requires Secured Party, any Issuing Bank or any Lender to give
reasonable notice of any sale or disposition or other action, Pledgor hereby
agrees that fifteen (15) days' prior written notice shall constitute reasonable
notice thereof. Such notice, in the case of public sale, shall state the time
and place fixed for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.06 Pledged Securities. Upon the occurrence and during
the continuance of an Event of Default and after any applicable notice and cure
period provided for in the Credit Agreement:
(a) All rights of Pledgor to receive the dividends and
interest payments which it would otherwise be authorized to receive
and retain pursuant to Section 4.02 shall cease, and all such rights
shall thereupon become vested in Secured Party who shall thereupon
have the sole right to receive and hold as Collateral such dividends
and interest payments, but Secured Party shall have no duty to receive
and hold such dividends and interest payments and shall not be
responsible for any failure to do so or delay in so doing.
(b) All dividends and interest payments which are
received by Pledgor contrary to the provisions of this Section 6.06
shall be received in trust for the benefit of Secured Party, shall be
segregated from other funds of Pledgor and shall be forthwith paid
over to Secured Party as Collateral in the same form as so received
(with any necessary indorsement).
(c) Secured Party may exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Pledged Securities as if it were the
absolute owner thereof, including without limitation, the right to
exchange at its discretion, any and all of the Pledged Securities upon
the merger, consolidation, reorganization, recapitalization or other
readjustment of any Issuer of such Pledged Securities or upon the
exercise by any such Issuer or Secured Party of any right, privilege
or option pertaining to any of the Pledged Securities, and in
connection therewith, to deposit and deliver any and all of the
Pledged Securities with any committee, depository, transfer agent,
registrar or other designated agency upon such terms and conditions as
it may determine, all without liability except to account for property
actually received by it, but Secured Party shall have no duty to
exercise any of the aforesaid rights, privileges or options and shall
not be responsible for any failure to do so or delay in so doing.
(d) All rights of Pledgor to exercise the voting and
other consensual rights which Pledgor would otherwise be entitled to
exercise pursuant to Section 4.07 with respect to the Pledged
Securities issued by such Issuer shall cease, and all such rights
shall thereupon become vested in Secured Party who shall thereupon
have the sole right to exercise such voting and other consensual
rights, but Secured Party shall have no duty to exercise any such
voting or other consensual rights and shall not be responsible for any
failure to do so or delay in so doing.
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<PAGE> 11
Section 6.07 Non-judicial Enforcement. Secured Party may enforce
its rights hereunder without prior judicial process or judicial hearing, and to
the extent permitted by law Pledgor expressly waives any and all legal rights
which might otherwise require Secured Party to enforce its rights by judicial
process.
ARTICLE VII
Miscellaneous
Section 7.01 Notices. Any notice required or permitted to be
given under or in connection with this Security Agreement shall be given in
accordance with the notice provisions of the Credit Agreement.
Section 7.02 Amendments and Waivers. Secured Party's, any Issuing
Bank's or any Lender's acceptance of partial or delinquent payments or any
forbearance, failure or delay by Secured Party in exercising any right, power
or remedy hereunder shall not be deemed a waiver of any obligation of Pledgor
or any Obligor, or of any right, power or remedy of Secured Party; and no
partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof. Secured Party may remedy any Event of Default
hereunder or in connection with the Obligations without waiving the Event of
Default so remedied. Pledgor hereby agrees that if Secured Party agrees to a
waiver of any provision hereunder, or an exchange of or release of the
Collateral, or the addition or release of any Obligor or other Person, any such
action shall not constitute a waiver of any of Secured Party's other rights or
of Pledgor's obligations hereunder. This Security Agreement may be amended
only by an instrument in writing in the manner set forth in the Credit
Agreement and may be supplemented only by documents delivered or to be
delivered in accordance with the express terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or other
reproduction of this Security Agreement may be delivered by Pledgor or Secured
Party to any financial intermediary or other third party for the purpose of
transferring or perfecting any or all of the Pledged Securities to Secured
Party or its designee or assignee.
Section 7.04 Possession of Collateral. Secured Party shall be
deemed to have possession of any Collateral in transit to it or set apart for
it (or, in either case, any of its agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations,
and after such sale or transfer and discharge there remains a surplus of
proceeds, Secured Party will deliver to Pledgor or such other Person as may be
required by a court of competent jurisdiction such excess proceeds in a
commercially reasonable time; provided, however, that neither Secured Party,
any Issuing Bank nor any Lender shall have any liability for any interest, cost
or expense in connection with any reasonable delay in delivering such proceeds
to Pledgor.
Section 7.06 Governing Law; Jurisdiction. This Security Agreement
and the security interest granted hereby shall be construed in accordance with
and governed by the laws of the State of Texas (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby).
Section 7.07 Continuing Security Agreement.
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<PAGE> 12
(a) Except as may be expressly applicable pursuant to
Section 9-505 of the Code, no action taken or omission to act by
Secured Party, the Issuing Banks or the Lenders hereunder, including,
without limitation, any exercise of voting or consensual rights
pursuant to Section 4.07 or any other action taken or inaction
pursuant to Section 6.02, shall be deemed to constitute a retention of
the Collateral in satisfaction of the Obligations or otherwise to be
in full satisfaction of the Obligations, and the Obligations shall
remain in full force and effect, until Secured Party, the Issuing
Banks and the Lenders shall have applied payments (including, without
limitation, collections from Collateral) towards the Obligations in
the full amount then outstanding or until such subsequent time as is
hereinafter provided in subsection (b) below.
(b) To the extent that any payments on the Obligations or
proceeds of the Collateral are subsequently invalidated, declared to
be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver or other Person under any
bankruptcy law, common law or equitable cause, then to such extent the
Obligations so satisfied shall be revived and continue as if such
payment or proceeds had not been received by Secured Party, the
Issuing Banks or the Lenders, and Secured Party's, the Issuing Banks'
and the Lenders' security interests, rights, powers and remedies
hereunder shall continue in full force and effect. In such event,
this Security Agreement shall be automatically reinstated if it shall
theretofore have been terminated pursuant to Section 7.08.
Section 7.08 Termination. The grant of a security interest
hereunder and all of Secured Party's, the Issuing Banks' and the Lenders'
rights, powers and remedies in connection therewith shall remain in full force
and effect until the complete payment of the Obligations and the compliance by
Pledgor with all covenants and agreements hereof and the termination of the
Credit Agreement, at which time Secured Party, at the written request and
expense of Pledgor, will release, reassign and transfer the Collateral to
Pledgor and declare this Security Agreement to be of no further force or
effect. Notwithstanding the foregoing, the provisions of subsection 7.07(b)
shall survive the termination of this Security Agreement.
Section 7.09 Counterparts, Effectiveness. This Security Agreement
may be executed in two or more counterparts. Each counterpart is deemed an
original, but all such counterparts taken together constitute one and the same
instrument. This Security Agreement becomes effective upon the execution
hereof by Pledgor and delivery of the same to Secured Party, and it is not
necessary for Secured Party, any Issuing Bank or any Lender to execute any
acceptance hereof or otherwise signify or express its acceptance hereof.
PLEDGOR: TESORO PETROLEUM CORPORATION
By: /s/ William T. VanKleef
-----------------------
Name: William T. VanKleef
Title: Vice President, Treasurer
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, AS AGENT
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<PAGE> 13
By: /s/ P. Stan Burge
--------------------
Name: P. Stan Burge
Title: Vice President
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<PAGE> 14
SCHEDULE 1.02
ISSUERS
Tesoro Alaska Petroleum Company, a Delaware corporation
Tesoro Refining, Marketing & Supply Company, a Delaware corporation
Tesoro Alaska Pipeline Company, a Delaware corporation
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<PAGE> 15
EXHIBIT A
PLEDGED SECURITIES
1. 10 shares of the common stock of Tesoro - Alaskan Petroleum
Corporation (now known as Tesoro Alaska Petroleum Company), a
Delaware corporation ("TAPC"), registered in the name of Tesoro
Petroleum Corporation ("Pledgor") on the books of TAPC, as
represented by Certificate No. 1.
2. 1,000 shares of the common stock Nikiski Alaska Pipeline Company (now
known as Tesoro Alaska Pipeline Corporation), a Delaware corporation
("Alaska Pipeline"), registered in the name of Pledgor on the books
of Alaska Pipeline as represented by Certificate No. 2.
3. 1,000 shares of the common stock of Tesoro Refining, Marketing &
Supply Company, a Delaware corporation ("TRMSC"), registered in the
name of Pledgor on the books of TRMSC, as represented by Certificate
No. 1.
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<PAGE> 1
EXHIBIT 10.6
SECURITY AGREEMENT
(Accounts and Inventory)
Between
TESORO PETROLEUM CORPORATION
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS AGENT
April 20, 1994
<PAGE> 2
SECURITY AGREEMENT
ACCOUNTS AND INVENTORY
THIS SECURITY AGREEMENT is made as of April 20, 1994, between TESORO
PETROLEUM CORPORATION, a Delaware corporation ("Debtor"), and TEXAS COMMERCE
BANK NATIONAL ASSOCIATION, a national banking association, as Agent ("Secured
Party"), for itself, the Issuing Banks and the Lenders.
RECITALS
A. On even date herewith, the Debtor, Texas Commerce Bank
National Association, individually, as Agent and as an Issuing Bank, Banque
Paribas, individually, as Co-Agent and as an Issuing Bank, and the other
financial institutions parties thereto entered into a Credit Agreement (as
amended from time to time, the "Credit Agreement").
B. The conditions precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make the initial Loans and the
Issuing Banks to issue Letters of Credit thereunder, include the execution and
delivery by Debtor of this Security Agreement, and Debtor has agreed to enter
into this Security Agreement.
C. Therefore, (i) in order to comply with the terms and
conditions of the Credit Agreement, (ii) to induce the Lenders at any time from
time to time to loan monies and the Issuing Banks to issue Letters of Credit,
with or without security to or for the account of Debtor in accordance with the
terms of the Credit Agreement, (iii) at the special insistence and request of
the Agent, the Issuing Banks and the Lenders, and (iv) for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees with Secured Party as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Terms Defined Above. As used in this Security
Agreement, the terms "Credit Agreement," "Debtor" and "Secured Party" shall
have the meanings respectively assigned to them.
Section 1.02 Certain Definitions. As used in this Security
Agreement, the following terms shall have the following meanings, unless the
context otherwise requires:
"Accounts" shall mean all accounts (as such term is defined in
the Code).
"Account Debtor" shall mean any Person liable (whether
directly or indirectly, primarily or secondarily) for the payment or
performance of any obligations included in the Collateral, whether as
an account debtor (as defined in the Code), obligor on an instrument,
issuer of documents or securities, guarantor or otherwise.
"Code" shall mean the Uniform Commercial Code as presently in
effect in the State of Texas, Texas Business and Commerce Code,
Chapters 1 through 9.
"Collateral" shall mean the following types or items of
Property (including Property hereafter acquired by Debtor as well as
Property which Debtor now owns or in which Debtor has rights):
<PAGE> 3
(a) all of Debtor's Accounts and Inventory;
(b) (i) any Property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any Property referred to in clause (a) of this definition;
and (ii) all certificates of title or other documents evidencing
ownership or possession of or otherwise relating to any Property
referred to in clause (a) of this definition;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this definition and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii) all policies of insurance (whether or not
required by Secured Party) covering any Property referred to in this
definition; and (iii) all proceeds, products, replacements, additions
to, substitutions for, accessions of, and Property necessary for the
operation of any of the Property referred to in this definition,
including, without limitation, insurance payable as a result of loss
or damage to any of the Property referred to in this definition,
refunds of unearned premiums of any such insurance policy and claims
against third parties;
(d) all books and records related to any of the Property
referred to in this definition, including, without limitation, any and
all books of account, customer lists and other records relating in any
way to the Collateral described in this definition;
(e) all of Debtor's general intangibles (as defined in
the Code) which are related (but only those related) to any Property
referred to in this definition, including, without limitation, all (i)
letters of credit, bonds, guaranties, purchase or sales agreements and
other contractual rights, rights to performance, and claims for
damages, refunds (including tax refunds) or other monies due or to
become due; (ii) orders, franchises, permits, certificates, licenses,
consents, exemptions, variances, authorizations or other approvals by
any Governmental Authority; (iii) business records, computer tapes and
computer software; and (iv) other intangible personal property,
whether similar or dissimilar to the Property referred to in clause
(a) of this definition; and
(f) all of Debtor's chattel paper, documents and
instruments (as such terms are defined in the Code) related to or
arising out of any Property referred to in clause (a) of this
definition.
It is expressly contemplated that additional Property may from
time to time be pledged, assigned or granted to Secured Party as
additional security for the Obligations, and, if so, then the term
"Collateral" as used herein shall be deemed for all purposes hereof to
include all such additional Property, together with all other Property
of the types described above related thereto. It is expressly agreed
that Collateral shall not include and shall be exclusive of any
equipment.
"Event of Default" shall have the meaning assigned such term
in Section 6.01 of this Security Agreement.
"Inventory" shall mean all inventory (as defined in the Code).
"Obligations" shall mean: (i) the Lender Indebtedness
described in the Credit Agreement, including without limitation, the
Letter of Credit Liabilities and the Notes, and any and all renewals,
extensions for any period, rearrangements or enlargements thereof and
any interest accrued thereon, whether prepetition or post-petition;
(ii) the performance of all obligations and
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<PAGE> 4
agreements under the Financing Documents, including this Security
Agreement; and (iii) all accrued and earned interest, charges,
expenses, attorneys' or other fees and any other sums payable to or
incurred by Secured Party, any Issuing Bank or any Lender in
connection with the execution, administration or enforcement of their
rights and remedies hereunder or any other Financing Document. The
Obligations are Senior Debt as such term is defined in that certain
Subordination Agreement dated December 15, 1992 among the Debtor,
Tesoro Alaska Petroleum Company and the State of Alaska attached to
the Settlement Agreement among the Debtor, Tesoro Alaska Petroleum
Company and the State of Alaska.
"Obligor" shall mean any Person, other than Debtor, liable
(whether directly or indirectly, primarily or secondarily) for the
payment or performance of any of the Obligations whether as maker,
co-maker, endorser, guarantor, accommodation party, general partner or
otherwise; and the term "Obligor" shall specifically include each
Guarantor named in the Credit Agreement.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Security Agreement" shall mean this Security Agreement, as
the same may be amended, modified or supplemented from time to time.
Section 1.03 Other Defined Terms. Unless otherwise
defined herein, all terms beginning with a capital letter which are defined in
the Credit Agreement shall have the meanings assigned therein, unless the
context hereof requires otherwise. All uncapitalized terms which are defined
in the Code shall have their respective meanings as used in the Code, unless
the context hereof requires otherwise.
ARTICLE II
SECURITY INTEREST
Section 2.01 Grant of Security Interest. Debtor hereby assigns
and grants to Secured Party, for its benefit and the benefit of the Lenders and
the Issuing Banks, a security interest in, lien upon and right of set-off
against the Collateral to secure the prompt payment and performance of the
Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Secured Party, the Issuing Banks and
the Lenders (which representations and warranties will survive the creation and
payment of the Obligations) that:
Section 3.01 First Priority Security Interest. The grant of the
security interest in the Collateral pursuant to this Security Agreement creates
a valid and perfected first priority security interest in the Collateral,
enforceable against Debtor and all third parties and securing payment of the
Obligations.
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<PAGE> 5
Section 3.02 No Filings By Third Parties. No financing statement
or other public notice or recording covering the Collateral is on file in any
public office (other than any financing statement or other public notice or
recording naming Secured Party as the secured party therein), and Debtor will
not execute any such financing statement or other public notice or recording so
long as any of the Obligations are outstanding.
Section 3.03 No Name Changes. Debtor has not, during the
preceding five years, entered into any contract, agreement, security instrument
or other document using a name other than, or been known by or otherwise used
any name other than, the name used by Debtor herein.
Section 3.04 Location of Debtor and Collateral. Debtor's chief
executive office and Debtor's records concerning the Collateral are located at
the address or location set forth on the signature page hereof. The Collateral
is located at such address or at the location(s), if any, specified in Exhibit
A hereto. Any Collateral not at such location(s) nevertheless remains subject
to Secured Party's security interest.
Section 3.05 Collateral. All statements or other information
provided by Debtor to Secured Party, any Issuing Bank or any Lender with
respect to the Collateral is or (in the case of subsequently furnished
information) will be when provided correct and complete in all material
respects. The delivery at any time by Debtor to Secured Party of additional
Collateral or of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article III are correct insofar as they
would pertain to such Collateral or the descriptions thereof.
Section 3.06 Accounts.
(a) Each Account represents the genuine, valid and legally
enforceable indebtedness of an Account Debtor arising from the sale, lease or
rendition by Debtor of goods or services and is not and will not be subject to
contra accounts, set-offs, defenses, counterclaims, allowances or adjustments
(other than discounts for prompt payment shown on the invoice), or objections
or complaints by the Account Debtor concerning its liability on the Account;
and any goods, the sale of which gave rise to an Account, have not been
returned or rejected by the Account Debtor or lost or damaged prior to receipt
by the Account Debtor.
(b) The amount shown as to each Account on Debtor's books is or
will be the true and undisputed amount owing and unpaid thereon. Except as
disclosed in writing to Secured Party, each Account arose or shall have arisen
in the ordinary course of Debtor's business; provided, however, that any
Accounts which arose or hereafter arise outside the ordinary course of Debtor's
business shall nevertheless be included as part of the Collateral. Debtor has
no knowledge of any bankruptcy, insolvency or other action affecting creditors'
rights with respect to any Account Debtor.
(c) Except as disclosed in writing to Secured Party, each invoice
or agreement evidencing the Accounts is or will be due and payable not more
than 90 days from the date thereof; provided, however, that any Accounts not so
due and payable shall nevertheless be included as part of the Collateral.
Section 3.07 Delivery of Documents or Letters of Credit. With
respect to any Inventory or other Collateral covered by one or more
certificates of title or other documents evidencing ownership or possession
thereof, and with respect to any Accounts or other Collateral supported by
letters of credit,
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<PAGE> 6
each of such certificates, documents or letters of credit has been delivered to
Secured Party (provided, however, that all certificates, documents and letters
of credit referred to in Section 1.02 shall be subject to the security interest
created by this Security Agreement irrespective of whether or not such delivery
shall have been made).
ARTICLE IV
COVENANTS AND AGREEMENTS
Debtor covenants and agrees that so long as any part of the
Obligations are outstanding:
Section 4.01 Change in Location of Collateral or Debtor. Debtor
will give Secured Party 30 days' prior written notice of (i) any change in
location of the Collateral to a jurisdiction other than Texas, Alaska,
California, Oregon or Washington and which would cause the Secured Party to be
unperfected in the Collateral, (ii) the opening or closing of any place of
Debtor's business or (iii) any change in the location of Debtor's chief
executive office or address.
Section 4.02 Documents; Collateral in Possession of Third Parties.
If certificates of title or other documents evidencing ownership or possession
of the Collateral are issued or outstanding, Debtor will cause the security
interest of Secured Party to be properly noted thereon and will, forthwith upon
receipt, deliver same to Secured Party. If any Collateral is at any time in
the possession or control of any warehouseman, bailee, agent or independent
contractor, Debtor shall notify such Person of Secured Party's security
interest in such Collateral. Upon Secured Party's request, Debtor shall
instruct any such Person to hold all such Collateral for Secured Party's
account subject to Debtor's instructions, or, if an Event of Default shall have
occurred, subject to Secured Party's instructions.
Section 4.03 Delivery of Letters of Credit and Instruments;
Proceeds. Debtor will deliver each letter of credit, if any, included in the
Collateral to Secured Party, in each case forthwith upon receipt by or for the
account of Debtor. If any Account becomes evidenced by a promissory note,
trade acceptance or any other instrument for the payment of money (other than
checks or drafts in payment of Accounts collected by Debtor in the ordinary
course of business prior to notification by Secured Party under Section 5.04),
Debtor will immediately deliver such instrument to Secured Party appropriately
endorsed to Secured Party, as collateral assignee and, regardless of the form
of presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, Debtor will remain liable thereon until such instrument is
paid in full. Except as permitted by Sections 4.03, 4.08 and 4.09 Debtor will
deliver to Secured Party all proceeds from the sale or other disposition of the
Collateral promptly upon receipt. If chattel paper, documents or instruments
are received as proceeds, which are required to be delivered to Secured Party,
they will be, immediately upon receipt, properly endorsed or assigned and
delivered to Secured Party as Collateral.
Section 4.04 Sale, Disposition or Encumbrance of Collateral.
Except (i) as permitted by Section 4.08, or (ii) with the prior written consent
of the Majority Lenders, Debtor will not in any way encumber any of the
Collateral (or permit or suffer any of the Collateral to be encumbered) or
sell, assign, lend, rent, lease or otherwise dispose of or transfer any of the
Collateral to or in favor of any Person other than Secured Party.
Section 4.05 Intentionally left blank.
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<PAGE> 7
Section 4.06 Records and Information.
(a) Debtor shall keep accurate and complete records of the
Collateral (including proceeds). These records shall reflect complete and
accurate stock records of the Inventory and all facts concerning each Account.
Debtor shall conduct a physical count of the Inventory at such intervals as
Secured Party requests and promptly supply Secured Party with a copy of such
count accompanied by a report of the value (valued at the lower of cost or
market value) of the Inventory. Secured Party may at any time have access to,
examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral.
(b) Debtor recognizes that financing statements pertaining to the
Collateral will be filed with the offices of the Secretary of State of Texas,
the Alaska Department of Natural Resources, the Secretary of State of
California, the Secretary of State of Oregon and the Department of Licensing of
the State of Washington. Debtor will immediately notify Secured Party of any
condition or event that may change the proper location for the filing of any
financing statements or other public notice or recordings for the purpose of
perfecting a security interest in the Collateral. Without limiting the
generality of the foregoing, Debtor will (i) immediately notify Secured Party
of any change to a jurisdiction other than as represented in Section 3.04 (A)
in the location of Debtor's chief executive office or chief place of business,
(B) in the location of the office where Debtor keeps its records concerning the
Accounts, or (C) in the "location" of Debtor within the meaning of Section
9-103(c) of the Code; (ii) immediately notify Secured Party of any change in
the location of the Collateral to any jurisdiction other than the States of
Texas, Alaska, California, Oregon and Washington; and (iii) notify Secured
Party 30 days prior to any change in Debtor's name, identity or corporate
structure or Tax Identification Number. In any notice furnished pursuant to
this paragraph, Debtor will expressly state that the notice is required by this
Security Agreement and contains facts that will or may require additional
filings of financing statements or other notices for the purpose of continuing
perfection of Secured Party's security interest in the Collateral. Debtor will
promptly provide written notice to Secured Party of all information which in
any way relates to or affects the Collateral generally, Secured Party's rights
or remedies with respect thereto, the filing of any financing statement or
other public notices or recordings, or the delivery and possession of items of
Collateral for the purpose of perfecting a security interest in the Collateral.
Section 4.07 Further Assurances. Upon the request of Secured
Party, Debtor shall (at Debtor's expense) execute and deliver all such
assignments, certificates, financing statements or other documents and give
further assurances and do all other acts and things as Secured Party may
reasonably request to perfect Secured Party's interest in the Collateral or to
protect, enforce or otherwise effect Secured Party's rights and remedies
hereunder.
Section 4.08 Inventory. Unless an Event of Default has occurred
and is continuing and after any applicable notice and cure periods provided for
in the Credit Agreement, Debtor may use the Inventory in any lawful manner not
inconsistent with this Security Agreement and with the terms of insurance
thereon and may sell, lease or otherwise dispose of its Inventory for cash or
terms in the ordinary course of business, and Debtor may retain the proceeds of
such sales, leases or other dispositions (subject to Section 4.03 and Section
4.09); provided, however, the Inventory shall remain in Debtor's possession and
control at all times prior to sale, lease or other disposition at Debtor's
address set forth in Section 3.04. Debtor shall bear any risk of loss of the
Inventory. Debtor shall not use any item of Inventory in a manner inconsistent
with the holding thereof for sale, lease or other disposition in the ordinary
course of business or in contravention of the terms of any agreement. Upon the
occurrence and continuance of an Event of Default and after any applicable cure
period, Debtor will not sell, lease or otherwise dispose of any of the
Inventory without the prior written consent of the Majority Lenders, and
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<PAGE> 8
Debtor shall immediately deliver to Secured Party any checks, cash or other
forms of payment which Debtor receives in connection with any Inventory,
appropriately endorsed.
Section 4.09 Accounts.
(a) Prior to notification by Secured Party under Section 6.02(i),
Debtor will collect the Accounts in the ordinary course of its business and may
retain the proceeds of such collections (subject to Section 4.03).
(b) Debtor shall immediately notify Secured Party in writing in
the event that any representation given in Article III with respect to any
Account ceases to be true and correct in all material respects; such notice
specifying other representation(s) that cease to be true and correct and the
action, if any, that Debtor proposes to take with respect thereto.
(c) Debtor will not modify, extend or substitute any contract, the
terms of which shall at any time have given rise to an Account, except in the
ordinary course of business or with the prior written consent of Secured Party.
Debtor will not re-date any invoice or sale or make sales with an extended
payment date beyond that customary in the industry, and in no event longer than
90 days. Debtor shall not adjust, settle, discount or compromise any of the
Accounts, except in the ordinary course of business or with the prior written
consent of Secured Party.
(d) Debtor will duly perform or cause to be performed all of
Debtor's obligations with respect to the Accounts and the underlying sales of
goods or other transactions giving rise to the Accounts.
Section 4.10 Condition of Collateral. Debtor will maintain all
Collateral in good condition and in accordance with industry standards and
practices. Debtor will not misuse, abuse, waste, destroy or endanger the
Collateral nor allow it to be used in any manner other than its intended use.
Debtor will not use any Collateral in violation of any Governmental
Requirements, or suffer it to be so used.
Section 4.11 Collateral Separate and Distinct. Debtor shall at
all times keep the Collateral, including proceeds, or cause it to be kept (when
in the possession of warehousemen, bailees, agents, independent contractors or
other third parties), separate and distinct from other Property.
Section 4.12 Change in Debtor's Name or Corporate Structure.
Debtor will not change its name, identity or corporate structure (including,
without limitation, any merger, consolidation or sale of substantially all of
its assets) without notifying Secured Party of such change in writing at least
30 days prior to the effective date of such change. Without the express
written consent of Secured Party, however, Debtor will not engage in any other
business or transaction under any name other than Debtor's name hereunder.
ARTICLE V
RIGHTS, DUTIES, AND POWERS OF SECURED PARTY
The following rights, duties and powers of Secured Party are
applicable irrespective of whether an Event of Default has occurred and is
continuing, but only after having given Debtor at least three (3) days prior
notice:
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<PAGE> 9
Section 5.01 Attorney-in-Fact. Secured Party is hereby fully
authorized and empowered (without the necessity of any further consent or
authorization from Debtor) and the right is expressly granted to Secured Party,
and Debtor hereby irrevocably appoints and makes Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor or otherwise, from time to time in Secured Party's
discretion, but at Debtor's cost and expense to:
(a) obtain, adjust, sell and cancel any insurance with
respect to the Collateral and endorse any draft drawn by insurers of
the Collateral, and Secured Party may apply any proceeds or unearned
premiums of such insurance to the Obligations (whether or not due);
and
(b) take any action and to execute any assignment,
certificate, financing statement, notification, document or instrument
which Secured Party may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Debtor
representing any payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the
same.
Section 5.02 Transfer of Collateral. Secured Party may transfer
any or all of the Obligations, and upon any such transfer, Secured Party may
transfer its interest in any or all of the Collateral and shall be fully
discharged thereafter from all liability therefor. Any transferee of the
Collateral shall be vested with all rights, powers and remedies of Secured
Party hereunder.
Section 5.03 Purchase Money Financing. To the extent that the
Lenders have advanced or will advance funds to or for the account of Debtor to
enable Debtor to purchase or otherwise acquire specific types or items of
Collateral, the Lenders may at their option pay such funds (i) directly to the
Person from whom Debtor will make such purchase or acquire such rights or (ii)
to Debtor, in which case Debtor covenants promptly to pay the same to such
Person and forthwith furnish to Secured Party, on request, evidence
satisfactory to Secured Party that such payment has been made from the funds so
provided by Secured Party for such payment.
Section 5.04 Proceeds. If so requested by Debtor, any payments
received by Secured Party on the Accounts or as proceeds of other Collateral
shall upon final collection by Secured Party be credited towards payment of the
Obligations. In the absence of such request from Debtor, and until so
requested, Secured Party may hold such collected payments as cash Collateral
(and Secured Party may at any time place a hold or freeze on all or a part of
any deposit account of Debtor containing deposits of such payments up to the
amount of such deposits).
Section 5.05 Discharge Encumbrances. Secured Party may, at its
option, discharge any taxes, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral, may pay for insurance on the
Collateral and may pay for the maintenance and preservation of the Collateral.
Debtor agrees to reimburse Secured Party upon demand for any payment so made,
plus interest on the portion thereof from time to time remaining unpaid from
the date of Secured Party's demand at the rate for overdue principal and
interest set forth in Section 2.06(c) of the Credit Agreement.
Section 5.06 Disclaimer of Certain Duties.
(a) The powers conferred upon Secured Party by this Security
Agreement are to protect the interest of Secured Party, the Issuing Banks and
the Lenders in the Collateral and shall not impose any duty upon Secured Party,
the Issuing Banks or any Lender to exercise any such powers. Debtor hereby
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<PAGE> 10
agrees that Secured Party, the Issuing Banks and the Lenders shall not be
liable for, nor shall the indebtedness evidenced by the Obligations be
diminished by, Secured Party's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the Collateral.
(b) Except as provided in the Credit Agreement, Secured Party
shall be under no duty whatsoever to make or give any presentment, notice of
dishonor, protest, demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Obligations, or to take any steps
necessary to preserve any rights against any Obligor, Account Debtor or other
Person.
Section 5.07 Modification of Obligations; Other Security. Debtor
waives (i) any and all notice of acceptance, creation, modification,
rearrangement, renewal or extension for any period of any instrument executed
by any Obligor in connection with the Obligations and (ii) any defense of any
Obligor by reason of disability, lack of authorization, cessation of the
liability of any Obligor or for any other reason. Debtor authorizes Secured
Party, without notice or demand and without any reservation of rights against
Debtor and without affecting Debtor's liability hereunder or on the
Obligations, from time to time to (x) take and hold other Property, other than
the Collateral, as security for the Obligations, and exchange, enforce, waive
and release any or all of the Collateral, (y) apply the Collateral in the
manner permitted by this Security Agreement and (z) renew, extend for any
period, accelerate, amend or modify, supplement, enforce, compromise, settle,
waive or release the obligations of any Obligor or any instrument or agreement
of such other Person with respect to any or all of the Obligations or
Collateral.
Section 5.08 Waiver of Notice; Demand and Presentment; etc.
Except for any notice required under the Credit Agreement, Debtor hereby waives
any demand, notice of default, notice of acceleration of the maturity of the
Obligations, notice of intent to accelerate the maturity of the Obligations,
presentment, protest and notice of dishonor as to any action taken by Secured
Party in connection with this Security Agreement, or any instrument or
document. Debtor waives any right of marshaling in respect of any and all
Collateral, and waives any right to require Secured Party, any Issuing Bank or
any Lender to proceed against any Obligor, Account Debtor or other Person,
exhaust any Collateral or enforce any other remedy which Secured Party, any
Issuing Bank or any Lender now has or may hereafter have against any Obligor or
other Person.
Section 5.09 Non-judicial Enforcement. To the fullest extent
allowed by applicable law, Secured Party may enforce its rights hereunder
without prior judicial process or judicial hearing, and to the fullest extent
permitted by law Debtor expressly waives any and all legal rights which might
otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. An Event of Default under the
Credit Agreement shall constitute an "Event of Default" under this Security
Agreement.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Secured Party may take any or all of the
following actions without notice (except where expressly required under the
Credit Agreement or below) or demand to Debtor:
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<PAGE> 11
(a) Declare all or part of the indebtedness pursuant to
the Obligations immediately due and payable and enforce payment of the
same by Debtor or any Obligor.
(b) Take possession of the Collateral, or at Secured
Party's request Debtor shall, at Debtor's cost, assemble the
Collateral and make it available at a location to be specified by
Secured Party which is reasonably convenient to Debtor and Secured
Party. In any event, Debtor shall bear the risk of accidental loss or
damage to or diminution in value of the Collateral, and Secured Party
shall have no liability whatsoever for failure to obtain or maintain
insurance, nor to determine whether any insurance ever in force is
adequate as to amount or as to risk insured.
(c) Sell or lease, in one or more sales or leases and in
one or more parcels, or otherwise dispose of any or all of the
Collateral in its then condition or in any other commercially
reasonable manner as Secured Party may elect, in a public or private
transaction, at any location as deemed reasonable by Secured Party
(including, without limitation, Debtor's premises), either for cash or
credit or for future delivery at such price as Secured Party may deem
fair, and (unless prohibited by the Code, as adopted in any applicable
jurisdiction) Secured Party, any Issuing Bank or any Lender may be the
purchaser of any or all Collateral so sold and may apply upon the
purchase price therefor any Obligations secured hereby. Any such sale
or transfer by Secured Party either to itself or to any other Person
shall be absolutely free from any claim of right by Debtor, including
any equity or right of redemption, stay or appraisal which Debtor has
or may have under any rule of law, regulation or statute now existing
or hereafter adopted. Upon any such sale or transfer, Secured Party
shall have the right to deliver, assign and transfer to the purchaser
or transferee thereof the Collateral so sold or transferred. It shall
not be necessary that the Collateral or any part thereof be present at
the location of any such sale or transfer. Secured Party may, at its
discretion, provide for a public sale, and any such public sale shall
be held at such time or times within ordinary business hours and at
such place or places as Secured Party may fix in the notice of such
sale. Secured Party shall not be obligated to make any sale pursuant
to any such notice. Secured Party may, without notice or publication,
adjourn any public or private sale by announcement at any time and
place fixed for such sale, and such sale may be made at any time or
place to which the same may be so adjourned. In the event any sale or
transfer hereunder is not completed or is defective in the opinion of
Secured Party, such sale or transfer shall not exhaust the rights of
Secured Party hereunder, and Secured Party shall have the right to
cause one or more subsequent sales or transfers to be made hereunder.
In the event that any of the Collateral is sold or transferred on
credit, or to be held by Secured Party for future delivery to a
purchaser or transferee, the Collateral so sold or transferred may be
retained by Secured Party until the purchase price or other
consideration is paid by the purchaser or transferee thereof, but in
the event that such purchaser or transferee fails to pay for the
Collateral so sold or transferred or to take delivery thereof, neither
Secured Party, any Issuing Bank nor any Lender shall incur any
liability in connection therewith. If only part of the Collateral is
sold or transferred such that the Obligations remain outstanding (in
whole or in part), Secured Party's rights and remedies hereunder shall
not be exhausted, waived or modified, and Secured Party is
specifically empowered to make one or more successive sales or
transfers until all the Collateral shall be sold or transferred and
all the Obligations are paid. In the event that Secured Party elects
not to sell the Collateral, Secured Party retains its rights to lease
or otherwise dispose of or utilize the Collateral or any part or parts
thereof in any manner authorized or permitted by law or in equity, and
to apply the proceeds of the same towards payment of the Obligations.
Each and every method of disposition of the Collateral described in
this Section 6.02(c) or in Section 6.02(f) shall constitute
disposition in a commercially reasonable manner.
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<PAGE> 12
(d) Take possession of all books and records of Debtor
pertaining to the Collateral. Secured Party shall have the authority
to enter upon any real or immoveable property or improvements thereon
in order to obtain any such books or records, or any Collateral
located thereon, and remove the same therefrom without liability.
(e) Apply proceeds of the disposition of the Collateral
to the Obligations in any manner elected by Secured Party and
permitted by the Code or otherwise permitted by law or in equity.
Such application may include, without limitation, the reasonable
expenses of retaking, holding, preparing for sale or other
disposition, and the reasonable attorneys' fees and legal expenses
incurred by Secured Party, the Issuing Banks and the Lenders.
(f) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by Secured Party of
the Collateral. Additionally, any sale or transfer hereunder may be
conducted by an auctioneer or any officer or agent of Secured Party.
(g) Apply and set-off (i) any deposits of Debtor now or
hereafter held by Secured Party, the Issuing Banks and the Lenders;
(ii) all claims of Debtor against Secured Party, now or hereafter
existing; (iii) any other Property, rights or interests of Debtor
which come into the possession or custody or under the control of
Secured Party; and (iv) the proceeds of any of the foregoing as if the
same were included in the Collateral. Secured Party agrees to notify
Debtor promptly after any such set-off or application; provided,
however, the failure of Secured Party to give any notice shall not
affect the validity of such set-off or application.
(h) With respect to the Collateral, receive, change the
address for delivery, open and dispose of mail addressed to Debtor,
and to execute, assign and endorse negotiable and other instruments
for the payment of money, documents of title or other evidences of
payment, shipment or storage for any form of Collateral on behalf of
and in the name of Debtor.
(i) Notify or require Debtor to notify Account Debtors
that the Accounts have been assigned to Secured Party and direct such
Account Debtors to make payments on the Accounts directly to Secured
Party. To the extent Secured Party does not so elect, Debtor shall
continue to collect and retain the Accounts. Secured Party or its
designee shall also have the right, in its own name or in the name of
Debtor, to do any of the following: (i) to demand, collect, receipt
for, settle, compromise any amounts due, give acquittances for,
prosecute or defend any action which may be in relation to any monies
due or to become due by virtue of, the Accounts; (ii) to sell,
transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured
Party were the absolute owner thereof; (iii) to extend the time of
payment of any of the Accounts, to grant waivers and make any
allowance or other adjustment with reference thereto; (iv) to endorse
the name of Debtor on notes, checks or other evidences of payments on
Collateral that may come into possession of Secured Party; (v) to take
control of cash and other proceeds of any Collateral; (vi) to sign the
name of Debtor on any invoice or bill of lading relating to any
Collateral, or any drafts against Account Debtors or other persons
making payment with respect to Collateral; (vii) to send a request for
verification of Accounts to any Account Debtor; and (viii) to do all
other acts and things necessary to carry out the intent of this
Agreement.
(j) Exercise all other rights and remedies permitted by
law or in equity.
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<PAGE> 13
Section 6.03 Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any Issuing Bank or any other
action of Secured Party, any Issuing Bank or any Lender hereunder results in
reduction of the Obligations, such action will not release Debtor from its
liability to Secured Party, the Issuing Banks and the Lenders for any unpaid
Obligations, including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall be
immediately due and payable to Secured Party at Secured Party's address set
forth on the signature page of this Security Agreement.
Section 6.04 Reasonable Notice. If any applicable provision of
any law requires Secured Party, any Issuing Bank or any Lender to give
reasonable notice of any sale or disposition or other action, Debtor hereby
agrees that fifteen (15) days' prior written notice shall constitute reasonable
notice thereof. Such notice, in the case of public sale, shall state the time
and place fixed for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.05 Account Debtors. Any payment or settlement of an
Account made by an Account Debtor will be, to the extent of such payment or to
the extent provided under such settlement, a release, discharge and acquittance
of the Account Debtor with respect to such Account, and Debtor shall take any
action as may be required by Secured Party in connection therewith. No Account
Debtor on any Account will ever be bound to make inquiry as to the termination
of this Agreement or the rights of Secured Party to act hereunder, but shall be
fully protected by Debtor in making payment directly to Secured Party.
ARTICLE VIII
MISCELLANEOUS
Section 7.01 Notices. Any notice required or permitted to be
given under or in connection with this Security Agreement shall be given as
specified in Section 8.01 of the Credit Agreement to the address specified on
the signature page of this Security Agreement.
Section 7.02 Amendments and Waivers. Secured Party's, any Issuing
Bank's or any Lender's acceptance of partial or delinquent payments or any
forbearance, failure or delay by the Secured Party in exercising any right,
power or remedy hereunder shall not be deemed a waiver of any obligation of
Debtor or any Obligor, or of any right, power or remedy of Secured Party; and
no partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof. Secured Party may remedy any Event of Default
hereunder or in connection with the Obligations without waiving the Event of
Default so remedied. Debtor hereby agrees that if Secured Party agrees to a
waiver of any provision hereunder, or an exchange of or release of the
Collateral, or the addition or release of any Obligor, any such action shall
not constitute a waiver of any of Secured Party's other rights or of Debtor's
obligations hereunder. This Security Agreement may be amended only by the
manner set forth in Section 8.02 of the Credit Agreement by an instrument in
writing executed jointly by Debtor and Secured Party and may be supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or other
reproduction of this Security Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
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<PAGE> 14
Section 7.04 Possession of Collateral. Secured Party shall be
deemed to have possession of any Collateral in transit to it or set apart for
it (or, in either case, any of its agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations,
and after such sale or transfer and discharge there remains a surplus of
proceeds, Secured Party will deliver to Debtor such excess proceeds in a
commercially reasonable time; provided, however, that neither Secured Party,
any Issuing Bank nor any Lender shall be liable for any interest, cost or
expense in connection with any delay in delivering such proceeds to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Security Agreement
and the security interest granted hereby shall be construed in accordance with
and governed by the laws of the State of Texas (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby). Debtor consents to and submits to in
personam jurisdiction and venue in the state district and county courts of the
county wherein Secured Party's offices are located at the address specified on
the signature page hereof, and in the Federal District Courts of the district
wherein such offices of Secured Party are located. This submission to
jurisdiction is nonexclusive and does not preclude Secured Party, any Issuing
Bank or any Lender from obtaining jurisdiction over Debtor or the Collateral in
any court otherwise having jurisdiction.
Section 7.07 Cumulative and Other Rights. The rights, powers and
remedies of Secured Party, the Issuing Banks and the Lenders hereunder are in
addition to all rights, powers and remedies given by law or in equity. The
exercise by Secured Party, any Issuing Bank or any Lender of any one or more of
the rights, powers and remedies herein shall not be construed as a waiver of
any other rights, powers and remedies, including, without limitation, any other
rights of set-off. If any of the Obligations are given in renewal, extension
for any period or rearrangement, or applied toward the payment of debt secured
by any lien, Secured Party shall be, and is hereby, subrogated to all the
rights, titles, interests and liens securing the debt so renewed, extended,
rearranged or paid.
Section 7.08 Continuing Security Agreement.
(a) This Security Agreement shall constitute a continuing security
agreement, and all representations and warranties, covenants and agreements
shall, as applicable, apply to all future as well as existing transactions.
Provisions of this Security Agreement, unless they are by their terms
exclusive, shall be in addition to other agreements between the parties.
(b) Except as may be expressly applicable pursuant to Section
9.505 of the Code, no action taken or omission to act by Secured Party, the
Issuing Banks or the Lenders hereunder, including, without limitation, any
action taken or inaction pursuant to Section 6.02, shall be deemed to
constitute a retention of the Collateral in satisfaction of the Obligations or
otherwise to be in full satisfaction of the Obligations, and the Obligations
shall remain in full force and effect, until Secured Party, the Issuing Banks
and the Lenders shall have applied payments (including, without limitation,
collections from Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter provided in
subsection (c) below.
(c) To the extent that any payments on the Obligations or proceeds
of the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
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<PAGE> 15
equitable cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Secured Party, the Issuing Banks or the Lenders, and Secured Party's, the
Issuing Banks' and the Lenders' security interests, rights, powers and remedies
hereunder shall continue in full force and effect. In such event, this
Security Agreement shall be automatically reinstated if it shall theretofore
have been terminated pursuant to Section 7.09.
(d) In the event that the Obligations are structured such that
there are times when no Indebtedness is owing thereunder, this Security
Agreement shall remain valid and in full force and effect as to all subsequent
indebtedness included in the Obligations, provided Secured Party has not in the
interim period executed a written release or termination statement or returned
possession of or reassigned the Collateral to Debtor.
Section 7.09 Termination. The grant of a security interest
hereunder and all of Secured Party's, the Issuing Banks' and the Lenders'
rights, powers and remedies in connection therewith shall remain in full force
and effect until Secured Party has retransferred and delivered all Collateral
in its possession to Debtor, and executed a written release or termination
statement and reassigned to Debtor without recourse or warranty any remaining
Collateral and all rights conveyed hereby. Upon the complete payment of the
Obligations and the compliance by Debtor with all covenants and agreements
hereof, Secured Party, at the written request and expense of Debtor, will
release, reassign and transfer the Collateral to Debtor and declare this
Security Agreement to be of no further force or effect. Notwithstanding the
foregoing, the provisions of Section 7.08(c) shall survive the termination of
this Security Agreement.
Section 7.10 Counterparts, Effectiveness. This Security Agreement
may be executed in two or more counterparts. Each counterpart is deemed an
original, but all such counterparts taken together constitute one and the same
instrument. This Security Agreement becomes effective upon the execution
hereof by Debtor and delivery of the same to Secured Party, and it is not
necessary for Secured Party, the Issuing Banks or any Lender to execute any
acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.11 Headings Descriptive. All titles or headings to
articles, sections, subsections or other divisions of this Security Agreement
or the exhibits hereto are only for the convenience of the parties and shall
not be construed to have any effect or meaning with respect to the other
content of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 7.12 Delivery of Copy/Waiver. The Debtor hereby
acknowledges receiving a copy of this Security Agreement. The Debtor waives
all rights to receive from the Secured Party a copy of any financing statement
or financing change statement filed or registered or verification statement
issued at any time in respect of this Security Agreement.
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<PAGE> 16
DEBTOR: TESORO PETROLEUM CORPORATION
By: /s/ William T. VanKleef
------------------------
Name: William T. VanKleef
Title: Vice President, Treasurer
Address of Chief Executive Office and
Location of the Collateral:
8700 Tesoro Drive
San Antonio, Texas 78217
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, AS AGENT
By: /s/ P. Stan Burge
------------------------
Name: P. Stan Burge
Title: Vice President
Address:
712 Main Street
Houston, Texas 77002
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<PAGE> 17
FINANCING STATEMENT
This Financing Statement is presented to a filing officer for filing
pursuant to the Uniform Commercial Code.
1. The name and address of the Debtor is:
TESORO PETROLEUM CORPORATION
8700 Tesoro Drive
San Antonio, Texas 78217
Federal Tax Identification No.: 98-0862768
2. The name and address of the Secured Party is:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Agent
712 Main Street
Houston, Texas 77002
Federal Tax Identification No.: 74-0800980
3. This Financing Statement covers the following Collateral:
(a) all of Debtor's accounts and inventory;
(b) (i) any property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any property referred to in this item 3; and (ii) all
certificates of title or other documents evidencing ownership or
possession of or otherwise relating to any property referred to in
clause (a) of this item 3;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this item 3 and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii) all policies of insurance (whether or not
required by Secured Party) covering any property referred to in this
item 3; and (iii), all proceeds, products, replacements, additions
to, substitutions for, accessions of, and property necessary for the
operation of any of the property referred to in this item 3,
including, without limitation, insurance payable as a result of loss
or damage to any of the property referred to in this item 3, refunds
of unearned premiums of any such insurance policy and claims against
third parties;
(d) all books and records related to any of the property
referred to in this item 3, including, without limitation, any and all
books of account, customer lists and other records relating in any way
to the Collateral described in this item 3;
(e) all of Debtor's general intangibles which are related
(but only those related) to any property referred to in this item 3,
including, without limitation, all (i) letters of credit, bonds,
guaranties, purchase or sales agreements and other contractual rights,
rights to performance, and claims for damages, refunds (including tax
refunds) or other monies due or to become due; (ii) orders,
franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental
authority; (iii) business records, computer tapes and computer
software; and (iv) other intangible personal property, whether
<PAGE> 18
similar or dissimilar to the other property described or referred to
in clause (a) of this item 3; and
(f) all of Debtor's chattel paper, documents and
instruments related to or arising out of any property referred to in
clause (a) of this item 3.
The Collateral shall not include and shall be exclusive of any
equipment.
DEBTOR: TESORO PETROLEUM CORPORATION
By: /s/ William T. VanKleef
---------------------------
Name: William T. VanKleef
Title: Vice President, Treasurer
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<PAGE> 1
EXHIBIT 10.7
SECURITY AGREEMENT
(Accounts and Inventory)
Between
TESORO ALASKA PETROLEUM COMPANY
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS AGENT
April 20, 1994
<PAGE> 2
SECURITY AGREEMENT
ACCOUNTS AND INVENTORY
THIS SECURITY AGREEMENT is made as of April 20, 1994, between TESORO
ALASKA PETROLEUM COMPANY, a Delaware corporation ("Debtor"), and TEXAS COMMERCE
BANK NATIONAL ASSOCIATION, a national banking association, as Agent ("Secured
Party"), for itself, the Issuing Banks and the Lenders.
RECITALS
A. On even date herewith, Tesoro Petroleum Corporation (the
"Company"), Texas Commerce Bank National Association, individually, as Agent
and as an Issuing Bank, Banque Paribas, individually, as Co-Agent and as an
Issuing Bank, and the other financial institutions parties thereto entered into
a Credit Agreement (as amended from time to time, the "Credit Agreement").
B. The conditions precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make the initial Loans and the
Issuing Banks to issue Letters of Credit thereunder, include the execution and
delivery by Debtor of this Security Agreement, and Debtor has agreed to enter
into this Security Agreement.
C. Therefore, (i) in order to comply with the terms and
conditions of the Credit Agreement, (ii) to induce the Lenders at any time from
time to time to loan monies and the Issuing Banks to issue Letters of Credit,
with or without security to or for the account of the Company in accordance
with the terms of the Credit Agreement, (iii) at the special insistence and
request of the Agent, the Issuing Banks and the Lenders, and (iv) for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor hereby agrees with Secured Party as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Terms Defined Above. As used in this Security
Agreement, the terms "Company," "Credit Agreement," "Debtor" and "Secured
Party" shall have the meanings respectively assigned to them.
Section 1.02 Certain Definitions. As used in this Security
Agreement, the following terms shall have the following meanings, unless the
context otherwise requires:
"Accounts" shall mean all accounts (as such term is defined in
the Code).
"Account Debtor" shall mean any Person liable (whether
directly or indirectly, primarily or secondarily) for the payment or
performance of any obligations included in the Collateral, whether as
an account debtor (as defined in the Code), obligor on an instrument,
issuer of documents or securities, guarantor or otherwise.
"Code" shall mean the Uniform Commercial Code as presently in
effect in the State of Texas, Texas Business and Commerce Code,
Chapters 1 through 9.
<PAGE> 3
"Collateral" shall mean the following types or items of
Property (including Property hereafter acquired by Debtor as well as
Property which Debtor now owns or in which Debtor has rights):
(a) all of Debtor's Accounts and Inventory;
(b) (i) any Property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any Property referred to in clause (a) of this definition;
and (ii) all certificates of title or other documents evidencing
ownership or possession of or otherwise relating to any Property
referred to in clause (a) of this definition;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this definition and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii) all policies of insurance (whether or not
required by Secured Party) covering any Property referred to in this
definition; and (iii) all proceeds, products, replacements, additions
to, substitutions for, accessions of, and Property necessary for the
operation of any of the Property referred to in this definition,
including, without limitation, insurance payable as a result of loss
or damage to any of the Property referred to in this definition,
refunds of unearned premiums of any such insurance policy and claims
against third parties;
(d) all books and records related to any of the Property
referred to in this definition, including, without limitation, any and
all books of account, customer lists and other records relating in any
way to the Collateral described in this definition;
(e) all of Debtor's general intangibles (as defined in
the Code) which are related (but only those related) to any Property
referred to in this definition, including, without limitation, all (i)
letters of credit, bonds, guaranties, purchase or sales agreements and
other contractual rights, rights to performance, and claims for
damages, refunds (including tax refunds) or other monies due or to
become due; (ii) orders, franchises, permits, certificates, licenses,
consents, exemptions, variances, authorizations or other approvals by
any Governmental Authority; (iii) business records, computer tapes and
computer software; and (iv) other intangible personal property,
whether similar or dissimilar to the Property referred to in clause
(a) of this definition; and
(f) all of Debtor's chattel paper, documents and
instruments (as such terms are defined in the Code) related to or
arising out of any Property referred to in clause (a) of this
definition.
It is expressly contemplated that additional Property may from
time to time be pledged, assigned or granted to Secured Party as
additional security for the Obligations, and, if so, then the term
"Collateral" as used herein shall be deemed for all purposes hereof to
include all such additional Property, together with all other Property
of the types described above related thereto. It is expressly agreed
that Collateral shall not include and shall be exclusive of any
equipment.
"Event of Default" shall have the meaning assigned such term
in Section 6.01 of this Security Agreement.
"Inventory" shall mean all inventory (as defined in the Code).
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"Obligations" shall mean with respect to the Debtor, the
Obligations (as defined in the Guaranty Agreement) to the extent the
Debtor is liable therefor as provided in the Guaranty Agreement. The
Obligations are Senior Debt as such term is defined in that certain
Subordination Agreement dated December 15, 1992 among the Company,
Tesoro Alaska Petroleum Company and the State of Alaska attached to
the Settlement Agreement among the Company, Tesoro Alaska Petroleum
Company and the State of Alaska.
"Obligor" shall mean the Company and any other Person, other
than Debtor, liable (whether directly or indirectly, primarily or
secondarily) for the payment or performance of any of the Obligations
whether as maker, co-maker, endorser, guarantor, accommodation party,
general partner or otherwise; and the term "Obligor" shall
specifically include each Guarantor, other than Debtor, named in the
Credit Agreement.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Security Agreement" shall mean this Security Agreement, as
the same may be amended, modified or supplemented from time to time.
Section 1.03 Other Defined Terms. Unless otherwise
defined herein, all terms beginning with a capital letter which are defined in
the Credit Agreement shall have the meanings assigned therein, unless the
context hereof requires otherwise. All uncapitalized terms which are defined
in the Code shall have their respective meanings as used in the Code, unless
the context hereof requires otherwise.
ARTICLE II
SECURITY INTEREST
Section 2.01 Grant of Security Interest. Debtor hereby assigns
and grants to Secured Party, for its benefit and the benefit of the Lenders and
the Issuing Banks, a security interest in, lien upon and right of set-off
against the Collateral to secure the prompt payment and performance of the
Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Secured Party, the Issuing Banks and
the Lenders (which representations and warranties will survive the creation and
payment of the Obligations) that:
Section 3.01 First Priority Security Interest. The grant of the
security interest in the Collateral pursuant to this Security Agreement creates
a valid and perfected first priority security interest in the Collateral,
enforceable against Debtor and all third parties and securing payment of the
Obligations.
Section 3.02 No Filings By Third Parties. No financing statement
or other public notice or recording covering the Collateral is on file in any
public office (other than any financing statement or other public notice or
recording naming Secured Party as the secured party therein), and Debtor will
not
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execute any such financing statement or other public notice or recording so
long as any of the Obligations are outstanding.
Section 3.03 No Name Changes. Debtor has not, during the
preceding five years, entered into any contract, agreement, security instrument
or other document using a name other than, or been known by or otherwise used
any name other than, the name used by Debtor herein.
Section 3.04 Location of Debtor and Collateral. Debtor's chief
executive office and Debtor's records concerning the Collateral are located at
the address or location set forth on the signature page hereof. The Collateral
is located at such address or at the location(s), if any, specified in Exhibit
A hereto. Any Collateral not at such location(s) nevertheless remains subject
to Secured Party's security interest.
Section 3.05 Collateral. All statements or other information
provided by Debtor to Secured Party, any Issuing Bank or any Lender with
respect to the Collateral is or (in the case of subsequently furnished
information) will be when provided correct and complete in all material
respects. The delivery at any time by Debtor to Secured Party of additional
Collateral or of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article III are correct insofar as they
would pertain to such Collateral or the descriptions thereof.
Section 3.06 Accounts.
(a) Each Account represents the genuine, valid and legally
enforceable indebtedness of an Account Debtor arising from the sale, lease or
rendition by Debtor of goods or services and is not and will not be subject to
contra accounts, set-offs, defenses, counterclaims, allowances or adjustments
(other than discounts for prompt payment shown on the invoice), or objections
or complaints by the Account Debtor concerning its liability on the Account;
and any goods, the sale of which gave rise to an Account, have not been
returned or rejected by the Account Debtor or lost or damaged prior to receipt
by the Account Debtor.
(b) The amount shown as to each Account on Debtor's books is or
will be the true and undisputed amount owing and unpaid thereon. Except as
disclosed in writing to Secured Party, each Account arose or shall have arisen
in the ordinary course of Debtor's business; provided, however, that any
Accounts which arose or hereafter arise outside the ordinary course of Debtor's
business shall nevertheless be included as part of the Collateral. Debtor has
no knowledge of any bankruptcy, insolvency or other action affecting creditors'
rights with respect to any Account Debtor.
(c) Except as disclosed in writing to Secured Party, each invoice
or agreement evidencing the Accounts is or will be due and payable not more
than 90 days from the date thereof; provided, however, that any Accounts not so
due and payable shall nevertheless be included as part of the Collateral.
Section 3.07 Delivery of Documents or Letters of Credit. With
respect to any Inventory or other Collateral covered by one or more
certificates of title or other documents evidencing ownership or possession
thereof, and with respect to any Accounts or other Collateral supported by
letters of credit, each of such certificates, documents or letters of credit
has been delivered to Secured Party (provided, however, that all certificates,
documents and letters of credit referred to in Section 1.02 shall be subject
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to the security interest created by this Security Agreement irrespective of
whether or not such delivery shall have been made).
Section 3.08 Ownership of Collateral; Encumbrances; Valid and
Binding Agreement. Debtor is the legal and beneficial owner of the Collateral
free and clear of any adverse claim, lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement, and Debtor has full right, power and authority to assign and grant a
security interest in the Collateral to Secured Party. This Agreement
constitutes a legal, valid and binding obligation of Debtor enforceable against
Debtor in accordance with its terms. The execution, delivery and performance
of this Agreement will not violate the terms of any contract, agreement, law,
regulation, order, injunction, judgment, decree or writ to which Debtor is
subject and does not require the consent or approval of any other Person.
Section 3.09 No Required Consent. No authorization, consent,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body (other than the filing of financing statements) is
required for (i) the due execution, delivery and performance by Debtor of this
Agreement, (ii) the grant by Debtor of the security interest granted by this
Agreement, (iii) the perfection of such security interest or (iv) the exercise
by Secured Party of its rights and remedies under this Agreement.
ARTICLE IV
COVENANTS AND AGREEMENTS
Debtor covenants and agrees that so long as any part of the
Obligations are outstanding:
Section 4.01 Change in Location of Collateral or Debtor. Debtor
will give Secured Party 30 days' prior written notice of (i) any change in
location of the Collateral to a jurisdiction other than Texas, Alaska,
California, Oregon or Washington and which would cause the Secured Party to be
unperfected in the Collateral, (ii) the opening or closing of any place of
Debtor's business or (iii) any change in the location of Debtor's chief
executive office or address.
Section 4.02 Documents; Collateral in Possession of Third Parties.
If certificates of title or other documents evidencing ownership or possession
of the Collateral are issued or outstanding, Debtor will cause the security
interest of Secured Party to be properly noted thereon and will, forthwith upon
receipt, deliver same to Secured Party. If any Collateral is at any time in
the possession or control of any warehouseman, bailee, agent or independent
contractor, Debtor shall notify such Person of Secured Party's security
interest in such Collateral. Upon Secured Party's request, Debtor shall
instruct any such Person to hold all such Collateral for Secured Party's
account subject to Debtor's instructions, or, if an Event of Default shall have
occurred, subject to Secured Party's instructions.
Section 4.03 Delivery of Letters of Credit and Instruments;
Proceeds. Debtor will deliver each letter of credit, if any, included in the
Collateral to Secured Party, in each case forthwith upon receipt by or for the
account of Debtor. If any Account becomes evidenced by a promissory note,
trade acceptance or any other instrument for the payment of money (other than
checks or drafts in payment of Accounts collected by Debtor in the ordinary
course of business prior to notification by Secured Party under Section 5.04),
Debtor will immediately deliver such instrument to Secured Party appropriately
endorsed to Secured Party, as collateral assignee and, regardless of the form
of presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, Debtor will remain liable thereon
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until such instrument is paid in full. Except as permitted by Sections 4.03,
4.08 and 4.09, Debtor will deliver to Secured Party all proceeds from the sale
or other disposition of the Collateral promptly upon receipt. If chattel
paper, documents or instruments are received as proceeds, which are required to
be delivered to Secured Party, they will be, immediately upon receipt, properly
endorsed or assigned and delivered to Secured Party as Collateral.
Section 4.04 Sale, Disposition or Encumbrance of Collateral.
Except (i) as permitted by Section 4.08, or (ii) with the prior written consent
of the Majority Lenders, Debtor will not in any way encumber any of the
Collateral (or permit or suffer any of the Collateral to be encumbered) or
sell, assign, lend, rent, lease or otherwise dispose of or transfer any of the
Collateral to or in favor of any Person other than Secured Party.
Section 4.05 Intentionally left blank.
Section 4.06 Records and Information.
(a) Debtor shall keep accurate and complete records of the
Collateral (including proceeds). These records shall reflect complete and
accurate stock records of the Inventory and all facts concerning each Account.
Debtor shall conduct a physical count of the Inventory at such intervals as
Secured Party requests and promptly supply Secured Party with a copy of such
count accompanied by a report of the value (valued at the lower of cost or
market value) of the Inventory. Secured Party may at any time have access to,
examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral.
(b) Debtor will promptly furnish such information as Secured Party
may from time to time reasonably request regarding (i) the business, affairs or
financial condition of Debtor or (ii) the Collateral or Secured Party's rights
or remedies with respect thereto. Any balance sheets or financial statements
requested by Secured Party pursuant to this Section 4.06(b) shall conform to
generally accepted accounting principles.
(c) Debtor recognizes that financing statements pertaining to the
Collateral will be filed with the offices of the Secretary of State of Texas,
the Alaska Department of Natural Resources, the Secretary of State of
California, the Secretary of State of Oregon and the Department of Licensing of
the State of Washington. Debtor will immediately notify Secured Party of any
condition or event that may change the proper location for the filing of any
financing statements or other public notice or recordings for the purpose of
perfecting a security interest in the Collateral. Without limiting the
generality of the foregoing, Debtor will (i) immediately notify Secured Party
of any change to a jurisdiction other than as represented in Section 3.04 (A)
in the location of Debtor's chief executive office or chief place of business,
(B) in the location of the office where Debtor keeps its records concerning the
Accounts, or (C) in the "location" of Debtor within the meaning of Section
9-103(c) of the Code; (ii) immediately notify Secured Party of any change in
the location of the Collateral to any jurisdiction other than the States of
Texas, Alaska, California, Oregon and Washington; and (ii) notify Secured Party
30 days prior to any change in Debtor's name, identity or corporate structure
or Tax Identification Number. In any notice furnished pursuant to this
paragraph, Debtor will expressly state that the notice is required by this
Security Agreement and contains facts that will or may require additional
filings of financing statements or other notices for the purpose of continuing
perfection of Secured Party's security interest in the Collateral. Debtor will
promptly provide written notice to Secured Party of all information which in
any way relates to or affects the Collateral generally, Secured Party's rights
or remedies with respect thereto,
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the filing of any financing statement or other public notices or recordings, or
the delivery and possession of items of Collateral for the purpose of
perfecting a security interest in the Collateral.
Section 4.07 Further Assurances. Upon the request of Secured
Party, Debtor shall (at Debtor's expense) execute and deliver all such
assignments, certificates, financing statements or other documents and give
further assurances and do all other acts and things as Secured Party may
reasonably request to perfect Secured Party's interest in the Collateral or to
protect, enforce or otherwise effect Secured Party's rights and remedies
hereunder.
Section 4.08 Inventory. Unless an Event of Default has occurred
and is continuing and after any applicable notice and cure periods provided for
in the Credit Agreement, Debtor may use the Inventory in any lawful manner not
inconsistent with this Security Agreement and with the terms of insurance
thereon and may sell, lease or otherwise dispose of its Inventory for cash or
terms in the ordinary course of business, and Debtor may retain the proceeds of
such sales, leases or other dispositions (subject to Section 4.03 and Section
4.09); provided, however, the Inventory shall remain in Debtor's possession and
control at all times prior to sale, lease or other disposition at Debtor's
address set forth in Section 3.04. Debtor shall bear any risk of loss of the
Inventory. Debtor shall not use any item of Inventory in a manner inconsistent
with the holding thereof for sale, lease or other disposition in the ordinary
course of business or in contravention of the terms of any agreement. Upon the
occurrence and continuance of an Event of Default and after any applicable cure
period, Debtor will not sell, lease or otherwise dispose of any of the
Inventory without the prior written consent of the Majority Lenders, and Debtor
shall immediately deliver to Secured Party any checks, cash or other forms of
payment which Debtor receives in connection with any Inventory, appropriately
endorsed.
Section 4.09 Accounts.
(a) Prior to notification by Secured Party under Section 6.02(i),
Debtor will collect the Accounts in the ordinary course of its business and may
retain the proceeds of such collections (subject to Section 4.03).
(b) Debtor shall immediately notify Secured Party in writing in
the event that any representation given in Article III with respect to any
Account ceases to be true and correct in all material respects; such notice
specifying other representation(s) that cease to be true and correct and the
action, if any, that Debtor proposes to take with respect thereto.
(c) Debtor will not modify, extend or substitute any contract, the
terms of which shall at any time have given rise to an Account, except in the
ordinary course of business or with the prior written consent of Secured Party.
Debtor will not re-date any invoice or sale or make sales with an extended
payment date beyond that customary in the industry, and in no event longer than
90 days. Debtor shall not adjust, settle, discount or compromise any of the
Accounts, except in the ordinary course of business or with the prior written
consent of Secured Party.
(d) Debtor will duly perform or cause to be performed all of
Debtor's obligations with respect to the Accounts and the underlying sales of
goods or other transactions giving rise to the Accounts.
Section 4.10 Condition of Collateral. Debtor will maintain all
Collateral in good condition and in accordance with industry standards and
practices. Debtor will not misuse, abuse, waste, destroy or
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endanger the Collateral nor allow it to be used in any manner other than its
intended use. Debtor will not use any Collateral in violation of any
Governmental Requirement, or suffer it to be so used.
Section 4.11 Collateral Separate and Distinct. Debtor shall at
all times keep the Collateral, including proceeds, or cause it to be kept (when
in the possession of warehousemen, bailees, agents, independent contractors or
other third parties), separate and distinct from other Property.
Section 4.12 Change in Debtor's Name or Corporate Structure.
Debtor will not change its name, identity or corporate structure (including,
without limitation, any merger, consolidation or sale of substantially all of
its assets) without notifying Secured Party of such change in writing at least
30 days prior to the effective date of such change. Without the express
written consent of Secured Party, however, Debtor will not engage in any other
business or transaction under any name other than Debtor's name hereunder.
ARTICLE V
RIGHTS, DUTIES, AND POWERS OF SECURED PARTY
The following rights, duties and powers of Secured Party are
applicable irrespective of whether an Event of Default has occurred and is
continuing, but only after having given Debtor at least three (3) days prior
notice:
Section 5.01 Attorney-in-Fact. Secured Party is hereby fully
authorized and empowered (without the necessity of any further consent or
authorization from Debtor) and the right is expressly granted to Secured Party,
and Debtor hereby irrevocably appoints and makes Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor or otherwise, from time to time in Secured Party's
discretion, but at Debtor's cost and expense to:
(a) obtain, adjust, sell and cancel any insurance with
respect to the Collateral and endorse any draft drawn by insurers of
the Collateral, and Secured Party may apply any proceeds or unearned
premiums of such insurance to the Obligations (whether or not due);
and
(b) take any action and to execute any assignment,
certificate, financing statement, notification, document or instrument
which Secured Party may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Debtor
representing any payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the
same.
Section 5.02 Transfer of Collateral. Secured Party may transfer
any or all of the Obligations, and upon any such transfer, Secured Party may
transfer its interest in any or all of the Collateral and shall be fully
discharged thereafter from all liability therefor. Any transferee of the
Collateral shall be vested with all rights, powers and remedies of Secured
Party hereunder.
Section 5.03 Purchase Money Financing. To the extent that the
Lenders have advanced or will advance funds to or for the account of Debtor to
enable Debtor to purchase or otherwise acquire specific types or items of
Collateral, the Lenders may at their option pay such funds (i) directly to the
Person from whom Debtor will make such purchase or acquire such rights or (ii)
to Debtor, in which case
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Debtor covenants promptly to pay the same to such Person and forthwith furnish
to Secured Party, on request, evidence satisfactory to Secured Party that such
payment has been made from the funds so provided by Secured Party for such
payment.
Section 5.04 Proceeds. If so requested by Debtor, any payments
received by Secured Party on the Accounts or as proceeds of other Collateral
shall upon final collection by Secured Party be credited towards payment of the
Obligations. In the absence of such request from Debtor, and until so
requested, Secured Party may hold such collected payments as cash Collateral
(and Secured Party may at any time place a hold or freeze on all or a part of
any deposit account of Debtor containing deposits of such payments up to the
amount of such deposits).
Section 5.05 Discharge Encumbrances. Secured Party may, at its
option, discharge any taxes, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral, may pay for insurance on the
Collateral and may pay for the maintenance and preservation of the Collateral.
Debtor agrees to reimburse Secured Party upon demand for any payment so made,
plus interest on the portion thereof from time to time remaining unpaid from
the date of Secured Party's demand at the rate for overdue principal and
interest set forth in Section 2.06(c) of the Credit Agreement.
Section 5.06 Disclaimer of Certain Duties.
(a) The powers conferred upon Secured Party by this Security
Agreement are to protect the interest of Secured Party, the Issuing Banks and
the Lenders in the Collateral and shall not impose any duty upon Secured Party,
the Issuing Banks or any Lender to exercise any such powers. Debtor hereby
agrees that Secured Party, the Issuing Banks and the Lenders shall not be
liable for, nor shall the indebtedness evidenced by the Obligations be
diminished by, Secured Party's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the Collateral.
(b) Except as provided in the Credit Agreement, Secured Party
shall be under no duty whatsoever to make or give any presentment, notice of
dishonor, protest, demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Obligations, or to take any steps
necessary to preserve any rights against any Obligor, Account Debtor or other
Person.
Section 5.07 Modification of Obligations; Other Security. Debtor
waives (i) any and all notice of acceptance, creation, modification,
rearrangement, renewal or extension for any period of any instrument executed
by any Obligor in connection with the Obligations and (ii) any defense of any
Obligor by reason of disability, lack of authorization, cessation of the
liability of any Obligor or for any other reason. Debtor authorizes Secured
Party, without notice or demand and without any reservation of rights against
Debtor and without affecting Debtor's liability hereunder or on the
Obligations, from time to time to (x) take and hold other Property, other than
the Collateral, as security for the Obligations, and exchange, enforce, waive
and release any or all of the Collateral, (y) apply the Collateral in the
manner permitted by this Security Agreement and (z) renew, extend for any
period, accelerate, amend or modify, supplement, enforce, compromise, settle,
waive or release the obligations of any Obligor or any instrument or agreement
of such other Person with respect to any or all of the Obligations or
Collateral.
Section 5.08 Waiver of Notice; Demand and Presentment; etc.
Except for any notice required under the Credit Agreement, Debtor hereby waives
any demand, notice of default, notice of acceleration of the maturity of the
Obligations, notice of intent to accelerate the maturity of the Obligations,
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presentment, protest and notice of dishonor as to any action taken by Secured
Party in connection with this Security Agreement, or any instrument or
document. Debtor waives any right of marshaling in respect of any and all
Collateral, and waives any right to require Secured Party, any Issuing Bank or
any Lender to proceed against any Obligor, Account Debtor or other Person,
exhaust any Collateral or enforce any other remedy which Secured Party, any
Issuing Bank or any Lender now has or may hereafter have against any Obligor or
other Person.
Section 5.09 Non-judicial Enforcement. To the fullest extent
allowed by applicable law, Secured Party may enforce its rights hereunder
without prior judicial process or judicial hearing, and to the fullest extent
permitted by law Debtor expressly waives any and all legal rights which might
otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. An Event of Default under the
Credit Agreement shall constitute an "Event of Default" under this Security
Agreement.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Secured Party may take any or all of the
following actions without notice (except where expressly required under the
Credit Agreement or below) or demand to Debtor:
(a) Declare all or part of the indebtedness pursuant to
the Obligations immediately due and payable and enforce payment of the
same by Debtor or any Obligor.
(b) Take possession of the Collateral, or at Secured
Party's request Debtor shall, at Debtor's cost, assemble the
Collateral and make it available at a location to be specified by
Secured Party which is reasonably convenient to Debtor and Secured
Party. In any event, Debtor shall bear the risk of accidental loss or
damage to or diminution in value of the Collateral, and Secured Party
shall have no liability whatsoever for failure to obtain or maintain
insurance, nor to determine whether any insurance ever in force is
adequate as to amount or as to risk insured.
(c) Sell or lease, in one or more sales or leases and in
one or more parcels, or otherwise dispose of any or all of the
Collateral in its then condition or in any other commercially
reasonable manner as Secured Party may elect, in a public or private
transaction, at any location as deemed reasonable by Secured Party
(including, without limitation, Debtor's premises), either for cash or
credit or for future delivery at such price as Secured Party may deem
fair, and (unless prohibited by the Code, as adopted in any applicable
jurisdiction) Secured Party, any Issuing Bank or any Lender may be the
purchaser of any or all Collateral so sold and may apply upon the
purchase price therefor any Obligations secured hereby. Any such sale
or transfer by Secured Party either to itself or to any other Person
shall be absolutely free from any claim of right by Debtor, including
any equity or right of redemption, stay or appraisal which Debtor has
or may have under any rule of law, regulation or statute now existing
or hereafter adopted. Upon any such sale or transfer, Secured Party
shall have the right to deliver, assign and transfer to the purchaser
or transferee thereof the Collateral so sold or transferred. It shall
not be necessary that the Collateral or any part thereof be present at
the location of any such sale or transfer. Secured Party may, at its
discretion, provide for a public sale, and any such public sale shall
be held at
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such time or times within ordinary business hours and at such place or
places as Secured Party may fix in the notice of such sale. Secured
Party shall not be obligated to make any sale pursuant to any such
notice. Secured Party may, without notice or publication, adjourn any
public or private sale by announcement at any time and place fixed for
such sale, and such sale may be made at any time or place to which the
same may be so adjourned. In the event any sale or transfer hereunder
is not completed or is defective in the opinion of Secured Party, such
sale or transfer shall not exhaust the rights of Secured Party
hereunder, and Secured Party shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. In the event that
any of the Collateral is sold or transferred on credit, or to be held
by Secured Party for future delivery to a purchaser or transferee, the
Collateral so sold or transferred may be retained by Secured Party
until the purchase price or other consideration is paid by the
purchaser or transferee thereof, but in the event that such purchaser
or transferee fails to pay for the Collateral so sold or transferred
or to take delivery thereof, neither Secured Party, any Issuing Bank
nor any Lender shall incur any liability in connection therewith. If
only part of the Collateral is sold or transferred such that the
Obligations remain outstanding (in whole or in part), Secured Party's
rights and remedies hereunder shall not be exhausted, waived or
modified, and Secured Party is specifically empowered to make one or
more successive sales or transfers until all the Collateral shall be
sold or transferred and all the Obligations are paid. In the event
that Secured Party elects not to sell the Collateral, Secured Party
retains its rights to lease or otherwise dispose of or utilize the
Collateral or any part or parts thereof in any manner authorized or
permitted by law or in equity, and to apply the proceeds of the same
towards payment of the Obligations. Each and every method of
disposition of the Collateral described in this Section 6.02(c) or in
Section 6.02(f) shall constitute disposition in a commercially
reasonable manner.
(d) Take possession of all books and records of Debtor
pertaining to the Collateral. Secured Party shall have the authority
to enter upon any real or immoveable property or improvements thereon
in order to obtain any such books or records, or any Collateral
located thereon, and remove the same therefrom without liability.
(e) Apply proceeds of the disposition of the Collateral
to the Obligations in any manner elected by Secured Party and
permitted by the Code or otherwise permitted by law or in equity.
Such application may include, without limitation, the reasonable
expenses of retaking, holding, preparing for sale or other
disposition, and the reasonable attorneys' fees and legal expenses
incurred by Secured Party, the Issuing Banks and the Lenders.
(f) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by Secured Party of
the Collateral. Additionally, any sale or transfer hereunder may be
conducted by an auctioneer or any officer or agent of Secured Party.
(g) Apply and set-off (i) any deposits of Debtor now or
hereafter held by Secured Party, the Issuing Banks and the Lenders;
(ii) all claims of Debtor against Secured Party, now or hereafter
existing; (iii) any other Property, rights or interests of Debtor
which come into the possession or custody or under the control of
Secured Party; and (iv) the proceeds of any of the foregoing as if the
same were included in the Collateral. Secured Party agrees to notify
Debtor promptly after any such set-off or application; provided,
however, the failure of Secured Party to give any notice shall not
affect the validity of such set-off or application.
(h) With respect to the Collateral, receive, change the
address for delivery, open and dispose of mail addressed to Debtor,
and to execute, assign and endorse negotiable and other
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<PAGE> 13
instruments for the payment of money, documents of title or other
evidences of payment, shipment or storage for any form of Collateral
on behalf of and in the name of Debtor.
(i) Notify or require Debtor to notify Account Debtors
that the Accounts have been assigned to Secured Party and direct such
Account Debtors to make payments on the Accounts directly to Secured
Party. To the extent Secured Party does not so elect, Debtor shall
continue to collect and retain the Accounts. Secured Party or its
designee shall also have the right, in its own name or in the name of
Debtor, to do any of the following: (i) to demand, collect, receipt
for, settle, compromise any amounts due, give acquittances for,
prosecute or defend any action which may be in relation to any monies
due or to become due by virtue of, the Accounts; (ii) to sell,
transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured
Party were the absolute owner thereof; (iii) to extend the time of
payment of any of the Accounts, to grant waivers and make any
allowance or other adjustment with reference thereto; (iv) to endorse
the name of Debtor on notes, checks or other evidences of payments on
Collateral that may come into possession of Secured Party; (v) to take
control of cash and other proceeds of any Collateral; (vi) to sign the
name of Debtor on any invoice or bill of lading relating to any
Collateral, or any drafts against Account Debtors or other persons
making payment with respect to Collateral; (vii) to send a request for
verification of Accounts to any Account Debtor; and (viii) to do all
other acts and things necessary to carry out the intent of this
Agreement.
(j) Exercise all other rights and remedies permitted by
law or in equity.
Section 6.03 Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any Issuing Bank or any other
action of Secured Party, any Issuing Bank or any Lender hereunder results in
reduction of the Obligations, such action will not release Debtor from its
liability to Secured Party, the Issuing Banks and the Lenders for any unpaid
Obligations, including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall be
immediately due and payable to Secured Party at Secured Party's address set
forth on the signature page of this Security Agreement.
Section 6.04 Reasonable Notice. If any applicable provision of
any law requires Secured Party any Issuing Bank or any Lender to give
reasonable notice of any sale or disposition or other action, Debtor hereby
agrees that fifteen (15) days' prior written notice shall constitute reasonable
notice thereof. Such notice, in the case of public sale, shall state the time
and place fixed for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.05 Account Debtors. Any payment or settlement of an
Account made by an Account Debtor will be, to the extent of such payment or to
the extent provided under such settlement, a release, discharge and acquittance
of the Account Debtor with respect to such Account, and Debtor shall take any
action as may be required by Secured Party in connection therewith. No Account
Debtor on any Account will ever be bound to make inquiry as to the termination
of this Agreement or the rights of Secured Party to act hereunder, but shall be
fully protected by Debtor in making payment directly to Secured Party.
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<PAGE> 14
ARTICLE VIII
MISCELLANEOUS
Section 7.01 Notices. Any notice required or permitted to be
given under or in connection with this Security Agreement shall be given in
accordance with the notice provisions of the Guaranty Agreement.
Section 7.02 Amendments and Waivers. Secured Party's, any Issuing
Bank's or any Lender's acceptance of partial or delinquent payments or any
forbearance, failure or delay by the Secured Party in exercising any right,
power or remedy hereunder shall not be deemed a waiver of any obligation of
Debtor or any Obligor, or of any right, power or remedy of Secured Party; and
no partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof. Secured Party may remedy any Event of Default
hereunder or in connection with the Obligations without waiving the Event of
Default so remedied. Debtor hereby agrees that if Secured Party agrees to a
waiver of any provision hereunder, or an exchange of or release of the
Collateral, or the addition or release of any Obligor, any such action shall
not constitute a waiver of any of Secured Party's other rights or of Debtor's
obligations hereunder. This Security Agreement may be amended only by the
manner set forth in Section 8.02 of the Credit Agreement by an instrument in
writing executed jointly by Debtor and Secured Party and may be supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or other
reproduction of this Security Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
Section 7.04 Possession of Collateral. Secured Party shall be
deemed to have possession of any Collateral in transit to it or set apart for
it (or, in either case, any of its agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations,
and after such sale or transfer and discharge there remains a surplus of
proceeds, Secured Party will deliver to Debtor such excess proceeds in a
commercially reasonable time; provided, however, that neither Secured Party,
any Issuing Bank nor any Lender shall be liable for any interest, cost or
expense in connection with any delay in delivering such proceeds to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Security Agreement
and the security interest granted hereby shall be construed in accordance with
and governed by the laws of the State of Texas (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby). Debtor consents to and submits to in
personam jurisdiction and venue in the state district and county courts of the
county wherein Secured Party's offices are located at the address specified on
the signature page hereof, and in the Federal District Courts of the district
wherein such offices of Secured Party are located. This submission to
jurisdiction is nonexclusive and does not preclude Secured Party, any Issuing
Bank or any Lender from obtaining jurisdiction over Debtor or the Collateral in
any court otherwise having jurisdiction.
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<PAGE> 15
Section 7.07 Cumulative and Other Rights. The rights, powers and
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party, any Issuing
Bank or any Lender of any one or more of the rights, powers and remedies herein
shall not be construed as a waiver of any other rights, powers and remedies,
including, without limitation, any other rights of set-off. If any of the
Obligations are given in renewal, extension for any period or rearrangement, or
applied toward the payment of debt secured by any lien, Secured Party shall be,
and is hereby, subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid.
Section 7.08 Subrogation. Until the Obligations have been paid in
full, Debtor hereby waives any claim, right or remedy which Debtor may now have
or hereafter acquire against the Company which arises out of this Security
Agreement or from the performance by Debtor hereunder, including without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, indemnification, or participation in any such claim, right or
remedy of any other Person against the Company; provided, however,
notwithstanding the foregoing, Debtor reserves its rights of contribution and
reimbursement, if any, from any Obligor. Until the Obligations have been paid
in full, Debtor further waives any benefit of any right to participate in any
security now or hereafter held by Secured Party, the Issuing Banks and/or the
Lenders.
Section 7.09 Continuing Security Agreement.
(a) This Security Agreement shall constitute a continuing security
agreement, and all representations and warranties, covenants and agreements
shall, as applicable, apply to all future as well as existing transactions.
Provisions of this Security Agreement, unless they are by their terms
exclusive, shall be in addition to other agreements between the parties.
(b) Except as may be expressly applicable pursuant to Section
9.505 of the Code, no action taken or omission to act by Secured Party, the
Issuing Banks or the Lenders hereunder, including, without limitation, any
action taken or inaction pursuant to Section 6.02, shall be deemed to
constitute a retention of the Collateral in satisfaction of the Obligations or
otherwise to be in full satisfaction of the Obligations, and the Obligations
shall remain in full force and effect, until Secured Party, the Issuing Banks
and the Lenders shall have applied payments (including, without limitation,
collections from Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter provided in
subsection (c) below.
(c) To the extent that any payments on the Obligations or proceeds
of the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Secured Party, the Issuing Banks or the Lenders, and Secured Party's, the
Issuing Banks' and the Lenders' security interests, rights, powers and remedies
hereunder shall continue in full force and effect. In such event, this
Security Agreement shall be automatically reinstated if it shall theretofore
have been terminated pursuant to Section 7.10.
(d) In the event that the Obligations are structured such that
there are times when no Indebtedness is owing thereunder, this Security
Agreement shall remain valid and in full force and effect as to all subsequent
indebtedness included in the Obligations, provided Secured Party has not in the
interim period executed a written release or termination statement or returned
possession of or reassigned the Collateral to Debtor.
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<PAGE> 16
Section 7.10 Termination. The grant of a security interest
hereunder and all of Secured Party's, the Issuing Banks' and the Lenders'
rights, powers and remedies in connection therewith shall remain in full force
and effect until Secured Party has retransferred and delivered all Collateral
in its possession to Debtor, and executed a written release or termination
statement and reassigned to Debtor without recourse or warranty any remaining
Collateral and all rights conveyed hereby. Upon the complete payment of the
Obligations and the compliance by Debtor with all covenants and agreements
hereof, Secured Party, at the written request and expense of Debtor, will
release, reassign and transfer the Collateral to Debtor and declare this
Security Agreement to be of no further force or effect. Notwithstanding the
foregoing, the provisions of Section 7.09(c) shall survive the termination of
this Security Agreement.
Section 7.11 Counterparts, Effectiveness. This Security Agreement
may be executed in two or more counterparts. Each counterpart is deemed an
original, but all such counterparts taken together constitute one and the same
instrument. This Security Agreement becomes effective upon the execution
hereof by Debtor and delivery of the same to Secured Party, and it is not
necessary for Secured Party, the Issuing Banks or any Lender to execute any
acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.12 Headings Descriptive. All titles or headings to
articles, sections, subsections or other divisions of this Security Agreement
or the exhibits hereto are only for the convenience of the parties and shall
not be construed to have any effect or meaning with respect to the other
content of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 7.13 Delivery of Copy/Waiver. The Debtor hereby
acknowledges receiving a copy of this Security Agreement. The Debtor waives
all rights to receive from the Secured Party a copy of any financing statement
or financing change statement filed or registered or verification statement
issued at any time in respect of this Security Agreement.
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<PAGE> 17
DEBTOR: TESORO ALASKA PETROLEUM COMPANY
By: /s/ William T. VanKleef
----------------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
Address of Chief Executive Office and
Location of the Collateral:
8700 Tesoro Drive
San Antonio, Texas 78217
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, AS AGENT
By: /s/ P. Stan Burge
-----------------------------------
Name: P. Stan Burge
Title: Vice President
Address:
712 Main Street
Houston, Texas 77002
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<PAGE> 18
FINANCING STATEMENT
This Financing Statement is presented to a filing officer for filing
pursuant to the Uniform Commercial Code.
1. The name and address of the Debtor is:
TESORO ALASKA PETROLEUM COMPANY
8700 Tesoro Drive
San Antonio, Texas 78217
Federal Tax Identification No.: 74-1646130
2. The name and address of the Secured Party is:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Agent
712 Main Street
Houston, Texas 77002
Federal Tax Identification No.: 74-0800980
3. This Financing Statement covers the following Collateral:
(a) all of Debtor's accounts and inventory;
(b) (i) any property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any property referred to in clause (a) of this item 3; and
(ii) all certificates of title or other documents evidencing ownership
or possession of or otherwise relating to any property referred to in
clause (a) of this item 3;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this item 3 and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii), all policies of insurance (whether or not
required by Secured Party) covering any property referred to in this
item 3; and (iii), all proceeds, products, replacements, additions
to, substitutions for, accessions of, and property necessary for the
operation of any of the property referred to in this item 3,
including, without limitation, insurance payable as a result of loss
or damage to any of the property referred to in this item 3, refunds
of unearned premiums of any such insurance policy and claims against
third parties;
(d) all books and records related to any of the property
referred to in this item 3, including, without limitation, any and all
books of account, customer lists and other records relating in any way
to the Collateral described in this item 3;
(e) all of Debtor's general intangibles which are related
(but only those related) to any property referred to in this item 3,
including, without limitation, all (i) letters of credit, bonds,
guaranties, purchase or sales agreements and other contractual rights,
rights to performance, and claims for damages, refunds (including tax
refunds) or other monies due or to become due; (ii) orders,
franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental
authority; (iii) business records, computer tapes and computer
software; and (iv) other intangible personal property, whether
<PAGE> 19
similar or dissimilar to the other property described or referred to
in clause (a) of this item 3; and
(f) all of Debtor's chattel paper, documents and
instruments related to or arising out of any property referred to in
clause (a) of this item 3.
The Collateral shall not include and shall be exclusive of any
equipment.
DEBTOR: TESORO ALASKA PETROLEUM COMPANY
By: /s/ William T. VanKleef
-----------------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
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<PAGE> 1
EXHIBIT 10.8
SECURITY AGREEMENT
(Accounts)
Between
TESORO PETROLEUM DISTRIBUTING COMPANY
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS AGENT
April 20, 1994
<PAGE> 2
SECURITY AGREEMENT
ACCOUNTS
THIS SECURITY AGREEMENT is made as of April 20, 1994, between TESORO
PETROLEUM DISTRIBUTING COMPANY, a Louisiana corporation ("Debtor"), and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, as Agent
("Secured Party"), for itself, the Issuing Banks and the Lenders.
RECITALS
A. On even date herewith, Tesoro Petroleum Corporation (the
"Company"), Texas Commerce Bank National Association, individually, as Agent
and as an Issuing Bank, Banque Paribas, individually, as Co-Agent and as an
Issuing Bank, and the other financial institutions parties thereto entered into
a Credit Agreement (as amended from time to time, the "Credit Agreement").
B. The conditions precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make the initial Loans and the
Issuing Banks to issue Letters of Credit thereunder, include the execution and
delivery by Debtor of this Security Agreement, and Debtor has agreed to enter
into this Security Agreement.
C. Therefore, (i) in order to comply with the terms and
conditions of the Credit Agreement, (ii) to induce the Lenders at any time from
time to time to loan monies and the Issuing Banks to issue Letters of Credit,
with or without security to or for the account of the Company in accordance
with the terms of the Credit Agreement, (iii) at the special insistence and
request of the Agent, the Issuing Banks and the Lenders, and (iv) for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor hereby agrees with Secured Party as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Terms Defined Above. As used in this Security
Agreement, the terms "Company," "Credit Agreement," "Debtor" and "Secured
Party" shall have the meanings respectively assigned to them.
Section 1.02 Certain Definitions. As used in this Security
Agreement, the following terms shall have the following meanings, unless the
context otherwise requires:
"Accounts" shall mean all accounts (as such term is defined
in the Code).
"Account Debtor" shall mean any Person liable (whether
directly or indirectly, primarily or secondarily) for the payment or
performance of any obligations included in the Collateral, whether as
an account debtor (as defined in the Code), obligor on an instrument,
issuer of documents or securities, guarantor or otherwise.
"Code" shall mean the Uniform Commercial Code as presently in
effect in the State of Texas, Texas Business and Commerce Code,
Chapters 1 through 9.
<PAGE> 3
"Collateral" shall mean the following types or items of
Property (including Property hereafter acquired by Debtor as well as
Property which Debtor now owns or in which Debtor has rights):
(a) all of Debtor's Accounts;
(b) any Property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any Property referred to in this definition;
(c) all proceeds, replacements, additions to and
substitutions for any of the Property referred to in this definition
and claims against third parties;
(d) all books and records related to any of the Property
referred to in this definition, including, without limitation, any and
all books of account, customer lists and other records relating in any
way to the Collateral described in this definition;
(e) all of Debtor's general intangibles (as defined in
the Code) which are related (but only those related) to any Property
referred to in this definition, including, without limitation, all (i)
letters of credit, bonds, guaranties, purchase or sales agreements and
other contractual rights, rights to performance, and claims for
damages, refunds (including tax refunds) or other monies due or to
become due; (ii) orders, franchises, permits, certificates, licenses,
consents, exemptions, variances, authorizations or other approvals by
any Governmental Authority; (iii) business records, computer tapes and
computer software; and (iv) other intangible personal property,
whether similar or dissimilar to the Property referred to in clause
(a) of this definition; and
(f) all of Debtor's chattel paper, documents and
instruments (as such terms are defined in the Code) related to or
arising out of any Property referred to in this definition.
It is expressly contemplated that additional Property may from
time to time be pledged, assigned or granted to Secured Party as
additional security for the Obligations, and, if so, then the term
"Collateral" as used herein shall be deemed for all purposes hereof to
include all such additional Property, together with all other Property
of the types described above related thereto. It is expressly agreed
that Collateral shall not include and shall be exclusive of any
equipment.
"Event of Default" shall have the meaning assigned such term in
Section 6.01 of this Security Agreement.
"Obligations" shall mean with respect to the Debtor, the
Obligations (as defined in the Guaranty Agreement) to the extent the
Debtor is liable therefor as provided in the Guaranty Agreement. The
Obligations are Senior Debt as such term is defined in that certain
Subordination Agreement dated December 15, 1992 among the Company,
Tesoro Alaska Petroleum Company and the State of Alaska attached to
the Settlement Agreement among the Company, Tesoro Alaska Petroleum
Company and the State of Alaska.
"Obligor" shall mean the Company and any other Person, other
than Debtor, liable (whether directly or indirectly, primarily or
secondarily) for the payment or performance of any of the Obligations
whether as maker, co-maker, endorser, guarantor, accommodation party,
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<PAGE> 4
general partner or otherwise; and the term "Obligor" shall
specifically include each Guarantor, other than Debtor, named in the
Credit Agreement.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Security Agreement" shall mean this Security Agreement, as
the same may be amended, modified or supplemented from time to time.
Section 1.03 Other Defined Terms. Unless otherwise defined
herein, all terms beginning with a capital letter which are defined in
the Credit Agreement shall have the meanings assigned therein, unless the
context hereof requires otherwise. All uncapitalized terms which are defined
in the Code shall have their respective meanings as used in the Code, unless
the context hereof requires otherwise.
ARTICLE II
SECURITY INTEREST
Section 2.01 Grant of Security Interest. Debtor hereby assigns
and grants to Secured Party, for its benefit and the benefit of the Lenders and
the Issuing Banks, a security interest in, lien upon and right of set-off
against the Collateral to secure the prompt payment and performance of the
Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Secured Party, the Issuing Banks and
the Lenders (which representations and warranties will survive the creation and
payment of the Obligations) that:
Section 3.01 First Priority Security Interest. The grant of the
security interest in the Collateral pursuant to this Security Agreement creates
a valid and perfected first priority security interest in the Collateral,
enforceable against Debtor and all third parties and securing payment of the
Obligations.
Section 3.02 No Filings By Third Parties. No financing statement
or other public notice or recording covering the Collateral is on file in any
public office (other than any financing statement or other public notice or
recording naming Secured Party as the secured party therein), and Debtor will
not execute any such financing statement or other public notice or recording so
long as any of the Obligations are outstanding.
Section 3.03 No Name Changes; Federal Tax Identification Number.
Debtor has not, during the preceding five years, entered into any contract,
agreement, security instrument or other document using a name other than, or
been known by or otherwise used any name other than, the name used by Debtor
herein. Debtor's federal tax identification number is 74-1268973.
Section 3.04 Location of Debtor. Debtor's chief executive office
and Debtor's records concerning the Collateral are located at the address or
location set forth on the signature page hereof.
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<PAGE> 5
Section 3.05 Collateral. All statements or other information
provided by Debtor to Secured Party, any Issuing Bank or any Lender with
respect to the Collateral is or (in the case of subsequently furnished
information) will be when provided correct and complete in all material
respects. The delivery at any time by Debtor to Secured Party of additional
Collateral or of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article III are correct insofar as they
would pertain to such Collateral or the descriptions thereof.
Section 3.06 Accounts.
(a) Each Account represents the genuine, valid and legally
enforceable indebtedness of an Account Debtor arising from the sale, lease or
rendition by Debtor of goods or services and is not and will not be subject to
contra accounts, set-offs, defenses, counterclaims, allowances or adjustments
(other than discounts for prompt payment shown on the invoice), or objections
or complaints by the Account Debtor concerning its liability on the Account;
and any goods, the sale of which gave rise to an Account, have not been
returned or rejected by the Account Debtor or lost or damaged prior to receipt
by the Account Debtor.
(b) The amount shown as to each Account on Debtor's books is or
will be the true and undisputed amount owing and unpaid thereon. Except as
disclosed in writing to Secured Party, each Account arose or shall have arisen
in the ordinary course of Debtor's business; provided, however, that any
Accounts which arose or hereafter arise outside the ordinary course of Debtor's
business shall nevertheless be included as part of the Collateral. Debtor has
no knowledge of any bankruptcy, insolvency or other action affecting creditors'
rights with respect to any Account Debtor.
(c) Except as disclosed in writing to Secured Party, each invoice
or agreement evidencing the Accounts is or will be due and payable not more
than 90 days from the date thereof; provided, however, that any Accounts not so
due and payable shall nevertheless be included as part of the Collateral.
Section 3.07 Delivery of Documents or Letters of Credit. With
respect to any Accounts or other Collateral supported by letters of credit,
each of such letters of credit has been delivered to Secured Party (provided,
however, that all letters of credit referred to in Section 1.02 shall be
subject to the security interest created by this Security Agreement
irrespective of whether or not such delivery shall have been made).
Section 3.08 Ownership of Collateral; Encumbrances; Valid and
Binding Agreement. Debtor is the legal and beneficial owner of the Collateral
free and clear of any adverse claim, lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement, and Debtor has full right, power and authority to assign and grant a
security interest in the Collateral to Secured Party. This Agreement
constitutes a legal, valid and binding obligation of Debtor enforceable against
Debtor in accordance with its terms. The execution, delivery and
performance of this Agreement will not violate the terms of any contract,
agreement, law, regulation, order, injunction, judgment, decree or writ to
which Debtor is subject and does not require the consent or approval of any
other Person.
Section 3.09 No Required Consent. No authorization, consent,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body (other than the filing of financing statements) is
required for (i) the due execution, delivery and performance by Debtor of this
Agreement, (ii) the grant by Debtor of the security interest granted by this
Agreement, (iii) the perfection
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<PAGE> 6
of such security interest or (iv) the exercise
by Secured Party of its rights and remedies under this Agreement.
ARTICLE IV
COVENANTS AND AGREEMENTS
Debtor covenants and agrees that so long as any part of the
Obligations are outstanding:
Section 4.01 Change in Location of Collateral or Debtor. Debtor
will give Secured Party 30 days' prior written notice of (i) the opening or
closing of any place of Debtor's business or (ii) any change in the location of
Debtor's chief executive office or address.
Section 4.02 Intentionally left blank.
Section 4.03 Delivery of Letters of Credit and Instruments;
Proceeds. Debtor will deliver each letter of credit, if any, included in the
Collateral to Secured Party, in each case forthwith upon receipt by or for the
account of Debtor. If any Account becomes evidenced by a promissory note,
trade acceptance or any other instrument for the payment of money (other than
checks or drafts in payment of Accounts collected by Debtor in the ordinary
course of business prior to notification by Secured Party under Section 5.04),
Debtor will immediately deliver such instrument to Secured Party appropriately
endorsed to Secured Party, as collateral assignee and, regardless of the form
of presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, Debtor will remain liable thereon until such instrument is
paid in full. Except as permitted by Sections 4.03 and 4.09, Debtor will
deliver to Secured Party all proceeds from the sale or other disposition of the
Collateral promptly upon receipt. If chattel paper, documents or instruments
are received as proceeds, which are required to be delivered to Secured Party,
they will be, immediately upon receipt, properly endorsed or assigned and
delivered to Secured Party as Collateral.
Section 4.04 Sale, Disposition or Encumbrance of Collateral.
Except with the prior written consent of the Majority Lenders, Debtor will not
in any way encumber any of the Collateral (or permit or suffer any of the
Collateral to be encumbered) or sell, assign, lend, rent, lease or otherwise
dispose of or transfer any of the Collateral to or in favor of any Person other
than Secured Party.
Section 4.05 Intentionally left blank.
Section 4.06 Records and Information.
(a) Debtor shall keep accurate and complete records of the
Collateral (including proceeds). These records shall reflect all facts
concerning each Account. Secured Party may at any time have access to,
examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral.
(b) Debtor will promptly furnish such information as Secured Party
may from time to time reasonably request regarding (i) the business, affairs or
financial condition of Debtor or (ii) the Collateral or Secured Party's rights
or remedies with respect thereto. Any balance sheets or financial statements
requested by Secured Party pursuant to this Section 4.06(b) shall conform to
generally accepted accounting principles.
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(c) Debtor recognizes that financing statements pertaining to the
Collateral will be filed with the offices of the Parish Clerk of Bienville
Parish, Louisiana, the Secretary of State of Texas, the Alaska Department of
Natural Resources, the Secretary of State of California, the Secretary of State
of Oregon and the Department of Licensing of the State of Washington. Debtor
will immediately notify Secured Party of any condition or event that may change
the proper location for the filing of any financing statements or other public
notice or recordings for the purpose of perfecting a security interest in the
Collateral. Without limiting the generality of the foregoing, Debtor will (i)
immediately notify Secured Party of any change to a jurisdiction other than as
represented in Section 3.04 (A) in the location of Debtor's chief executive
office or chief place of business, (B) in the location of the office where
Debtor keeps its records concerning the Accounts, or (C) in the "location" of
Debtor within the meaning of Section 9-103(c) of the Code; and (ii) notify
Secured Party 30 days prior to any change in Debtor's name, identity or
corporate structure or Tax Identification Number. In any notice furnished
pursuant to this paragraph, Debtor will expressly state that the notice is
required by this Security Agreement and contains facts that will or may require
additional filings of financing statements or other notices for the purpose of
continuing perfection of Secured Party's security interest in the Collateral.
Debtor will promptly provide written notice to Secured Party of all information
which in any way relates to or affects the Collateral generally, Secured
Party's rights or remedies with respect thereto, the filing of any financing
statement or other public notices or recordings, or the delivery and possession
of items of Collateral for the purpose of perfecting a security interest in the
Collateral.
Section 4.07 Further Assurances. Upon the request of Secured
Party, Debtor shall (at Debtor's expense) execute and deliver all such
assignments, certificates, financing statements or other documents and give
further assurances and do all other acts and things as Secured Party may
reasonably request to perfect Secured Party's interest in the Collateral or to
protect, enforce or otherwise effect Secured Party's rights and remedies
hereunder.
Section 4.08 Intentionally left blank.
Section 4.09 Accounts.
(a) Prior to notification by Secured Party under Section 6.02(i),
Debtor will collect the Accounts in the ordinary course of its business and may
retain the proceeds of such collections (subject to Section 4.03).
(b) Debtor shall immediately notify Secured Party in writing in
the event that any representation given in Article III with respect to any
Account ceases to be true and correct in all material respects; such notice
specifying other representation(s) that cease to be true and correct and the
action, if any, that Debtor proposes to take with respect thereto.
(c) Debtor will not modify, extend or substitute any contract, the
terms of which shall at any time have given rise to an Account, except in the
ordinary course of business or with the prior written consent of Secured Party.
Debtor will not re-date any invoice or sale or make sales with an extended
payment date beyond that customary in the industry, and in no event longer than
90 days. Debtor shall not adjust, settle, discount or compromise any of the
Accounts, except in the ordinary course of business or with the prior written
consent of Secured Party.
(d) Debtor will duly perform or cause to be performed all of
Debtor's obligations with respect to the Accounts and the underlying sales of
goods or other transactions giving rise to the Accounts.
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Section 4.10 Condition of Collateral. Debtor will maintain all
Collateral in good condition and in accordance with industry standards and
practices. Debtor will not misuse, abuse, waste, destroy or endanger the
Collateral nor allow it to be used in any manner other than its intended use.
Debtor will not use any Collateral in violation of any Governmental
Requirement, or suffer it to be so used.
Section 4.11 Collateral Separate and Distinct. Debtor shall at
all times keep the Collateral, including proceeds, or cause it to be kept (when
in the possession of warehousemen, bailees, agents, independent contractors or
other third parties), separate and distinct from other Property.
Section 4.12 Change in Debtor's Name or Corporate Structure.
Debtor will not change its name, identity or corporate structure (including,
without limitation, any merger, consolidation or sale of substantially all of
its assets) without notifying Secured Party of such change in writing at least
30 days prior to the effective date of such change. Without the express
written consent of Secured Party, however, Debtor will not engage in any other
business or transaction under any name other than Debtor's name hereunder.
ARTICLE V
RIGHTS, DUTIES, AND POWERS OF SECURED PARTY
The following rights, duties and powers of Secured Party are
applicable irrespective of whether an Event of Default has occurred and is
continuing, but only after having given Debtor at least three (3) days prior
notice:
Section 5.01 Attorney-in-Fact. Secured Party is hereby fully
authorized and empowered (without the necessity of any further consent or
authorization from Debtor) and the right is expressly granted to Secured Party,
and Debtor hereby irrevocably appoints and makes Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor or otherwise, from time to time in Secured Party's
discretion, but at Debtor's cost and expense, to take any action and to execute
any assignment, certificate, financing statement, notification, document or
instrument which Secured Party may deem necessary or advisable to accomplish
the purposes of this Security Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Debtor
representing any payment or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same.
Section 5.02 Transfer of Collateral. Secured Party may transfer
any or all of the Obligations, and upon any such transfer, Secured Party may
transfer its interest in any or all of the Collateral and shall be fully
discharged thereafter from all liability therefor. Any transferee of the
Collateral shall be vested with all rights, powers and remedies of Secured
Party hereunder.
Section 5.03 Purchase Money Financing. To the extent that the
Lenders have advanced or will advance funds to or for the account of Debtor to
enable Debtor to purchase or otherwise acquire specific types or items of
Collateral, the Lenders may at their option pay such funds (i) directly to the
Person from whom Debtor will make such purchase or acquire such rights or (ii)
to Debtor, in which case Debtor covenants promptly to pay the same to such
Person and forthwith furnish to Secured Party, on request, evidence
satisfactory to Secured Party that such payment has been made from the funds so
provided by Secured Party for such payment.
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Section 5.04 Proceeds. If so requested by Debtor, any payments
received by Secured Party on the Accounts or as proceeds of other Collateral
shall upon final collection by Secured Party be credited towards payment of the
Obligations. In the absence of such request from Debtor, and until so
requested, Secured Party may hold such collected payments as cash Collateral
(and Secured Party may at any time place a hold or freeze on all or a part of
any deposit account of Debtor containing deposits of such payments up to the
amount of such deposits).
Section 5.05 Discharge Encumbrances. Secured Party may, at its
option, discharge any taxes, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral, may pay for insurance on the
Collateral and may pay for the maintenance and preservation of the Collateral.
Debtor agrees to reimburse Secured Party upon demand for any payment so made,
plus interest on the portion thereof from time to time remaining unpaid from
the date of Secured Party's demand at the rate for overdue principal and
interest set forth in Section 2.06(c) of the Credit Agreement.
Section 5.06 Disclaimer of Certain Duties.
(a) The powers conferred upon Secured Party by this Security
Agreement are to protect the interest of Secured Party, the Issuing Banks and
the Lenders in the Collateral and shall not impose any duty upon Secured Party,
the Issuing Banks or any Lender to exercise any such powers. Debtor hereby
agrees that Secured Party, the Issuing Banks and the Lenders shall not be
liable for, nor shall the indebtedness evidenced by the Obligations be
diminished by, Secured Party's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the Collateral.
(b) Except as provided in the Credit Agreement, Secured Party
shall be under no duty whatsoever to make or give any presentment, notice of
dishonor, protest, demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Obligations, or to take any steps
necessary to preserve any rights against any Obligor, Account Debtor or other
Person.
Section 5.07 Modification of Obligations; Other Security. Debtor
waives (i) any and all notice of acceptance, creation, modification,
rearrangement, renewal or extension for any period of any instrument executed
by any Obligor in connection with the Obligations and (ii) any defense of any
Obligor by reason of disability, lack of authorization, cessation of the
liability of any Obligor or for any other reason. Debtor authorizes Secured
Party, without notice or demand and without any reservation of rights against
Debtor and without affecting Debtor's liability hereunder or on the
Obligations, from time to time to (x) take and hold other Property, other than
the Collateral, as security for the Obligations, and exchange, enforce, waive
and release any or all of the Collateral, (y) apply the Collateral in the
manner permitted by this Security Agreement and (z) renew, extend for any
period, accelerate, amend or modify, supplement, enforce, compromise, settle,
waive or release the obligations of any Obligor or any instrument or agreement
of such other Person with respect to any or all of the Obligations or
Collateral.
Section 5.08 Waiver of Notice; Demand and Presentment; etc.
Except for any notice required under the Credit Agreement, Debtor hereby waives
any demand, notice of default, notice of acceleration of the maturity of the
Obligations, notice of intent to accelerate the maturity of the Obligations,
presentment, protest and notice of dishonor as to any action taken by Secured
Party in connection with this Security Agreement, or any instrument or
document. Debtor waives any right of marshaling in respect of any and all
Collateral, and waives any right to require Secured Party, any Issuing Bank or
any Lender to proceed against any Obligor, Account Debtor or other Person,
exhaust any Collateral or
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enforce any other remedy which Secured Party, any Issuing Bank or any
Lender now has or may hereafter have against any Obligor or other Person.
Section 5.09 Non-judicial Enforcement. To the fullest extent
allowed by applicable law, Secured Party may enforce its rights hereunder
without prior judicial process or judicial hearing, and to the fullest extent
permitted by law Debtor expressly waives any and all legal rights which might
otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. An Event of Default under the
Credit Agreement shall constitute an "Event of Default" under this Security
Agreement.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Secured Party may take any or all of the
following actions without notice (except where expressly required under the
Credit Agreement or below) or demand to Debtor:
(a) With respect to Collateral not located in Louisiana.
(i) Declare all or part of the indebtedness pursuant to
the Obligations immediately due and payable and enforce payment of the
same by Debtor or any Obligor.
(ii) Take possession of the Collateral, or at Secured
Party's request Debtor shall, at Debtor's cost, assemble the
Collateral and make it available at a location to be specified by
Secured Party which is reasonably convenient to Debtor and Secured
Party. In any event, Debtor shall bear the risk of accidental loss or
damage to or diminution in value of the Collateral, and Secured Party
shall have no liability whatsoever for failure to obtain or maintain
insurance, nor to determine whether any insurance ever in force is
adequate as to amount or as to risk insured.
(iii) Sell or lease, in one or more sales or leases and in
one or more parcels, or otherwise dispose of any or all of the
Collateral in its then condition or in any other commercially
reasonable manner as Secured Party may elect, in a public
or private transaction, at any location as deemed reasonable by
Secured Party (including, without limitation, Debtor's premises),
either for cash or credit or for future delivery at such price as
Secured Party may deem fair, and (unless prohibited by the Code, as
adopted in any applicable jurisdiction) Secured Party, any Issuing
Bank or any Lender may be the purchaser of any or all Collateral so
sold and may apply upon the purchase price therefor any Obligations
secured hereby. Any such sale or transfer by Secured Party either to
itself or to any other Person shall be absolutely free from any claim
of right by Debtor, including any equity or right of redemption, stay
or appraisal which Debtor has or may have under any rule of law,
regulation or statute now existing or hereafter adopted. Upon any
such sale or transfer, Secured Party shall have the right to deliver,
assign and transfer to the purchaser or transferee thereof the
Collateral so sold or transferred. It shall not be necessary that the
Collateral or any part thereof be present at the location of any such
sale or transfer. Secured Party may, at its discretion, provide for a
public sale, and any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as
Secured Party may fix in the notice of such sale. Secured Party shall
not be obligated to make any sale
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pursuant to any such notice.
Secured Party may, without notice or publication, adjourn any public
or private sale by announcement at any time and place fixed for such
sale, and such sale may be made at any time or place to which the same
may be so adjourned. In the event any sale or transfer hereunder is
not completed or is defective in the opinion of Secured Party, such
sale or transfer shall not exhaust the rights of Secured Party
hereunder, and Secured Party shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. In the event that
any of the Collateral is sold or transferred on credit, or to be held
by Secured Party for future delivery to a purchaser or transferee, the
Collateral so sold or transferred may be retained by Secured Party
until the purchase price or other consideration is paid by the
purchaser or transferee thereof, but in the event that such purchaser
or transferee fails to pay for the Collateral so sold or transferred
or to take delivery thereof, neither Secured Party, any Issuing Bank
nor any Lender shall incur any liability in connection therewith. If
only part of the Collateral is sold or transferred such that the
Obligations remain outstanding (in whole or in part), Secured Party's
rights and remedies hereunder shall not be exhausted, waived or
modified, and Secured Party is specifically empowered to make one or
more successive sales or transfers until all the Collateral shall be
sold or transferred and all the Obligations are paid. In the event
that Secured Party elects not to sell the Collateral, Secured Party
retains its rights to lease or otherwise dispose of or utilize the
Collateral or any part or parts thereof in any manner authorized or
permitted by law or in equity, and to apply the proceeds of the same
towards payment of the Obligations. Each and every method of
disposition of the Collateral described in this Section 6.02(c) or in
Section 6.02(f) shall constitute disposition in a commercially
reasonable manner.
(iv) Take possession of all books and records of Debtor
pertaining to the Collateral. Secured Party shall have the authority
to enter upon any real or immoveable property or improvements thereon
in order to obtain any such books or records, or any Collateral
located thereon, and remove the same therefrom without liability.
(v) Apply proceeds of the disposition of the Collateral
to the Obligations in any manner elected by Secured Party and
permitted by the Code or otherwise permitted by law or in equity.
Such application may include, without limitation, the reasonable
expenses of retaking, holding, preparing for sale or other
disposition, and the reasonable attorneys' fees and legal expenses
incurred by Secured Party, the Issuing Banks and the Lenders.
(vi) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by Secured Party of
the Collateral. Additionally, any sale or transfer hereunder may be
conducted by an auctioneer or any officer or agent of Secured Party.
(vii) Apply and set-off (A) any deposits of Debtor now or
hereafter held by Secured Party, the Issuing Banks and the Lenders;
(B) all claims of Debtor against Secured Party, now or hereafter
existing; (C) any other Property, rights or interests of Debtor which
come into the possession or custody or under the control of Secured
Party; and (D) the proceeds of any of the foregoing as if the same
were included in the Collateral. Secured Party agrees to notify
Debtor promptly after any such set-off or application; provided,
however, the failure of Secured Party to give any notice shall not
affect the validity of such set-off or application.
(viii) With respect to the Collateral, receive, change the
address for delivery, open and dispose of mail addressed to Debtor,
and to execute, assign and endorse negotiable and other instruments
for the payment of money, documents of title or other evidences of
payment, shipment or storage for any form of Collateral on behalf of
and in the name of Debtor.
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(ix) Notify or require Debtor to notify Account Debtors
that the Accounts have been assigned to Secured Party and direct such
Account Debtors to make payments on the Accounts directly to Secured
Party. To the extent Secured Party does not so elect, Debtor shall
continue to collect and retain the Accounts. Secured Party or its
designee shall also have the right, in its own name or in the name of
Debtor, to do any of the following: (A) to demand, collect, receipt
for, settle, compromise any amounts due, give acquittances for,
prosecute or defend any action which may be in relation to any monies
due or to become due by virtue of, the Accounts; (B) to sell, transfer
or assign or otherwise deal in the Accounts or the proceeds thereof or
the related goods, as fully and effectively as if Secured Party were
the absolute owner thereof; (C) to extend the time of payment of any
of the Accounts, to grant waivers and make any allowance or other
adjustment with reference thereto; (D) to endorse the name of Debtor
on notes, checks or other evidences of payments on Collateral that may
come into possession of Secured Party; (E) to take control of cash and
other proceeds of any Collateral; (F) to sign the name of Debtor on
any invoice or bill of lading relating to any Collateral, or any
drafts against Account Debtors or other persons making payment with
respect to Collateral; (G) to send a request for verification of
Accounts to any Account Debtor; and (H) to do all other acts and
things necessary to carry out the intent of this Agreement.
(x) Exercise all other rights and remedies permitted by
law or in equity.
(b) With respect to any Collateral located in Louisiana, Secured
Party's rights shall also include the following:
(i) Secured Party, at its option, may declare all
Obligations immediately due and payable or performable and
Secured Party shall thereupon, in addition to the rights and
remedies provided in this Security Agreement or in any other
instrument or document executed by Debtor, have all the rights and
remedies of a "secured party" under Louisiana Commercial Laws (La.
R.S. 10:9-101 et seq.) and under all other applicable laws of
Louisiana or any other state having jurisdiction. Secured Party shall
have the right to sell, transfer or otherwise dispose of any and all
of the Collateral and to apply the proceeds thereof toward payment of
all costs, expenses, attorney's fees and legal expenses thereby
incurred by Secured Party and toward payment and performance of the
Obligations in such order or manner as Secured Party may elect.
Unless the Collateral threatens to decline speedily in value, Secured
Party shall send Debtor reasonable notice of the time and place of any
public sale or of the time after which any private sale or the
disposition thereof is to be made. The requirement of sending a
reasonable notice shall be met if such notice is mailed, postage
prepaid, to Debtor at the address set forth on the signature page
hereof at least fifteen (15) days before the time of such sale or
disposition. All expenses of retaking, holding, maintaining,
preparing for sale, selling and the like, including Secured Party's
reasonable attorney's fees and legal expenses, shall constitute
additional Obligations of Debtor and shall be immediately due and
payable, and payment of the same shall be secured by and entitled to
the benefits of this Security Agreement. If the proceeds of any sale
or other lawful disposition of the Collateral by Secured Party are
insufficient to fully pay the Obligations, then Debtor shall pay or
cause to be paid any deficiency.
(ii) Debtor agrees that, in the event any
proceedings are taken under this Security Agreement by way of
executory process or otherwise, any and all declarations of
fact made by authentic act before a notary public and in the
presence of two witnesses
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by person declaring that such facts
lie within his knowledge shall constitute authentic evidence
of such facts for purposes of executory process, and in
connection with any such action to foreclose or otherwise
realize upon the Collateral.
(iii) Debtor expressly waives:
(A) The benefit of appraisement provided
for in Articles 2332, 2336, 2723, 2724, Louisiana
Code of Civil Procedure and all other laws conferring
such benefits.
(B) The demand and three days' delay
accorded by Articles 2639 and 2721, Louisiana Code of
Civil Procedure.
(C) The three days' delay provided by
Articles 2331 and 2722, Louisiana Code of Civil
Procedure.
(D) The benefit of the other provisions
of Articles 2331, 2722 and 2723, Louisiana Code of
Civil Procedure; Debtor expressly agrees to the
immediate seizure of the Collateral in the event of
suit hereon.
(iv) Debtor does further confess judgment for the
full amount of the Obligations in principal, interest,
attorneys' fees and all other costs and charges and does
consent and agree that upon the occurrence of any Event of
Default, Secured Party may cause all of the Collateral to be
seized and sold under executory or any other legal process, at
the option of Secured Party.
(v) Notwithstanding anything to the contrary
contained in this Article VI or elsewhere in this Security
Agreement, the Obligations shall immediately become fully due,
payable, performable, satisfiable and dischargeable without
the necessity of further action on the part of Secured Party,
and Debtor hereby expressly waives any required notice of
intent to accelerate the Obligations and notice of
acceleration of the Obligations.
Section 6.03 Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any Issuing Bank or any other
action of Secured Party, any Issuing Bank or any Lender hereunder results in
reduction of the Obligations, such action will not release Debtor from its
liability to Secured Party, the Issuing Banks and the Lenders for any unpaid
Obligations, including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall be
immediately due and payable to Secured Party at Secured Party's address set
forth on the signature page of this Security Agreement.
Section 6.04 Reasonable Notice. If any applicable provision of
any law requires Secured Party any Issuing Bank or any Lender to give
reasonable notice of any sale or disposition or other action, Debtor hereby
agrees that fifteen (15) days' prior written notice shall constitute reasonable
notice thereof. Such notice, in the case of public sale, shall state the time
and place fixed for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.05 Account Debtors. Any payment or settlement of an
Account made by an Account Debtor will be, to the extent of such payment or to
the extent provided under such settlement, a release, discharge and acquittance
of the Account Debtor with respect to such Account, and Debtor shall take any
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action as may be required by Secured Party in connection therewith. No Account
Debtor on any Account will ever be bound to make inquiry as to the termination
of this Agreement or the rights of Secured Party to act hereunder, but shall be
fully protected by Debtor in making payment directly to Secured Party.
ARTICLE VIII
MISCELLANEOUS
Section 7.01 Notices. Any notice required or permitted to be
given under or in connection with this Security Agreement shall be given in
accordance with the notice provisions of the Guaranty Agreement.
Section 7.02 Amendments and Waivers. Secured Party's, any Issuing
Bank's or any Lender's acceptance of partial or delinquent payments or any
forbearance, failure or delay by the Secured Party in exercising any right,
power or remedy hereunder shall not be deemed a waiver of any obligation of
Debtor or any Obligor, or of any right, power or remedy of Secured Party; and
no partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof. Secured Party may remedy any Event of Default
hereunder or in connection with the Obligations without waiving the Event of
Default so remedied. Debtor hereby agrees that if Secured Party agrees to a
waiver of any provision hereunder, or an exchange of or release of the
Collateral, or the addition or release of any Obligor, any such action shall
not constitute a waiver of any of Secured Party's other rights or of Debtor's
obligations hereunder. This Security Agreement may be amended only by the
manner set forth in Section 8.02 of the Credit Agreement by an instrument in
writing executed jointly by Debtor and Secured Party and may be supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or other
reproduction of this Security Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
Section 7.04 Possession of Collateral. Secured Party shall be
deemed to have possession of any Collateral in transit to it or set apart for
it (or, in either case, any of its agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations,
and after such sale or transfer and discharge there remains a surplus of
proceeds, Secured Party will deliver to Debtor such excess proceeds in a
commercially reasonable time; provided, however, that neither Secured Party,
any Issuing Bank nor any Lender shall be liable for any interest, cost or
expense in connection with any delay in delivering such proceeds to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Security Agreement
and the security interest granted hereby shall be construed in accordance with
and governed by the laws of the State of Texas (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby). Debtor consents to and submits to in
personam jurisdiction and venue in the state district and county courts of the
county wherein Secured Party's offices are located at the address specified on
the signature page hereof, and in the Federal District Courts of the district
wherein
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such offices of Secured Party are located. This submission to
jurisdiction is nonexclusive and does not preclude Secured Party, any Issuing
Bank or any Lender from obtaining jurisdiction over Debtor or the Collateral in
any court otherwise having jurisdiction.
Section 7.07 Cumulative and Other Rights. The rights, powers and
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party, any Issuing
Bank or any Lender of any one or more of the rights, powers and remedies herein
shall not be construed as a waiver of any other rights, powers and remedies,
including, without limitation, any other rights of set-off. If any of the
Obligations are given in renewal, extension for any period or rearrangement, or
applied toward the payment of debt secured by any lien, Secured Party shall be,
and is hereby, subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid.
Section 7.08 Subrogation. Until the Obligations have been paid in
full, Debtor hereby waives any claim, right or remedy which Debtor may now have
or hereafter acquire against the Company which arises out of this Security
Agreement or from the performance by Debtor hereunder, including without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, indemnification, or participation in any such claim, right or
remedy of any other Person against the Company; provided, however,
notwithstanding the foregoing, Debtor reserves its rights of contribution and
reimbursement, if any, from any Obligor. Until the Obligations have been paid
in full, Debtor further waives any benefit of any right to participate in any
security now or hereafter held by Secured Party, the Issuing Banks and/or the
Lenders.
Section 7.09 Continuing Security Agreement.
(a) This Security Agreement shall constitute a continuing security
agreement, and all representations and warranties, covenants and agreements
shall, as applicable, apply to all future as well as existing transactions.
Provisions of this Security Agreement, unless they are by their terms
exclusive, shall be in addition to other agreements between the parties.
(b) Except as may be expressly applicable pursuant to Section
9.505 of the Code, no action taken or omission to act by Secured Party, the
Issuing Banks or the Lenders hereunder, including, without limitation, any
action taken or inaction pursuant to Section 6.02, shall be deemed to
constitute a retention of the Collateral in satisfaction of the Obligations or
otherwise to be in full satisfaction of the Obligations, and the Obligations
shall remain in full force and effect, until Secured Party, the Issuing Banks
and the Lenders shall have applied payments (including, without limitation,
collections from Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter provided in
subsection (c) below.
(c) To the extent that any payments on the Obligations or proceeds
of the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Secured Party, the Issuing Banks or the Lenders, and Secured Party's, the
Issuing Banks' and the Lenders' security interests, rights, powers and remedies
hereunder shall continue in full force and effect. In such event, this
Security Agreement shall be automatically reinstated if it shall theretofore
have been terminated pursuant to Section 7.10.
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(d) In the event that the Obligations are structured such that
there are times when no Indebtedness is owing thereunder, this Security
Agreement shall remain valid and in full force and effect as to all subsequent
indebtedness included in the Obligations, provided Secured Party has not in the
interim period executed a written release or termination statement or returned
possession of or reassigned the Collateral to Debtor.
Section 7.10 Termination. The grant of a security interest
hereunder and all of Secured Party's, the Issuing Banks' and the Lenders'
rights, powers and remedies in connection therewith shall remain in full force
and effect until Secured Party has retransferred and delivered all Collateral
in its possession to Debtor, and executed a written release or termination
statement and reassigned to Debtor without recourse or warranty any remaining
Collateral and all rights conveyed hereby. Upon the complete payment of the
Obligations and the compliance by Debtor with all covenants and agreements
hereof, Secured Party, at the written request and expense of Debtor, will
release, reassign and transfer the Collateral to Debtor and declare this
Security Agreement to be of no further force or effect. Notwithstanding the
foregoing, the provisions of Section 7.09(c) shall survive the termination of
this Security Agreement.
Section 7.11 Counterparts, Effectiveness. This Security Agreement
may be executed in two or more counterparts. Each counterpart is deemed an
original, but all such counterparts taken together constitute one and the same
instrument. This Security Agreement becomes effective upon the execution
hereof by Debtor and delivery of the same to Secured Party, and it is not
necessary for Secured Party, the Issuing Banks or any Lender to execute any
acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.12 Headings Descriptive. All titles or headings to
articles, sections, subsections or other divisions of this Security Agreement
or the exhibits hereto are only for the convenience of the parties and shall
not be construed to have any effect or meaning with respect to the other
content of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 7.13 Delivery of Copy/Waiver. The Debtor hereby
acknowledges receiving a copy of this Security Agreement. The Debtor waives
all rights to receive from the Secured Party a copy of any financing statement
or financing change statement filed or registered or verification statement
issued at any time in respect of this Security Agreement.
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<PAGE> 17
DEBTOR:
WITNESS TO ALL SIGNATURES: TESORO PETROLEUM DISTRIBUTING COMPANY
/s/ Trina Chandler By: /s/ William T. VanKleef
- ------------------------------ ----------------------------------------
Name: Name: William T. VanKleef
Title: Vice President and Treasurer
/s/ Frank T. Garcia
- ------------------------------
Name: Address of Chief Executive Office and
Location of the Collateral:
6100 Humphreys Street
Harahan, Louisiana 70123
SECURED PARTY:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, AS AGENT
By: /s/ P. Stan Burge
----------------------------------------
Name: P. Stan Burge
Title: Vice President
Address:
712 Main Street
Houston, Texas 77002
/s/ Anne A. Griffin
-----------------------
Notary Public in and
for the State of Texas
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<PAGE> 18
FINANCING STATEMENT
This Financing Statement is presented to a filing officer for filing
pursuant to the Uniform Commercial Code.
1. The name and address of the Debtor is:
TESORO PETROLEUM DISTRIBUTING COMPANY
6100 Humphreys Street
Harahan, Louisiana 70123
Federal Tax Identification No.: 74-1268973
2. The name and address of the Secured Party is:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Agent
712 Main Street
Houston, Texas 77002
Federal Tax Identification No.: 74-0800980
3. This Financing Statement covers the following Collateral:
(a) all of Debtor's accounts;
(b) any property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any property referred to in this item 3;
(c) all proceeds, replacements, additions to and
substitutions for any of the property referred to in this item 3 and
claims against third parties;
(d) all books and records related to any of the property
referred to in this item 3, including, without limitation, any and all
books of account, customer lists and other records relating in any way
to the Collateral described in this item 3;
(e) all of Debtor's general intangibles which are related
(but only those related) to any property referred to in this item 3,
including, without limitation, all (i) letters of credit, bonds,
guaranties, purchase or sales agreements and other contractual rights,
rights to performance, and claims for damages, refunds (including tax
refunds) or other monies due or to become due; (ii) orders,
franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental
authority; (iii) business records, computer tapes and computer
software; and (iv) other intangible personal property, whether similar
or dissimilar to the other property described or referred to in clause
(a) of this item 3; and
(f) all of Debtor's chattel paper, documents and
instruments related to or arising out of any property referred to in
this item 3.
The Collateral shall not include and shall be exclusive of any
equipment.
<PAGE> 19
Debtor's Federal Tax Identification No. 74-1268973
DEBTOR: TESORO PETROLEUM DISTRIBUTING COMPANY
By: /s/ William T. VanKleef
-----------------------------------
Name: William T. VanKleef Title:
Title: Vice President and Treasurer
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<PAGE> 1
EXHIBIT 10.9
SECURITY AGREEMENT
(Accounts and Inventory)
Between
TESORO EXPLORATION AND PRODUCTION COMPANY
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS AGENT
April 20, 1994
<PAGE> 2
SECURITY AGREEMENT
ACCOUNTS AND INVENTORY
THIS SECURITY AGREEMENT is made as of April 20, 1994, between TESORO
EXPLORATION AND PRODUCTION COMPANY, a Delaware corporation ("Debtor"), and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, as
Agent ("Secured Party"), for itself, the Issuing Banks and the Lenders.
RECITALS
A. On even date herewith, Tesoro Petroleum Corporation (the
"Company"), Texas Commerce Bank National Association, individually, as Agent
and as an Issuing Bank, Banque Paribas, individually, as Co-Agent and as an
Issuing Bank, and the other financial institutions parties thereto entered into
a Credit Agreement (as amended from time to time, the "Credit Agreement").
B. The conditions precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make the initial Loans and the
Issuing Banks to issue Letters of Credit thereunder, include the execution and
delivery by Debtor of this Security Agreement, and Debtor has agreed to enter
into this Security Agreement.
C. Therefore, (i) in order to comply with the terms and
conditions of the Credit Agreement, (ii) to induce the Lenders at any time from
time to time to loan monies and the Issuing Banks to issue Letters of Credit,
with or without security to or for the account of the Company in accordance
with the terms of the Credit Agreement, (iii) at the special insistence and
request of the Agent, the Issuing Banks and the Lenders, and (iv) for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor hereby agrees with Secured Party as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Terms Defined Above. As used in this Security
Agreement, the terms "Company," "Credit Agreement," "Debtor" and "Secured
Party" shall have the meanings respectively assigned to them.
Section 1.02 Certain Definitions. As used in this Security
Agreement, the following terms shall have the following meanings, unless the
context otherwise requires:
"Accounts" shall mean all accounts (as such term is defined in
the Code).
"Account Debtor" shall mean any Person liable (whether
directly or indirectly, primarily or secondarily) for the payment or
performance of any obligations included in the Collateral, whether as
an account debtor (as defined in the Code), obligor on an instrument,
issuer of documents or securities, guarantor or otherwise.
"Code" shall mean the Uniform Commercial Code as presently in
effect in the State of Texas, Texas Business and Commerce Code,
Chapters 1 through 9.
<PAGE> 3
"Collateral" shall mean the following types or items of
Property (including Property hereafter acquired by Debtor as well as
Property which Debtor now owns or in which Debtor has rights):
(a) all of Debtor's Accounts and Inventory;
(b) (i) any Property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any Property referred to in clause (a) of this definition;
and (ii) all certificates of title or other documents evidencing
ownership or possession of or otherwise relating to any Property
referred to in clause (a) of this definition;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this definition and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii) all policies of insurance (whether or not
required by Secured Party) covering any Property referred to in this
definition; and (iii) all proceeds, products, replacements, additions
to, substitutions for, accessions of, and Property necessary for the
operation of any of the Property referred to in this definition,
including, without limitation, insurance payable as a result of loss
or damage to any of the Property referred to in this definition,
refunds of unearned premiums of any such insurance policy and claims
against third parties;
(d) all books and records related to any of the Property
referred to in this definition, including, without limitation, any and
all books of account, customer lists and other records relating in any
way to the Collateral described in this definition;
(e) all of Debtor's general intangibles (as defined in
the Code) which are related (but only those related) to any Property
referred to in this definition, including, without limitation, all (i)
letters of credit, bonds, guaranties, purchase or sales agreements and
other contractual rights, rights to performance, and claims for
damages, refunds (including tax refunds) or other monies due or to
become due; (ii) orders, franchises, permits, certificates, licenses,
consents, exemptions, variances, authorizations or other approvals by
any Governmental Authority; (iii) business records, computer tapes and
computer software; and (iv) other intangible personal property,
whether similar or dissimilar to the Property referred to in clause
(a) of this definition; and
(f) all of Debtor's chattel paper, documents and
instruments (as such terms are defined in the Code) related to or
arising out of any Property referred to in clause (a) of this
definition.
It is expressly contemplated that additional Property may from
time to time be pledged, assigned or granted to Secured Party as
additional security for the Obligations, and, if so, then the term
"Collateral" as used herein shall be deemed for all purposes hereof to
include all such additional Property, together with all other Property
of the types described above related thereto. It is expressly agreed
that Collateral shall not include and shall be exclusive of any
equipment.
"Event of Default" shall have the meaning assigned such term
in Section 6.01 of this Security Agreement.
"Inventory" shall mean all inventory (as defined in the Code).
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<PAGE> 4
"Obligations" shall mean with respect to the Debtor, the
Obligations (as defined in the Guaranty Agreement) to the extent the
Debtor is liable therefor as provided in the Guaranty Agreement. The
Obligations are Senior Debt as such term is defined in that certain
Subordination Agreement dated December 15, 1992 among the Company,
Tesoro Alaska Petroleum Company and the State of Alaska attached to
the Settlement Agreement among the Company, Tesoro Alaska Petroleum
Company and the State of Alaska.
"Obligor" shall mean the Company and any other Person, other
than Debtor, liable (whether directly or indirectly, primarily or
secondarily) for the payment or performance of any of the Obligations
whether as maker, co-maker, endorser, guarantor, accommodation party,
general partner or otherwise; and the term "Obligor" shall
specifically include each Guarantor, other than Debtor, named in the
Credit Agreement.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Security Agreement" shall mean this Security Agreement, as
the same may be amended, modified or supplemented from time to time.
Section 1.03 Other Defined Terms. Unless otherwise
defined herein, all terms beginning with a capital letter which are defined in
the Credit Agreement shall have the meanings assigned therein, unless the
context hereof requires otherwise. All uncapitalized terms which are defined
in the Code shall have their respective meanings as used in the Code, unless
the context hereof requires otherwise.
ARTICLE II
SECURITY INTEREST
Section 2.01 Grant of Security Interest. Debtor hereby assigns
and grants to Secured Party, for its benefit and the benefit of the Lenders and
the Issuing Banks, a security interest in, lien upon and right of set-off
against the Collateral to secure the prompt payment and performance of the
Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Secured Party, the Issuing Banks and
the Lenders (which representations and warranties will survive the creation and
payment of the Obligations) that:
Section 3.01 First Priority Security Interest. The grant of the
security interest in the Collateral pursuant to this Security Agreement creates
a valid and perfected first priority security interest in the Collateral,
enforceable against Debtor and all third parties and securing payment of the
Obligations.
Section 3.02 No Filings By Third Parties. No financing statement
or other public notice or recording covering the Collateral is on file in any
public office (other than any financing statement or other public notice or
recording naming Secured Party as the secured party therein), and Debtor will
not
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<PAGE> 5
execute any such financing statement or other public notice or recording so
long as any of the Obligations are outstanding.
Section 3.03 No Name Changes. Debtor has not, during the
preceding five years, entered into any contract, agreement, security instrument
or other document using a name other than, or been known by or otherwise used
any name other than, the name used by Debtor herein.
Section 3.04 Location of Debtor and Collateral. Debtor's chief
executive office and Debtor's records concerning the Collateral are located at
the address or location set forth on the signature page hereof. The Collateral
is located at such address or at the location(s), if any, specified in Exhibit
A hereto. Any Collateral not at such location(s) nevertheless remains subject
to Secured Party's security interest.
Section 3.05 Collateral. All statements or other information
provided by Debtor to Secured Party, any Issuing Bank or any Lender with
respect to the Collateral is or (in the case of subsequently furnished
information) will be when provided correct and complete in all material
respects. The delivery at any time by Debtor to Secured Party of additional
Collateral or of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article III are correct insofar as they
would pertain to such Collateral or the descriptions thereof.
Section 3.06 Accounts.
(a) Each Account represents the genuine, valid and legally
enforceable indebtedness of an Account Debtor arising from the sale, lease or
rendition by Debtor of goods or services and is not and will not be subject to
contra accounts, set-offs, defenses, counterclaims, allowances or adjustments
(other than discounts for prompt payment shown on the invoice), or objections
or complaints by the Account Debtor concerning its liability on the Account;
and any goods, the sale of which gave rise to an Account, have not been
returned or rejected by the Account Debtor or lost or damaged prior to receipt
by the Account Debtor.
(b) The amount shown as to each Account on Debtor's books is or
will be the true and undisputed amount owing and unpaid thereon. Except as
disclosed in writing to Secured Party, each Account arose or shall have arisen
in the ordinary course of Debtor's business; provided, however, that any
Accounts which arose or hereafter arise outside the ordinary course of Debtor's
business shall nevertheless be included as part of the Collateral. Debtor has
no knowledge of any bankruptcy, insolvency or other action affecting creditors'
rights with respect to any Account Debtor.
(c) Except as disclosed in writing to Secured Party, each invoice
or agreement evidencing the Accounts is or will be due and payable not more
than 90 days from the date thereof; provided, however, that any Accounts not so
due and payable shall nevertheless be included as part of the Collateral.
Section 3.07 Delivery of Documents or Letters of Credit. With
respect to any Inventory or other Collateral covered by one or more
certificates of title or other documents evidencing ownership or possession
thereof, and with respect to any Accounts or other Collateral supported by
letters of credit, each of such certificates, documents or letters of credit
has been delivered to Secured Party (provided, however, that all certificates,
documents and letters of credit referred to in Section 1.02 shall be subject
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<PAGE> 6
to the security interest created by this Security Agreement irrespective of
whether or not such delivery shall have been made).
Section 3.08 Ownership of Collateral; Encumbrances; Valid and
Binding Agreement. Debtor is the legal and beneficial owner of the Collateral
free and clear of any adverse claim, lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement, and Debtor has full right, power and authority to assign and grant a
security interest in the Collateral to Secured Party. This Agreement
constitutes a legal, valid and binding obligation of Debtor enforceable against
Debtor in accordance with its terms. The execution, delivery and performance
of this Agreement will not violate the terms of any contract, agreement, law,
regulation, order, injunction, judgment, decree or writ to which Debtor is
subject and does not require the consent or approval of any other Person.
Section 3.09 No Required Consent. No authorization, consent,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body (other than the filing of financing statements) is
required for (i) the due execution, delivery and performance by Debtor of this
Agreement, (ii) the grant by Debtor of the security interest granted by this
Agreement, (iii) the perfection of such security interest or (iv) the exercise
by Secured Party of its rights and remedies under this Agreement.
ARTICLE IV
COVENANTS AND AGREEMENTS
Debtor covenants and agrees that so long as any part of the
Obligations are outstanding:
Section 4.01 Change in Location of Collateral or Debtor. Debtor
will give Secured Party 30 days' prior written notice of (i) any change in
location of the Collateral to a jurisdiction other than Texas, Alaska,
California, Oregon or Washington and which would cause the Secured Party to be
unperfected in the Collateral, (ii) the opening or closing of any place of
Debtor's business or (iii) any change in the location of Debtor's chief
executive office or address.
Section 4.02 Documents; Collateral in Possession of Third Parties.
If certificates of title or other documents evidencing ownership or possession
of the Collateral are issued or outstanding, Debtor will cause the security
interest of Secured Party to be properly noted thereon and will, forthwith upon
receipt, deliver same to Secured Party. If any Collateral is at any time in
the possession or control of any warehouseman, bailee, agent or independent
contractor, Debtor shall notify such Person of Secured Party's security
interest in such Collateral. Upon Secured Party's request, Debtor shall
instruct any such Person to hold all such Collateral for Secured Party's
account subject to Debtor's instructions, or, if an Event of Default shall have
occurred, subject to Secured Party's instructions.
Section 4.03 Delivery of Letters of Credit and Instruments;
Proceeds. Debtor will deliver each letter of credit, if any, included in the
Collateral to Secured Party, in each case forthwith upon receipt by or for the
account of Debtor. If any Account becomes evidenced by a promissory note,
trade acceptance or any other instrument for the payment of money (other than
checks or drafts in payment of Accounts collected by Debtor in the ordinary
course of business prior to notification by Secured Party under Section 5.04),
Debtor will immediately deliver such instrument to Secured Party appropriately
endorsed to Secured Party, as collateral assignee and, regardless of the form
of presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, Debtor will remain liable thereon
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<PAGE> 7
until such instrument is paid in full. Except as permitted by Sections 4.03,
4.08 and 4.09, Debtor will deliver to Secured Party all proceeds from the sale
or other disposition of the Collateral promptly upon receipt. If chattel
paper, documents or instruments are received as proceeds, which are required to
be delivered to Secured Party, they will be, immediately upon receipt, properly
endorsed or assigned and delivered to Secured Party as Collateral.
Section 4.04 Sale, Disposition or Encumbrance of Collateral.
Except (i) as permitted by Section 4.08, or (ii) with the prior written consent
of the Majority Lenders, Debtor will not in any way encumber any of the
Collateral (or permit or suffer any of the Collateral to be encumbered) or
sell, assign, lend, rent, lease or otherwise dispose of or transfer any of the
Collateral to or in favor of any Person other than Secured Party.
Section 4.05 Intentionally left blank.
Section 4.06 Records and Information.
(a) Debtor shall keep accurate and complete records of the
Collateral (including proceeds). These records shall reflect complete and
accurate stock records of the Inventory and all facts concerning each Account.
Debtor shall conduct a physical count of the Inventory at such intervals as
Secured Party requests and promptly supply Secured Party with a copy of such
count accompanied by a report of the value (valued at the lower of cost or
market value) of the Inventory. Secured Party may at any time have access to,
examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral.
(b) Debtor will promptly furnish such information as Secured Party
may from time to time reasonably request regarding (i) the business, affairs or
financial condition of Debtor or (ii) the Collateral or Secured Party's rights
or remedies with respect thereto. Any balance sheets or financial statements
requested by Secured Party pursuant to this Section 4.06(b) shall conform to
generally accepted accounting principles.
(c) Debtor recognizes that financing statements pertaining to the
Collateral will be filed with the offices of the Secretary of State of Texas,
the Alaska Department of Natural Resources, the Secretary of State of
California, the Secretary of State of Oregon and the Department of Licensing of
the State of Washington. Debtor will immediately notify Secured Party of any
condition or event that may change the proper location for the filing of any
financing statements or other public notice or recordings for the purpose of
perfecting a security interest in the Collateral. Without limiting the
generality of the foregoing, Debtor will (i) immediately notify Secured Party
of any change to a jurisdiction other than as represented in Section 3.04 (A)
in the location of Debtor's chief executive office or chief place of business,
(B) in the location of the office where Debtor keeps its records concerning the
Accounts, or (C) in the "location" of Debtor within the meaning of Section
9-103(c) of the Code; (ii) immediately notify Secured Party of any change in
the location of the Collateral to any jurisdiction other than the States of
Texas, Alaska, California, Oregon and Washington; and (ii) notify Secured Party
30 days prior to any change in Debtor's name, identity or corporate structure
or Tax Identification Number. In any notice furnished pursuant to this
paragraph, Debtor will expressly state that the notice is required by this
Security Agreement and contains facts that will or may require additional
filings of financing statements or other notices for the purpose of continuing
perfection of Secured Party's security interest in the Collateral. Debtor will
promptly provide written notice to Secured Party of all information which in
any way relates to or affects the Collateral generally, Secured Party's rights
or remedies with respect thereto,
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<PAGE> 8
the filing of any financing statement or other public notices or recordings, or
the delivery and possession of items of Collateral for the purpose of
perfecting a security interest in the Collateral.
Section 4.07 Further Assurances. Upon the request of Secured
Party, Debtor shall (at Debtor's expense) execute and deliver all such
assignments, certificates, financing statements or other documents and give
further assurances and do all other acts and things as Secured Party may
reasonably request to perfect Secured Party's interest in the Collateral or to
protect, enforce or otherwise effect Secured Party's rights and remedies
hereunder.
Section 4.08 Inventory. Unless an Event of Default has occurred
and is continuing and after any applicable notice and cure periods provided for
in the Credit Agreement, Debtor may use the Inventory in any lawful manner not
inconsistent with this Security Agreement and with the terms of insurance
thereon and may sell, lease or otherwise dispose of its Inventory for cash or
terms in the ordinary course of business, and Debtor may retain the proceeds of
such sales, leases or other dispositions (subject to Section 4.03 and Section
4.09); provided, however, the Inventory shall remain in Debtor's possession and
control at all times prior to sale, lease or other disposition at Debtor's
address set forth in Section 3.04. Debtor shall bear any risk of loss of the
Inventory. Debtor shall not use any item of Inventory in a manner inconsistent
with the holding thereof for sale, lease or other disposition in the ordinary
course of business or in contravention of the terms of any agreement. Upon the
occurrence and continuance of an Event of Default and after any applicable cure
period, Debtor will not sell, lease or otherwise dispose of any of the
Inventory without the prior written consent of the Majority Lenders, and Debtor
shall immediately deliver to Secured Party any checks, cash or other forms of
payment which Debtor receives in connection with any Inventory, appropriately
endorsed.
Section 4.09 Accounts.
(a) Prior to notification by Secured Party under Section 6.02(i),
Debtor will collect the Accounts in the ordinary course of its business and may
retain the proceeds of such collections (subject to Section 4.03).
(b) Debtor shall immediately notify Secured Party in writing in
the event that any representation given in Article III with respect to any
Account ceases to be true and correct in all material respects; such notice
specifying other representation(s) that cease to be true and correct and the
action, if any, that Debtor proposes to take with respect thereto.
(c) Debtor will not modify, extend or substitute any contract, the
terms of which shall at any time have given rise to an Account, except in the
ordinary course of business or with the prior written consent of Secured Party.
Debtor will not re-date any invoice or sale or make sales with an extended
payment date beyond that customary in the industry, and in no event longer than
90 days. Debtor shall not adjust, settle, discount or compromise any of the
Accounts, except in the ordinary course of business or with the prior written
consent of Secured Party.
(d) Debtor will duly perform or cause to be performed all of
Debtor's obligations with respect to the Accounts and the underlying sales of
goods or other transactions giving rise to the Accounts.
Section 4.10 Condition of Collateral. Debtor will maintain all
Collateral in good condition and in accordance with industry standards and
practices. Debtor will not misuse, abuse, waste, destroy or
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<PAGE> 9
endanger the Collateral nor allow it to be used in any manner other than its
intended use. Debtor will not use any Collateral in violation of any
Governmental Requirement, or suffer it to be so used.
Section 4.11 Collateral Separate and Distinct. Debtor shall at
all times keep the Collateral, including proceeds, or cause it to be kept (when
in the possession of warehousemen, bailees, agents, independent contractors or
other third parties), separate and distinct from other Property.
Section 4.12 Change in Debtor's Name or Corporate Structure.
Debtor will not change its name, identity or corporate structure (including,
without limitation, any merger, consolidation or sale of substantially all of
its assets) without notifying Secured Party of such change in writing at least
30 days prior to the effective date of such change. Without the express
written consent of Secured Party, however, Debtor will not engage in any other
business or transaction under any name other than Debtor's name hereunder.
ARTICLE V
RIGHTS, DUTIES, AND POWERS OF SECURED PARTY
The following rights, duties and powers of Secured Party are
applicable irrespective of whether an Event of Default has occurred and is
continuing, but only after having given Debtor at least three (3) days prior
notice:
Section 5.01 Attorney-in-Fact. Secured Party is hereby fully
authorized and empowered (without the necessity of any further consent or
authorization from Debtor) and the right is expressly granted to Secured Party,
and Debtor hereby irrevocably appoints and makes Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor or otherwise, from time to time in Secured Party's
discretion, but at Debtor's cost and expense to:
(a) obtain, adjust, sell and cancel any insurance with
respect to the Collateral and endorse any draft drawn by insurers of
the Collateral, and Secured Party may apply any proceeds or unearned
premiums of such insurance to the Obligations (whether or not due);
and
(b) take any action and to execute any assignment,
certificate, financing statement, notification, document or instrument
which Secured Party may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Debtor
representing any payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the
same.
Section 5.02 Transfer of Collateral. Secured Party may transfer
any or all of the Obligations, and upon any such transfer, Secured Party may
transfer its interest in any or all of the Collateral and shall be fully
discharged thereafter from all liability therefor. Any transferee of the
Collateral shall be vested with all rights, powers and remedies of Secured
Party hereunder.
Section 5.03 Purchase Money Financing. To the extent that the
Lenders have advanced or will advance funds to or for the account of Debtor to
enable Debtor to purchase or otherwise acquire specific types or items of
Collateral, the Lenders may at their option pay such funds (i) directly to the
Person from whom Debtor will make such purchase or acquire such rights or (ii)
to Debtor, in which case
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Debtor covenants promptly to pay the same to such Person and forthwith furnish
to Secured Party, on request, evidence satisfactory to Secured Party that such
payment has been made from the funds so provided by Secured Party for such
payment.
Section 5.04 Proceeds. If so requested by Debtor, any payments
received by Secured Party on the Accounts or as proceeds of other Collateral
shall upon final collection by Secured Party be credited towards payment of the
Obligations. In the absence of such request from Debtor, and until so
requested, Secured Party may hold such collected payments as cash Collateral
(and Secured Party may at any time place a hold or freeze on all or a part of
any deposit account of Debtor containing deposits of such payments up to the
amount of such deposits).
Section 5.05 Discharge Encumbrances. Secured Party may, at its
option, discharge any taxes, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral, may pay for insurance on the
Collateral and may pay for the maintenance and preservation of the Collateral.
Debtor agrees to reimburse Secured Party upon demand for any payment so made,
plus interest on the portion thereof from time to time remaining unpaid from
the date of Secured Party's demand at the rate for overdue principal and
interest set forth in Section 2.06(c) of the Credit Agreement.
Section 5.06 Disclaimer of Certain Duties.
(a) The powers conferred upon Secured Party by this Security
Agreement are to protect the interest of Secured Party, the Issuing Banks and
the Lenders in the Collateral and shall not impose any duty upon Secured Party,
the Issuing Banks or any Lender to exercise any such powers. Debtor hereby
agrees that Secured Party, the Issuing Banks and the Lenders shall not be
liable for, nor shall the indebtedness evidenced by the Obligations be
diminished by, Secured Party's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the Collateral.
(b) Except as provided in the Credit Agreement, Secured Party
shall be under no duty whatsoever to make or give any presentment, notice of
dishonor, protest, demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Obligations, or to take any steps
necessary to preserve any rights against any Obligor, Account Debtor or other
Person.
Section 5.07 Modification of Obligations; Other Security. Debtor
waives (i) any and all notice of acceptance, creation, modification,
rearrangement, renewal or extension for any period of any instrument executed
by any Obligor in connection with the Obligations and (ii) any defense of any
Obligor by reason of disability, lack of authorization, cessation of the
liability of any Obligor or for any other reason. Debtor authorizes Secured
Party, without notice or demand and without any reservation of rights against
Debtor and without affecting Debtor's liability hereunder or on the
Obligations, from time to time to (x) take and hold other Property, other than
the Collateral, as security for the Obligations, and exchange, enforce, waive
and release any or all of the Collateral, (y) apply the Collateral in the
manner permitted by this Security Agreement and (z) renew, extend for any
period, accelerate, amend or modify, supplement, enforce, compromise, settle,
waive or release the obligations of any Obligor or any instrument or agreement
of such other Person with respect to any or all of the Obligations or
Collateral.
Section 5.08 Waiver of Notice; Demand and Presentment; etc.
Except for any notice required under the Credit Agreement, Debtor hereby waives
any demand, notice of default, notice of acceleration of the maturity of the
Obligations, notice of intent to accelerate the maturity of the Obligations,
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<PAGE> 11
presentment, protest and notice of dishonor as to any action taken by Secured
Party in connection with this Security Agreement, or any instrument or
document. Debtor waives any right of marshaling in respect of any and all
Collateral, and waives any right to require Secured Party, any Issuing Bank or
any Lender to proceed against any Obligor, Account Debtor or other Person,
exhaust any Collateral or enforce any other remedy which Secured Party, any
Issuing Bank or any Lender now has or may hereafter have against any Obligor or
other Person.
Section 5.09 Non-judicial Enforcement. To the fullest extent
allowed by applicable law, Secured Party may enforce its rights hereunder
without prior judicial process or judicial hearing, and to the fullest extent
permitted by law Debtor expressly waives any and all legal rights which might
otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. An Event of Default under the
Credit Agreement shall constitute an "Event of Default" under this Security
Agreement.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Secured Party may take any or all of the
following actions without notice (except where expressly required under the
Credit Agreement or below) or demand to Debtor:
(a) Declare all or part of the indebtedness pursuant to
the Obligations immediately due and payable and enforce payment of the
same by Debtor or any Obligor.
(b) Take possession of the Collateral, or at Secured
Party's request Debtor shall, at Debtor's cost, assemble the
Collateral and make it available at a location to be specified by
Secured Party which is reasonably convenient to Debtor and Secured
Party. In any event, Debtor shall bear the risk of accidental loss or
damage to or diminution in value of the Collateral, and Secured Party
shall have no liability whatsoever for failure to obtain or maintain
insurance, nor to determine whether any insurance ever in force is
adequate as to amount or as to risk insured.
(c) Sell or lease, in one or more sales or leases and in
one or more parcels, or otherwise dispose of any or all of the
Collateral in its then condition or in any other commercially
reasonable manner as Secured Party may elect, in a public or private
transaction, at any location as deemed reasonable by Secured Party
(including, without limitation, Debtor's premises), either for cash or
credit or for future delivery at such price as Secured Party may deem
fair, and (unless prohibited by the Code, as adopted in any applicable
jurisdiction) Secured Party, any Issuing Bank or any Lender may be the
purchaser of any or all Collateral so sold and may apply upon the
purchase price therefor any Obligations secured hereby. Any such sale
or transfer by Secured Party either to itself or to any other Person
shall be absolutely free from any claim of right by Debtor, including
any equity or right of redemption, stay or appraisal which Debtor has
or may have under any rule of law, regulation or statute now existing
or hereafter adopted. Upon any such sale or transfer, Secured Party
shall have the right to deliver, assign and transfer to the purchaser
or transferee thereof the Collateral so sold or transferred. It shall
not be necessary that the Collateral or any part thereof be present at
the location of any such sale or transfer. Secured Party may, at its
discretion, provide for a public sale, and any such public sale shall
be held at
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<PAGE> 12
such time or times within ordinary business hours and at such place or
places as Secured Party may fix in the notice of such sale. Secured
Party shall not be obligated to make any sale pursuant to any such
notice. Secured Party may, without notice or publication, adjourn any
public or private sale by announcement at any time and place fixed for
such sale, and such sale may be made at any time or place to which the
same may be so adjourned. In the event any sale or transfer hereunder
is not completed or is defective in the opinion of Secured Party, such
sale or transfer shall not exhaust the rights of Secured Party
hereunder, and Secured Party shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. In the event that
any of the Collateral is sold or transferred on credit, or to be held
by Secured Party for future delivery to a purchaser or transferee, the
Collateral so sold or transferred may be retained by Secured Party
until the purchase price or other consideration is paid by the
purchaser or transferee thereof, but in the event that such purchaser
or transferee fails to pay for the Collateral so sold or transferred
or to take delivery thereof, neither Secured Party, any Issuing Bank
nor any Lender shall incur any liability in connection therewith. If
only part of the Collateral is sold or transferred such that the
Obligations remain outstanding (in whole or in part), Secured Party's
rights and remedies hereunder shall not be exhausted, waived or
modified, and Secured Party is specifically empowered to make one or
more successive sales or transfers until all the Collateral shall be
sold or transferred and all the Obligations are paid. In the event
that Secured Party elects not to sell the Collateral, Secured Party
retains its rights to lease or otherwise dispose of or utilize the
Collateral or any part or parts thereof in any manner authorized or
permitted by law or in equity, and to apply the proceeds of the same
towards payment of the Obligations. Each and every method of
disposition of the Collateral described in this Section 6.02(c) or in
Section 6.02(f) shall constitute disposition in a commercially
reasonable manner.
(d) Take possession of all books and records of Debtor
pertaining to the Collateral. Secured Party shall have the authority
to enter upon any real or immoveable property or improvements thereon
in order to obtain any such books or records, or any Collateral
located thereon, and remove the same therefrom without liability.
(e) Apply proceeds of the disposition of the Collateral
to the Obligations in any manner elected by Secured Party and
permitted by the Code or otherwise permitted by law or in equity.
Such application may include, without limitation, the reasonable
expenses of retaking, holding, preparing for sale or other
disposition, and the reasonable attorneys' fees and legal expenses
incurred by Secured Party, the Issuing Banks and the Lenders.
(f) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by Secured Party of
the Collateral. Additionally, any sale or transfer hereunder may be
conducted by an auctioneer or any officer or agent of Secured Party.
(g) Apply and set-off (i) any deposits of Debtor now or
hereafter held by Secured Party, the Issuing Banks and the Lenders;
(ii) all claims of Debtor against Secured Party, now or hereafter
existing; (iii) any other Property, rights or interests of Debtor
which come into the possession or custody or under the control of
Secured Party; and (iv) the proceeds of any of the foregoing as if the
same were included in the Collateral. Secured Party agrees to notify
Debtor promptly after any such set-off or application; provided,
however, the failure of Secured Party to give any notice shall not
affect the validity of such set-off or application.
(h) With respect to the Collateral, receive, change the
address for delivery, open and dispose of mail addressed to Debtor,
and to execute, assign and endorse negotiable and other
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<PAGE> 13
instruments for the payment of money, documents of title or other
evidences of payment, shipment or storage for any form of Collateral
on behalf of and in the name of Debtor.
(i) Notify or require Debtor to notify Account Debtors
that the Accounts have been assigned to Secured Party and direct such
Account Debtors to make payments on the Accounts directly to Secured
Party. To the extent Secured Party does not so elect, Debtor shall
continue to collect and retain the Accounts. Secured Party or its
designee shall also have the right, in its own name or in the name of
Debtor, to do any of the following: (i) to demand, collect, receipt
for, settle, compromise any amounts due, give acquittances for,
prosecute or defend any action which may be in relation to any monies
due or to become due by virtue of, the Accounts; (ii) to sell,
transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured
Party were the absolute owner thereof; (iii) to extend the time of
payment of any of the Accounts, to grant waivers and make any
allowance or other adjustment with reference thereto; (iv) to endorse
the name of Debtor on notes, checks or other evidences of payments on
Collateral that may come into possession of Secured Party; (v) to take
control of cash and other proceeds of any Collateral; (vi) to sign the
name of Debtor on any invoice or bill of lading relating to any
Collateral, or any drafts against Account Debtors or other persons
making payment with respect to Collateral; (vii) to send a request for
verification of Accounts to any Account Debtor; and (viii) to do all
other acts and things necessary to carry out the intent of this
Agreement.
(j) Exercise all other rights and remedies permitted by
law or in equity.
Section 6.03 Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any Issuing Bank or any other
action of Secured Party, any Issuing Bank or any Lender hereunder results in
reduction of the Obligations, such action will not release Debtor from its
liability to Secured Party, the Issuing Banks and the Lenders for any unpaid
Obligations, including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall be
immediately due and payable to Secured Party at Secured Party's address set
forth on the signature page of this Security Agreement.
Section 6.04 Reasonable Notice. If any applicable provision of
any law requires Secured Party any Issuing Bank or any Lender to give
reasonable notice of any sale or disposition or other action, Debtor hereby
agrees that fifteen (15) days' prior written notice shall constitute reasonable
notice thereof. Such notice, in the case of public sale, shall state the time
and place fixed for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.05 Account Debtors. Any payment or settlement of an
Account made by an Account Debtor will be, to the extent of such payment or to
the extent provided under such settlement, a release, discharge and acquittance
of the Account Debtor with respect to such Account, and Debtor shall take any
action as may be required by Secured Party in connection therewith. No Account
Debtor on any Account will ever be bound to make inquiry as to the termination
of this Agreement or the rights of Secured Party to act hereunder, but shall be
fully protected by Debtor in making payment directly to Secured Party.
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<PAGE> 14
ARTICLE VIII
MISCELLANEOUS
Section 7.01 Notices. Any notice required or permitted to be
given under or in connection with this Security Agreement shall be given in
accordance with the notice provisions of the Guaranty Agreement.
Section 7.02 Amendments and Waivers. Secured Party's, any Issuing
Bank's or any Lender's acceptance of partial or delinquent payments or any
forbearance, failure or delay by the Secured Party in exercising any right,
power or remedy hereunder shall not be deemed a waiver of any obligation of
Debtor or any Obligor, or of any right, power or remedy of Secured Party; and
no partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof. Secured Party may remedy any Event of Default
hereunder or in connection with the Obligations without waiving the Event of
Default so remedied. Debtor hereby agrees that if Secured Party agrees to a
waiver of any provision hereunder, or an exchange of or release of the
Collateral, or the addition or release of any Obligor, any such action shall
not constitute a waiver of any of Secured Party's other rights or of Debtor's
obligations hereunder. This Security Agreement may be amended only by the
manner set forth in Section 8.02 of the Credit Agreement by an instrument in
writing executed jointly by Debtor and Secured Party and may be supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or other
reproduction of this Security Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
Section 7.04 Possession of Collateral. Secured Party shall be
deemed to have possession of any Collateral in transit to it or set apart for
it (or, in either case, any of its agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations,
and after such sale or transfer and discharge there remains a surplus of
proceeds, Secured Party will deliver to Debtor such excess proceeds in a
commercially reasonable time; provided, however, that neither Secured Party,
any Issuing Bank nor any Lender shall be liable for any interest, cost or
expense in connection with any delay in delivering such proceeds to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Security Agreement
and the security interest granted hereby shall be construed in accordance with
and governed by the laws of the State of Texas (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby). Debtor consents to and submits to in
personam jurisdiction and venue in the state district and county courts of the
county wherein Secured Party's offices are located at the address specified on
the signature page hereof, and in the Federal District Courts of the district
wherein such offices of Secured Party are located. This submission to
jurisdiction is nonexclusive and does not preclude Secured Party, any Issuing
Bank or any Lender from obtaining jurisdiction over Debtor or the Collateral in
any court otherwise having jurisdiction.
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<PAGE> 15
Section 7.07 Cumulative and Other Rights. The rights, powers and
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party, any Issuing
Bank or any Lender of any one or more of the rights, powers and remedies herein
shall not be construed as a waiver of any other rights, powers and remedies,
including, without limitation, any other rights of set-off. If any of the
Obligations are given in renewal, extension for any period or rearrangement, or
applied toward the payment of debt secured by any lien, Secured Party shall be,
and is hereby, subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid.
Section 7.08 Subrogation. Until the Obligations have been paid in
full, Debtor hereby waives any claim, right or remedy which Debtor may now have
or hereafter acquire against the Company which arises out of this Security
Agreement or from the performance by Debtor hereunder, including without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, indemnification, or participation in any such claim, right or
remedy of any other Person against the Company; provided, however,
notwithstanding the foregoing, Debtor reserves its rights of contribution and
reimbursement, if any, from any Obligor. Until the Obligations have been paid
in full, Debtor further waives any benefit of any right to participate in any
security now or hereafter held by Secured Party, the Issuing Banks and/or the
Lenders.
Section 7.09 Continuing Security Agreement.
(a) This Security Agreement shall constitute a continuing security
agreement, and all representations and warranties, covenants and agreements
shall, as applicable, apply to all future as well as existing transactions.
Provisions of this Security Agreement, unless they are by their terms
exclusive, shall be in addition to other agreements between the parties.
(b) Except as may be expressly applicable pursuant to Section
9.505 of the Code, no action taken or omission to act by Secured Party, the
Issuing Banks or the Lenders hereunder, including, without limitation, any
action taken or inaction pursuant to Section 6.02, shall be deemed to
constitute a retention of the Collateral in satisfaction of the Obligations or
otherwise to be in full satisfaction of the Obligations, and the Obligations
shall remain in full force and effect, until Secured Party, the Issuing Banks
and the Lenders shall have applied payments (including, without limitation,
collections from Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter provided in
subsection (c) below.
(c) To the extent that any payments on the Obligations or proceeds
of the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Secured Party, the Issuing Banks or the Lenders, and Secured Party's, the
Issuing Banks' and the Lenders' security interests, rights, powers and remedies
hereunder shall continue in full force and effect. In such event, this
Security Agreement shall be automatically reinstated if it shall theretofore
have been terminated pursuant to Section 7.10.
(d) In the event that the Obligations are structured such that
there are times when no Indebtedness is owing thereunder, this Security
Agreement shall remain valid and in full force and effect as to all subsequent
indebtedness included in the Obligations, provided Secured Party has not in the
interim period executed a written release or termination statement or returned
possession of or reassigned the Collateral to Debtor.
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<PAGE> 16
Section 7.10 Termination. The grant of a security interest
hereunder and all of Secured Party's, the Issuing Banks' and the Lenders'
rights, powers and remedies in connection therewith shall remain in full force
and effect until Secured Party has retransferred and delivered all Collateral
in its possession to Debtor, and executed a written release or termination
statement and reassigned to Debtor without recourse or warranty any remaining
Collateral and all rights conveyed hereby. Upon the complete payment of the
Obligations and the compliance by Debtor with all covenants and agreements
hereof, Secured Party, at the written request and expense of Debtor, will
release, reassign and transfer the Collateral to Debtor and declare this
Security Agreement to be of no further force or effect. Notwithstanding the
foregoing, the provisions of Section 7.09(c) shall survive the termination of
this Security Agreement.
Section 7.11 Counterparts, Effectiveness. This Security Agreement
may be executed in two or more counterparts. Each counterpart is deemed an
original, but all such counterparts taken together constitute one and the same
instrument. This Security Agreement becomes effective upon the execution
hereof by Debtor and delivery of the same to Secured Party, and it is not
necessary for Secured Party, the Issuing Banks or any Lender to execute any
acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.12 Headings Descriptive. All titles or headings to
articles, sections, subsections or other divisions of this Security Agreement
or the exhibits hereto are only for the convenience of the parties and shall
not be construed to have any effect or meaning with respect to the other
content of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 7.13 Delivery of Copy/Waiver. The Debtor hereby
acknowledges receiving a copy of this Security Agreement. The Debtor waives
all rights to receive from the Secured Party a copy of any financing statement
or financing change statement filed or registered or verification statement
issued at any time in respect of this Security Agreement.
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<PAGE> 17
DEBTOR: TESORO EXPLORATION AND PRODUCTION
COMPANY
By: /s/ William T. VanKleef
-----------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
Address of Chief Executive Office and
Location of the Collateral:
8700 Tesoro Drive
San Antonio, Texas 78217
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, AS AGENT
By: /s/ P. Stan Burge
-----------------------
Name: P. Stan Burge
Title: Vice President
Address:
712 Main Street
Houston, Texas 77002
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<PAGE> 18
FINANCING STATEMENT
This Financing Statement is presented to a filing officer for filing
pursuant to the Uniform Commercial Code.
1. The name and address of the Debtor is:
TESORO EXPLORATION AND PRODUCTION COMPANY
8700 Tesoro Drive
San Antonio, Texas 78217
Federal Tax Identification No.: 74-2307903
2. The name and address of the Secured Party is:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Agent
712 Main Street
Houston, Texas 77002
Federal Tax Identification No.: 74-0800980
3. This Financing Statement covers the following Collateral:
(a) all of Debtor's accounts and inventory;
(b) (i) any property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any property referred to in clause (a) of this item 3; and
(ii) all certificates of title or other documents evidencing ownership
or possession of or otherwise relating to any property referred to in
clause (a) of this item 3;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this item 3 and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii), all policies of insurance (whether or not
required by Secured Party) covering any property referred to in this
item 3; and (iii), all proceeds, products, replacements, additions
to, substitutions for, accessions of, and property necessary for the
operation of any of the property referred to in this item 3,
including, without limitation, insurance payable as a result of loss
or damage to any of the property referred to in this item 3, refunds
of unearned premiums of any such insurance policy and claims against
third parties;
(d) all books and records related to any of the property
referred to in this item 3, including, without limitation, any and all
books of account, customer lists and other records relating in any way
to the Collateral described in this item 3;
(e) all of Debtor's general intangibles which are related
(but only those related) to any property referred to in this item 3,
including, without limitation, all (i) letters of credit, bonds,
guaranties, purchase or sales agreements and other contractual rights,
rights to performance, and claims for damages, refunds (including tax
refunds) or other monies due or to become due; (ii) orders,
franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental
authority; (iii) business records, computer tapes and computer
software; and (iv) other intangible personal property, whether
<PAGE> 19
similar or dissimilar to the other property described or referred to
in clause (a) of this item 3; and
(f) all of Debtor's chattel paper, documents and
instruments related to or arising out of any property referred to in
clause (a) of this item 3.
The Collateral shall not include and shall be exclusive of any
equipment.
DEBTOR: TESORO EXPLORATION AND PRODUCTION
COMPANY
By: /s/ William T. VanKleef
-----------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
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<PAGE> 1
EXHIBIT 10.10
SECURITY AGREEMENT
(Accounts and Inventory)
Between
TESORO REFINING, MARKETING & SUPPLY COMPANY
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
AS AGENT
April 20, 1994
<PAGE> 2
SECURITY AGREEMENT
ACCOUNTS AND INVENTORY
THIS SECURITY AGREEMENT is made as of April 20, 1994, between TESORO
REFINING, MARKETING & SUPPLY COMPANY, a Delaware corporation ("Debtor"), and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, as
Agent ("Secured Party"), for itself, the Issuing Banks and the Lenders.
RECITALS
A. On even date herewith, Tesoro Petroleum Corporation (the
"Company"), Texas Commerce Bank National Association, individually, as Agent
and as an Issuing Bank, Banque Paribas, individually, as Co-Agent and as an
Issuing Bank, and the other financial institutions parties thereto entered into
a Credit Agreement (as amended from time to time, the "Credit Agreement").
B. The conditions precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make the initial Loans and the
Issuing Banks to issue Letters of Credit thereunder, include the execution and
delivery by Debtor of this Security Agreement, and Debtor has agreed to enter
into this Security Agreement.
C. Therefore, (i) in order to comply with the terms and
conditions of the Credit Agreement, (ii) to induce the Lenders at any time from
time to time to loan monies and the Issuing Banks to issue Letters of Credit,
with or without security to or for the account of the Company in accordance
with the terms of the Credit Agreement, (iii) at the special insistence and
request of the Agent, the Issuing Banks and the Lenders, and (iv) for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor hereby agrees with Secured Party as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Terms Defined Above. As used in this Security
Agreement, the terms "Company," "Credit Agreement," "Debtor" and "Secured
Party" shall have the meanings respectively assigned to them.
Section 1.02 Certain Definitions. As used in this Security
Agreement, the following terms shall have the following meanings, unless the
context otherwise requires:
"Accounts" shall mean all accounts (as such term is defined
in the Code).
"Account Debtor" shall mean any Person liable (whether
directly or indirectly, primarily or secondarily) for the payment or
performance of any obligations included in the Collateral, whether as
an account debtor (as defined in the Code), obligor on an instrument,
issuer of documents or securities, guarantor or otherwise.
"Code" shall mean the Uniform Commercial Code as presently in
effect in the State of Texas, Texas Business and Commerce Code,
Chapters 1 through 9.
<PAGE> 3
"Collateral" shall mean the following types or items of
Property (including Property hereafter acquired by Debtor as well as
Property which Debtor now owns or in which Debtor has rights):
(a) all of Debtor's Accounts and Inventory;
(b) (i) any Property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any Property referred to in clause (a) of this definition;
and (ii) all certificates of title or other documents evidencing
ownership or possession of or otherwise relating to any Property
referred to in clause (a) of this definition;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this definition and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii) all policies of insurance (whether or not
required by Secured Party) covering any Property referred to in this
definition; and (iii) all proceeds, products, replacements, additions
to, substitutions for, accessions of, and Property necessary for the
operation of any of the Property referred to in this definition,
including, without limitation, insurance payable as a result of loss
or damage to any of the Property referred to in this definition,
refunds of unearned premiums of any such insurance policy and claims
against third parties;
(d) all books and records related to any of the Property
referred to in this definition, including, without limitation, any and
all books of account, customer lists and other records relating in any
way to the Collateral described in this definition;
(e) all of Debtor's general intangibles (as defined in
the Code) which are related (but only those related) to any Property
referred to in this definition, including, without limitation, all (i)
letters of credit, bonds, guaranties, purchase or sales agreements and
other contractual rights, rights to performance, and claims for
damages, refunds (including tax refunds) or other monies due or to
become due; (ii) orders, franchises, permits, certificates, licenses,
consents, exemptions, variances, authorizations or other approvals by
any Governmental Authority; (iii) business records, computer tapes and
computer software; and (iv) other intangible personal property,
whether similar or dissimilar to the Property referred to in clause
(a) of this definition; and
(f) all of Debtor's chattel paper, documents and
instruments (as such terms are defined in the Code) related to or
arising out of any Property referred to in clause (a) of this
definition.
It is expressly contemplated that additional Property may from
time to time be pledged, assigned or granted to Secured Party as
additional security for the Obligations, and, if so, then the term
"Collateral" as used herein shall be deemed for all purposes hereof to
include all such additional Property, together with all other Property
of the types described above related thereto. It is expressly agreed
that Collateral shall not include and shall be exclusive of any
equipment.
"Event of Default" shall have the meaning assigned such term
in Section 6.01 of this Security Agreement.
"Inventory" shall mean all inventory (as defined in the Code).
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"Obligations" shall mean with respect to the Debtor, the
Obligations (as defined in the Guaranty Agreement) to the extent the
Debtor is liable therefor as provided in the Guaranty Agreement. The
Obligations are Senior Debt as such term is defined in that certain
Subordination Agreement dated December 15, 1992 among the Company,
Tesoro Alaska Petroleum Company and the State of Alaska attached to
the Settlement Agreement among the Company, Tesoro Alaska Petroleum
Company and the State of Alaska.
"Obligor" shall mean the Company and any other Person, other
than Debtor, liable (whether directly or indirectly, primarily or
secondarily) for the payment or performance of any of the Obligations
whether as maker, co-maker, endorser, guarantor, accommodation party,
general partner or otherwise; and the term "Obligor" shall
specifically include each Guarantor, other than Debtor, named in the
Credit Agreement.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Security Agreement" shall mean this Security Agreement, as
the same may be amended, modified or supplemented from time to time.
Section 1.03 Other Defined Terms. Unless otherwise defined herein,
all terms beginning with a capital letter which are defined in the Credit
Agreement shall have the meanings assigned therein, unless the context hereof
requires otherwise. All uncapitalized terms which are defined in the Code
shall have their respective meanings as used in the Code, unless the context
hereof requires otherwise.
ARTICLE II
SECURITY INTEREST
Section 2.01 Grant of Security Interest. Debtor hereby assigns
and grants to Secured Party, for its benefit and the benefit of the Lenders and
the Issuing Banks, a security interest in, lien upon and right of set-off
against the Collateral to secure the prompt payment and performance of the
Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Secured Party, the Issuing Banks and
the Lenders (which representations and warranties will survive the creation and
payment of the Obligations) that:
Section 3.01 First Priority Security Interest. The grant of the
security interest in the Collateral pursuant to this Security Agreement creates
a valid and perfected first priority security interest in the Collateral,
enforceable against Debtor and all third parties and securing payment of the
Obligations.
Section 3.02 No Filings By Third Parties. No financing statement
or other public notice or recording covering the Collateral is on file in any
public office (other than any financing statement or other public notice or
recording naming Secured Party as the secured party therein), and Debtor will
not
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execute any such financing statement or other public notice or recording so
long as any of the Obligations are outstanding.
Section 3.03 No Name Changes. Debtor has not, during the
preceding five years, entered into any contract, agreement, security instrument
or other document using a name other than, or been known by or otherwise used
any name other than, the name used by Debtor herein.
Section 3.04 Location of Debtor and Collateral. Debtor's chief
executive office and Debtor's records concerning the Collateral are located at
the address or location set forth on the signature page hereof. The Collateral
is located at such address or at the location(s), if any, specified in Exhibit
A hereto. Any Collateral not at such location(s) nevertheless remains subject
to Secured Party's security interest.
Section 3.05 Collateral. All statements or other information
provided by Debtor to Secured Party, any Issuing Bank or any Lender with
respect to the Collateral is or (in the case of subsequently furnished
information) will be when provided correct and complete in all material
respects. The delivery at any time by Debtor to Secured Party of additional
Collateral or of additional descriptions of Collateral shall constitute a
representation and warranty by Debtor to Secured Party hereunder that the
representations and warranties of this Article III are correct insofar as they
would pertain to such Collateral or the descriptions thereof.
Section 3.06 Accounts.
(a) Each Account represents the genuine, valid and legally
enforceable indebtedness of an Account Debtor arising from the sale, lease or
rendition by Debtor of goods or services and is not and will not be subject to
contra accounts, set-offs, defenses, counterclaims, allowances or adjustments
(other than discounts for prompt payment shown on the invoice), or objections
or complaints by the Account Debtor concerning its liability on the Account;
and any goods, the sale of which gave rise to an Account, have not been
returned or rejected by the Account Debtor or lost or damaged prior to receipt
by the Account Debtor.
(b) The amount shown as to each Account on Debtor's books is or
will be the true and undisputed amount owing and unpaid thereon. Except as
disclosed in writing to Secured Party, each Account arose or shall have arisen
in the ordinary course of Debtor's business; provided, however, that any
Accounts which arose or hereafter arise outside the ordinary course of Debtor's
business shall nevertheless be included as part of the Collateral. Debtor has
no knowledge of any bankruptcy, insolvency or other action affecting creditors'
rights with respect to any Account Debtor.
(c) Except as disclosed in writing to Secured Party, each invoice
or agreement evidencing the Accounts is or will be due and payable not more
than 90 days from the date thereof; provided, however, that any Accounts not so
due and payable shall nevertheless be included as part of the Collateral.
Section 3.07 Delivery of Documents or Letters of Credit. With
respect to any Inventory or other Collateral covered by one or more
certificates of title or other documents evidencing ownership or possession
thereof, and with respect to any Accounts or other Collateral supported by
letters of credit, each of such certificates, documents or letters of credit
has been delivered to Secured Party (provided, however, that all certificates,
documents and letters of credit referred to in Section 1.02 shall be subject
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to the security interest created by this Security Agreement irrespective of
whether or not such delivery shall have been made).
Section 3.08 Ownership of Collateral; Encumbrances; Valid and
Binding Agreement. Debtor is the legal and beneficial owner of the Collateral
free and clear of any adverse claim, lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement, and Debtor has full right, power and authority to assign and grant a
security interest in the Collateral to Secured Party. This Agreement
constitutes a legal, valid and binding obligation of Debtor enforceable against
Debtor in accordance with its terms. The execution, delivery and performance
of this Agreement will not violate the terms of any contract, agreement, law,
regulation, order, injunction, judgment, decree or writ to which Debtor is
subject and does not require the consent or approval of any other Person.
Section 3.09 No Required Consent. No authorization, consent,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body (other than the filing of financing statements) is
required for (i) the due execution, delivery and performance by Debtor of this
Agreement, (ii) the grant by Debtor of the security interest granted by this
Agreement, (iii) the perfection of such security interest or (iv) the exercise
by Secured Party of its rights and remedies under this Agreement.
ARTICLE IV
COVENANTS AND AGREEMENTS
Debtor covenants and agrees that so long as any part of the
Obligations are outstanding:
Section 4.01 Change in Location of Collateral or Debtor. Debtor
will give Secured Party 30 days' prior written notice of (i) any change in
location of the Collateral to a jurisdiction other than Texas, Alaska,
California, Oregon or Washington and which would cause the Secured Party to be
unperfected in the Collateral, (ii) the opening or closing of any place of
Debtor's business or (iii) any change in the location of Debtor's chief
executive office or address.
Section 4.02 Documents; Collateral in Possession of Third Parties.
If certificates of title or other documents evidencing ownership or possession
of the Collateral are issued or outstanding, Debtor will cause the security
interest of Secured Party to be properly noted thereon and will, forthwith upon
receipt, deliver same to Secured Party. If any Collateral is at any time in
the possession or control of any warehouseman, bailee, agent or independent
contractor, Debtor shall notify such Person of Secured Party's security
interest in such Collateral. Upon Secured Party's request, Debtor shall
instruct any such Person to hold all such Collateral for Secured Party's
account subject to Debtor's instructions, or, if an Event of Default shall have
occurred, subject to Secured Party's instructions.
Section 4.03 Delivery of Letters of Credit and Instruments;
Proceeds. Debtor will deliver each letter of credit, if any, included in the
Collateral to Secured Party, in each case forthwith upon receipt by or for the
account of Debtor. If any Account becomes evidenced by a promissory note,
trade acceptance or any other instrument for the payment of money (other than
checks or drafts in payment of Accounts collected by Debtor in the ordinary
course of business prior to notification by Secured Party under Section 5.04),
Debtor will immediately deliver such instrument to Secured Party appropriately
endorsed to Secured Party, as collateral assignee and, regardless of the form
of presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, Debtor will remain liable thereon
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until such instrument is paid in full. Except as permitted by Sections 4.03,
4.08 and 4.09, Debtor will deliver to Secured Party all proceeds from the sale
or other disposition of the Collateral promptly upon receipt. If chattel
paper, documents or instruments are received as proceeds, which are required to
be delivered to Secured Party, they will be, immediately upon receipt, properly
endorsed or assigned and delivered to Secured Party as Collateral.
Section 4.04 Sale, Disposition or Encumbrance of Collateral.
Except (i) as permitted by Section 4.08, or (ii) with the prior written consent
of the Majority Lenders, Debtor will not in any way encumber any of the
Collateral (or permit or suffer any of the Collateral to be encumbered) or
sell, assign, lend, rent, lease or otherwise dispose of or transfer any of the
Collateral to or in favor of any Person other than Secured Party.
Section 4.05 Intentionally left blank.
Section 4.06 Records and Information.
(a) Debtor shall keep accurate and complete records of the
Collateral (including proceeds). These records shall reflect complete and
accurate stock records of the Inventory and all facts concerning each Account.
Debtor shall conduct a physical count of the Inventory at such intervals as
Secured Party requests and promptly supply Secured Party with a copy of such
count accompanied by a report of the value (valued at the lower of cost or
market value) of the Inventory. Secured Party may at any time have access to,
examine, audit, make extracts from and inspect without hindrance or delay
Debtor's records, files and the Collateral.
(b) Debtor will promptly furnish such information as Secured Party
may from time to time reasonably request regarding (i) the business, affairs or
financial condition of Debtor or (ii) the Collateral or Secured Party's rights
or remedies with respect thereto. Any balance sheets or financial statements
requested by Secured Party pursuant to this Section 4.06(b) shall conform to
generally accepted accounting principles.
(c) Debtor recognizes that financing statements pertaining to the
Collateral will be filed with the offices of the Secretary of State of Texas,
the Alaska Department of Natural Resources, the Secretary of State of
California, the Secretary of State of Oregon and the Department of Licensing of
the State of Washington. Debtor will immediately notify Secured Party of any
condition or event that may change the proper location for the filing of any
financing statements or other public notice or recordings for the purpose of
perfecting a security interest in the Collateral. Without limiting the
generality of the foregoing, Debtor will (i) immediately notify Secured Party
of any change to a jurisdiction other than as represented in Section 3.04 (A)
in the location of Debtor's chief executive office or chief place of business,
(B) in the location of the office where Debtor keeps its records concerning the
Accounts, or (C) in the "location" of Debtor within the meaning of Section
9-103(c) of the Code; (ii) immediately notify Secured Party of any change in
the location of the Collateral to any jurisdiction other than the States of
Texas, Alaska, California, Oregon and Washington; and (ii) notify Secured Party
30 days prior to any change in Debtor's name, identity or corporate structure
or Tax Identification Number. In any notice furnished pursuant to this
paragraph, Debtor will expressly state that the notice is required by this
Security Agreement and contains facts that will or may require additional
filings of financing statements or other notices for the purpose of continuing
perfection of Secured Party's security interest in the Collateral. Debtor will
promptly provide written notice to Secured Party of all information which in
any way relates to or affects the Collateral generally, Secured Party's rights
or remedies with respect thereto,
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the filing of any financing statement or other public notices or recordings,
or the delivery and possession of items of Collateral for the purpose of
perfecting a security interest in the Collateral.
Section 4.07 Further Assurances. Upon the request of Secured
Party, Debtor shall (at Debtor's expense) execute and deliver all such
assignments, certificates, financing statements or other documents and give
further assurances and do all other acts and things as Secured Party may
reasonably request to perfect Secured Party's interest in the Collateral or to
protect, enforce or otherwise effect Secured Party's rights and remedies
hereunder.
Section 4.08 Inventory. Unless an Event of Default has occurred
and is continuing and after any applicable notice and cure periods provided for
in the Credit Agreement, Debtor may use the Inventory in any lawful manner not
inconsistent with this Security Agreement and with the terms of insurance
thereon and may sell, lease or otherwise dispose of its Inventory for cash or
terms in the ordinary course of business, and Debtor may retain the proceeds of
such sales, leases or other dispositions (subject to Section 4.03 and Section
4.09); provided, however, the Inventory shall remain in Debtor's possession and
control at all times prior to sale, lease or other disposition at Debtor's
address set forth in Section 3.04. Debtor shall bear any risk of loss of the
Inventory. Debtor shall not use any item of Inventory in a manner inconsistent
with the holding thereof for sale, lease or other disposition in the ordinary
course of business or in contravention of the terms of any agreement. Upon the
occurrence and continuance of an Event of Default and after any applicable cure
period, Debtor will not sell, lease or otherwise dispose of any of the
Inventory without the prior written consent of the Majority Lenders, and Debtor
shall immediately deliver to Secured Party any checks, cash or other forms of
payment which Debtor receives in connection with any Inventory, appropriately
endorsed.
Section 4.09 Accounts.
(a) Prior to notification by Secured Party under Section 6.02(i),
Debtor will collect the Accounts in the ordinary course of its business and may
retain the proceeds of such collections (subject to Section 4.03).
(b) Debtor shall immediately notify Secured Party in writing in
the event that any representation given in Article III with respect to any
Account ceases to be true and correct in all material respects; such notice
specifying other representation(s) that cease to be true and correct and the
action, if any, that Debtor proposes to take with respect thereto.
(c) Debtor will not modify, extend or substitute any contract, the
terms of which shall at any time have given rise to an Account, except in the
ordinary course of business or with the prior written consent of Secured Party.
Debtor will not re-date any invoice or sale or make sales with an extended
payment date beyond that customary in the industry, and in no event longer than
90 days. Debtor shall not adjust, settle, discount or compromise any of the
Accounts, except in the ordinary course of business or with the prior written
consent of Secured Party.
(d) Debtor will duly perform or cause to be performed all of
Debtor's obligations with respect to the Accounts and the underlying sales of
goods or other transactions giving rise to the Accounts.
Section 4.10 Condition of Collateral. Debtor will maintain all
Collateral in good condition and in accordance with industry standards and
practices. Debtor will not misuse, abuse, waste, destroy or
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endanger the Collateral nor allow it to be used
in any manner other than its intended use. Debtor will not use any Collateral
in violation of any Governmental Requirement, or suffer it to be so used.
Section 4.11 Collateral Separate and Distinct. Debtor shall at
all times keep the Collateral, including proceeds, or cause it to be kept (when
in the possession of warehousemen, bailees, agents, independent contractors or
other third parties), separate and distinct from other Property.
Section 4.12 Change in Debtor's Name or Corporate Structure.
Debtor will not change its name, identity or corporate structure (including,
without limitation, any merger, consolidation or sale of substantially all of
its assets) without notifying Secured Party of such change in writing at least
30 days prior to the effective date of such change. Without the express
written consent of Secured Party, however, Debtor will not engage in any other
business or transaction under any name other than Debtor's name hereunder.
ARTICLE V
RIGHTS, DUTIES, AND POWERS OF SECURED PARTY
The following rights, duties and powers of Secured Party are
applicable irrespective of whether an Event of Default has occurred and is
continuing, but only after having given Debtor at least three (3) days prior
notice:
Section 5.01 Attorney-in-Fact. Secured Party is hereby fully
authorized and empowered (without the necessity of any further consent or
authorization from Debtor) and the right is expressly granted to Secured Party,
and Debtor hereby irrevocably appoints and makes Secured Party as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor or otherwise, from time to time in Secured Party's
discretion, but at Debtor's cost and expense to:
(a) obtain, adjust, sell and cancel any insurance with
respect to the Collateral and endorse any draft drawn by insurers of
the Collateral, and Secured Party may apply any proceeds or unearned
premiums of such insurance to the Obligations (whether or not due);
and
(b) take any action and to execute any assignment,
certificate, financing statement, notification, document or instrument
which Secured Party may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Debtor
representing any payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the
same.
Section 5.02 Transfer of Collateral. Secured Party may transfer
any or all of the Obligations, and upon any such transfer, Secured Party may
transfer its interest in any or all of the Collateral and shall be fully
discharged thereafter from all liability therefor. Any transferee of the
Collateral shall be vested with all rights, powers and remedies of Secured
Party hereunder.
Section 5.03 Purchase Money Financing. To the extent that the
Lenders have advanced or will advance funds to or for the account of Debtor to
enable Debtor to purchase or otherwise acquire specific types or items of
Collateral, the Lenders may at their option pay such funds (i) directly to the
Person from whom Debtor will make such purchase or acquire such rights or (ii)
to Debtor, in which case
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Debtor covenants promptly to pay the same to such Person and forthwith furnish
to Secured Party, on request, evidence satisfactory to Secured Party that such
payment has been made from the funds so provided by Secured Party for such
payment.
Section 5.04 Proceeds. If so requested by Debtor, any payments
received by Secured Party on the Accounts or as proceeds of other Collateral
shall upon final collection by Secured Party be credited towards payment of the
Obligations. In the absence of such request from Debtor, and until so
requested, Secured Party may hold such collected payments as cash Collateral
(and Secured Party may at any time place a hold or freeze on all or a part of
any deposit account of Debtor containing deposits of such payments up to the
amount of such deposits).
Section 5.05 Discharge Encumbrances. Secured Party may, at its
option, discharge any taxes, Liens, security interests or other encumbrances at
any time levied or placed on the Collateral, may pay for insurance on the
Collateral and may pay for the maintenance and preservation of the Collateral.
Debtor agrees to reimburse Secured Party upon demand for any payment so made,
plus interest on the portion thereof from time to time remaining unpaid from
the date of Secured Party's demand at the rate for overdue principal and
interest set forth in Section 2.06(c) of the Credit Agreement.
Section 5.06 Disclaimer of Certain Duties.
(a) The powers conferred upon Secured Party by this Security
Agreement are to protect the interest of Secured Party, the Issuing Banks and
the Lenders in the Collateral and shall not impose any duty upon Secured Party,
the Issuing Banks or any Lender to exercise any such powers. Debtor hereby
agrees that Secured Party, the Issuing Banks and the Lenders shall not be
liable for, nor shall the indebtedness evidenced by the Obligations be
diminished by, Secured Party's delay or failure to collect upon, foreclose,
sell, take possession of or otherwise obtain value for the Collateral.
(b) Except as provided in the Credit Agreement, Secured Party
shall be under no duty whatsoever to make or give any presentment, notice of
dishonor, protest, demand for performance, notice of non-performance, notice of
intent to accelerate, notice of acceleration, or other notice or demand in
connection with any Collateral or the Obligations, or to take any steps
necessary to preserve any rights against any Obligor, Account Debtor or other
Person.
Section 5.07 Modification of Obligations; Other Security. Debtor
waives (i) any and all notice of acceptance, creation, modification,
rearrangement, renewal or extension for any period of any instrument executed
by any Obligor in connection with the Obligations and (ii) any defense of any
Obligor by reason of disability, lack of authorization, cessation of the
liability of any Obligor or for any other reason. Debtor authorizes Secured
Party, without notice or demand and without any reservation of rights against
Debtor and without affecting Debtor's liability hereunder or on the
Obligations, from time to time to (x) take and hold other Property, other than
the Collateral, as security for the Obligations, and exchange, enforce, waive
and release any or all of the Collateral, (y) apply the Collateral in the
manner permitted by this Security Agreement and (z) renew, extend for any
period, accelerate, amend or modify, supplement, enforce, compromise, settle,
waive or release the obligations of any Obligor or any instrument or agreement
of such other Person with respect to any or all of the Obligations or
Collateral.
Section 5.08 Waiver of Notice; Demand and Presentment; etc.
Except for any notice required under the Credit Agreement, Debtor hereby waives
any demand, notice of default, notice of acceleration of the maturity of the
Obligations, notice of intent to accelerate the maturity of the Obligations,
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presentment, protest and notice of dishonor as to any action taken by Secured
Party in connection with this Security Agreement, or any instrument or
document. Debtor waives any right of marshaling in respect of any and all
Collateral, and waives any right to require Secured Party, any Issuing Bank or
any Lender to proceed against any Obligor, Account Debtor or other Person,
exhaust any Collateral or enforce any other remedy which Secured Party, any
Issuing Bank or any Lender now has or may hereafter have against any Obligor or
other Person.
Section 5.09 Non-judicial Enforcement. To the fullest extent
allowed by applicable law, Secured Party may enforce its rights hereunder
without prior judicial process or judicial hearing, and to the fullest extent
permitted by law Debtor expressly waives any and all legal rights which might
otherwise require Secured Party to enforce its rights by judicial process.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default. An Event of Default under the
Credit Agreement shall constitute an "Event of Default" under this Security
Agreement.
Section 6.02 Remedies. Upon the occurrence and during the
continuance of any Event of Default, Secured Party may take any or all of the
following actions without notice (except where expressly required under the
Credit Agreement or below) or demand to Debtor:
(a) Declare all or part of the indebtedness pursuant to
the Obligations immediately due and payable and enforce payment of the
same by Debtor or any Obligor.
(b) Take possession of the Collateral, or at Secured
Party's request Debtor shall, at Debtor's cost, assemble the
Collateral and make it available at a location to be specified by
Secured Party which is reasonably convenient to Debtor and Secured
Party. In any event, Debtor shall bear the risk of accidental loss or
damage to or diminution in value of the Collateral, and Secured Party
shall have no liability whatsoever for failure to obtain or maintain
insurance, nor to determine whether any insurance ever in force is
adequate as to amount or as to risk insured.
(c) Sell or lease, in one or more sales or leases and in
one or more parcels, or otherwise dispose of any or all of the
Collateral in its then condition or in any other commercially
reasonable manner as Secured Party may elect, in a public or private
transaction, at any location as deemed reasonable by Secured Party
(including, without limitation, Debtor's premises), either for cash or
credit or for future delivery at such price as Secured Party may deem
fair, and (unless prohibited by the Code, as adopted in any applicable
jurisdiction) Secured Party, any Issuing Bank or any Lender may be the
purchaser of any or all Collateral so sold and may apply upon the
purchase price therefor any Obligations secured hereby. Any such sale
or transfer by Secured Party either to itself or to any other Person
shall be absolutely free from any claim of right by Debtor, including
any equity or right of redemption, stay or appraisal which Debtor has
or may have under any rule of law, regulation or statute now existing
or hereafter adopted. Upon any such sale or transfer, Secured Party
shall have the right to deliver, assign and transfer to the purchaser
or transferee thereof the Collateral so sold or transferred. It shall
not be necessary that the Collateral or any part thereof be present at
the location of any such sale or transfer. Secured Party may, at its
discretion, provide for a public sale, and any such public sale shall
be held at
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such time or times within ordinary business hours and at such place or
places as Secured Party may fix in the notice of such sale. Secured
Party shall not be obligated to make any sale pursuant to any such
notice. Secured Party may, without notice or publication, adjourn any
public or private sale by announcement at any time and place fixed for
such sale, and such sale may be made at any time or place to which the
same may be so adjourned. In the event any sale or transfer hereunder
is not completed or is defective in the opinion of Secured Party, such
sale or transfer shall not exhaust the rights of Secured Party
hereunder, and Secured Party shall have the right to cause one or more
subsequent sales or transfers to be made hereunder. In the event that
any of the Collateral is sold or transferred on credit, or to be held
by Secured Party for future delivery to a purchaser or transferee, the
Collateral so sold or transferred may be retained by Secured Party
until the purchase price or other consideration is paid by the
purchaser or transferee thereof, but in the event that such purchaser
or transferee fails to pay for the Collateral so sold or transferred
or to take delivery thereof, neither Secured Party, any Issuing Bank
nor any Lender shall incur any liability in connection therewith. If
only part of the Collateral is sold or transferred such that the
Obligations remain outstanding (in whole or in part), Secured Party's
rights and remedies hereunder shall not be exhausted, waived or
modified, and Secured Party is specifically empowered to make one or
more successive sales or transfers until all the Collateral shall be
sold or transferred and all the Obligations are paid. In the event
that Secured Party elects not to sell the Collateral, Secured Party
retains its rights to lease or otherwise dispose of or utilize the
Collateral or any part or parts thereof in any manner authorized or
permitted by law or in equity, and to apply the proceeds of the same
towards payment of the Obligations. Each and every method of
disposition of the Collateral described in this Section 6.02(c) or in
Section 6.02(f) shall constitute disposition in a commercially
reasonable manner.
(d) Take possession of all books and records of Debtor
pertaining to the Collateral. Secured Party shall have the authority
to enter upon any real or immoveable property or improvements thereon
in order to obtain any such books or records, or any Collateral
located thereon, and remove the same therefrom without liability.
(e) Apply proceeds of the disposition of the Collateral
to the Obligations in any manner elected by Secured Party and
permitted by the Code or otherwise permitted by law or in equity.
Such application may include, without limitation, the reasonable
expenses of retaking, holding, preparing for sale or other
disposition, and the reasonable attorneys' fees and legal expenses
incurred by Secured Party, the Issuing Banks and the Lenders.
(f) Appoint any Person as agent to perform any act or
acts necessary or incident to any sale or transfer by Secured Party of
the Collateral. Additionally, any sale or transfer hereunder may be
conducted by an auctioneer or any officer or agent of Secured Party.
(g) Apply and set-off (i) any deposits of Debtor now or
hereafter held by Secured Party, the Issuing Banks and the Lenders;
(ii) all claims of Debtor against Secured Party, now or hereafter
existing; (iii) any other Property, rights or interests of Debtor
which come into the possession or custody or under the control of
Secured Party; and (iv) the proceeds of any of the foregoing as if the
same were included in the Collateral. Secured Party agrees to notify
Debtor promptly after any such set-off or application; provided,
however, the failure of Secured Party to give any notice shall not
affect the validity of such set-off or application.
(h) With respect to the Collateral, receive, change the
address for delivery, open and dispose of mail addressed to Debtor,
and to execute, assign and endorse negotiable and other
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instruments for the payment of money, documents of title or other
evidences of payment, shipment or storage for any form of Collateral
on behalf of and in the name of Debtor.
(i) Notify or require Debtor to notify Account Debtors
that the Accounts have been assigned to Secured Party and direct such
Account Debtors to make payments on the Accounts directly to Secured
Party. To the extent Secured Party does not so elect, Debtor shall
continue to collect and retain the Accounts. Secured Party or its
designee shall also have the right, in its own name or in the name of
Debtor, to do any of the following: (i) to demand, collect, receipt
for, settle, compromise any amounts due, give acquittances for,
prosecute or defend any action which may be in relation to any monies
due or to become due by virtue of, the Accounts; (ii) to sell,
transfer or assign or otherwise deal in the Accounts or the proceeds
thereof or the related goods, as fully and effectively as if Secured
Party were the absolute owner thereof; (iii) to extend the time of
payment of any of the Accounts, to grant waivers and make any
allowance or other adjustment with reference thereto; (iv) to endorse
the name of Debtor on notes, checks or other evidences of payments on
Collateral that may come into possession of Secured Party; (v) to take
control of cash and other proceeds of any Collateral; (vi) to sign the
name of Debtor on any invoice or bill of lading relating to any
Collateral, or any drafts against Account Debtors or other persons
making payment with respect to Collateral; (vii) to send a request for
verification of Accounts to any Account Debtor; and (viii) to do all
other acts and things necessary to carry out the intent of this
Agreement.
(j) Exercise all other rights and remedies permitted by
law or in equity.
Section 6.03 Liability for Deficiency. If any sale or other
disposition of Collateral by Secured Party or any Issuing Bank or any other
action of Secured Party, any Issuing Bank or any Lender hereunder results in
reduction of the Obligations, such action will not release Debtor from its
liability to Secured Party, the Issuing Banks and the Lenders for any unpaid
Obligations, including costs, charges and expenses incurred in the liquidation
of Collateral, together with interest thereon, and the same shall be
immediately due and payable to Secured Party at Secured Party's address set
forth on the signature page of this Security Agreement.
Section 6.04 Reasonable Notice. If any applicable provision of
any law requires Secured Party any Issuing Bank or any Lender to give
reasonable notice of any sale or disposition or other action, Debtor hereby
agrees that fifteen (15) days' prior written notice shall constitute reasonable
notice thereof. Such notice, in the case of public sale, shall state the time
and place fixed for such sale and, in the case of private sale, the time after
which such sale is to be made.
Section 6.05 Account Debtors. Any payment or settlement of an
Account made by an Account Debtor will be, to the extent of such payment or to
the extent provided under such settlement, a release, discharge and acquittance
of the Account Debtor with respect to such Account, and Debtor shall take any
action as may be required by Secured Party in connection therewith. No Account
Debtor on any Account will ever be bound to make inquiry as to the termination
of this Agreement or the rights of Secured Party to act hereunder, but shall be
fully protected by Debtor in making payment directly to Secured Party.
-12-
<PAGE> 14
ARTICLE VIII
MISCELLANEOUS
Section 7.01 Notices. Any notice required or permitted to be
given under or in connection with this Security Agreement shall be given in
accordance with the notice provisions of the Guaranty Agreement.
Section 7.02 Amendments and Waivers. Secured Party's, any Issuing
Bank's or any Lender's acceptance of partial or delinquent payments or any
forbearance, failure or delay by the Secured Party in exercising any right,
power or remedy hereunder shall not be deemed a waiver of any obligation of
Debtor or any Obligor, or of any right, power or remedy of Secured Party; and
no partial exercise of any right, power or remedy shall preclude any other or
further exercise thereof. Secured Party may remedy any Event of Default
hereunder or in connection with the Obligations without waiving the Event of
Default so remedied. Debtor hereby agrees that if Secured Party agrees to a
waiver of any provision hereunder, or an exchange of or release of the
Collateral, or the addition or release of any Obligor, any such action shall
not constitute a waiver of any of Secured Party's other rights or of Debtor's
obligations hereunder. This Security Agreement may be amended only by the
manner set forth in Section 8.02 of the Credit Agreement by an instrument in
writing executed jointly by Debtor and Secured Party and may be supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
Section 7.03 Copy as Financing Statement. A photocopy or other
reproduction of this Security Agreement or any financing statement covering the
Collateral is sufficient as a financing statement, and the same may be filed
with any appropriate filing authority for the purpose of perfecting Secured
Party's security interest in the Collateral.
Section 7.04 Possession of Collateral. Secured Party shall be
deemed to have possession of any Collateral in transit to it or set apart for
it (or, in either case, any of its agents, affiliates or correspondents).
Section 7.05 Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations,
and after such sale or transfer and discharge there remains a surplus of
proceeds, Secured Party will deliver to Debtor such excess proceeds in a
commercially reasonable time; provided, however, that neither Secured Party,
any Issuing Bank nor any Lender shall be liable for any interest, cost or
expense in connection with any delay in delivering such proceeds to Debtor.
Section 7.06 Governing Law; Jurisdiction. This Security Agreement
and the security interest granted hereby shall be construed in accordance with
and governed by the laws of the State of Texas (except to the extent that the
laws of any other jurisdiction govern the perfection and priority of the
security interests granted hereby). Debtor consents to and submits to in
personam jurisdiction and venue in the state district and county courts of the
county wherein Secured Party's offices are located at the address specified on
the signature page hereof, and in the Federal District Courts of the district
wherein such offices of Secured Party are located. This submission to
jurisdiction is nonexclusive and does not preclude Secured Party, any Issuing
Bank or any Lender from obtaining jurisdiction over Debtor or the Collateral in
any court otherwise having jurisdiction.
-13-
<PAGE> 15
Section 7.07 Cumulative and Other Rights. The rights, powers and
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party, any Issuing
Bank or any Lender of any one or more of the rights, powers and remedies herein
shall not be construed as a waiver of any other rights, powers and remedies,
including, without limitation, any other rights of set-off. If any of the
Obligations are given in renewal, extension for any period or rearrangement, or
applied toward the payment of debt secured by any lien, Secured Party shall be,
and is hereby, subrogated to all the rights, titles, interests and liens
securing the debt so renewed, extended, rearranged or paid.
Section 7.08 Subrogation. Until the Obligations have been paid in
full, Debtor hereby waives any claim, right or remedy which Debtor may now have
or hereafter acquire against the Company which arises out of this Security
Agreement or from the performance by Debtor hereunder, including without
limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, indemnification, or participation in any such claim, right or
remedy of any other Person against the Company; provided, however,
notwithstanding the foregoing, Debtor reserves its rights of contribution and
reimbursement, if any, from any Obligor. Until the Obligations have been paid
in full, Debtor further waives any benefit of any right to participate in any
security now or hereafter held by Secured Party, the Issuing Banks and/or the
Lenders.
Section 7.09 Continuing Security Agreement.
(a) This Security Agreement shall constitute a continuing security
agreement, and all representations and warranties, covenants and agreements
shall, as applicable, apply to all future as well as existing transactions.
Provisions of this Security Agreement, unless they are by their terms
exclusive, shall be in addition to other agreements between the parties.
(b) Except as may be expressly applicable pursuant to Section
9.505 of the Code, no action taken or omission to act by Secured Party, the
Issuing Banks or the Lenders hereunder, including, without limitation, any
action taken or inaction pursuant to Section 6.02, shall be deemed to
constitute a retention of the Collateral in satisfaction of the Obligations or
otherwise to be in full satisfaction of the Obligations, and the Obligations
shall remain in full force and effect, until Secured Party, the Issuing Banks
and the Lenders shall have applied payments (including, without limitation,
collections from Collateral) towards the Obligations in the full amount then
outstanding or until such subsequent time as is hereinafter provided in
subsection (c) below.
(c) To the extent that any payments on the Obligations or proceeds
of the Collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent the Obligations so satisfied shall be
revived and continue as if such payment or proceeds had not been received by
Secured Party, the Issuing Banks or the Lenders, and Secured Party's, the
Issuing Banks' and the Lenders' security interests, rights, powers and remedies
hereunder shall continue in full force and effect. In such event, this
Security Agreement shall be automatically reinstated if it shall theretofore
have been terminated pursuant to Section 7.10.
(d) In the event that the Obligations are structured such that
there are times when no Indebtedness is owing thereunder, this Security
Agreement shall remain valid and in full force and effect as to all subsequent
indebtedness included in the Obligations, provided Secured Party has not in the
interim period executed a written release or termination statement or returned
possession of or reassigned the Collateral to Debtor.
-14-
<PAGE> 16
Section 7.10 Termination. The grant of a security interest
hereunder and all of Secured Party's, the Issuing Banks' and the Lenders'
rights, powers and remedies in connection therewith shall remain in full force
and effect until Secured Party has retransferred and delivered all Collateral
in its possession to Debtor, and executed a written release or termination
statement and reassigned to Debtor without recourse or warranty any remaining
Collateral and all rights conveyed hereby. Upon the complete payment of the
Obligations and the compliance by Debtor with all covenants and agreements
hereof, Secured Party, at the written request and expense of Debtor, will
release, reassign and transfer the Collateral to Debtor and declare this
Security Agreement to be of no further force or effect. Notwithstanding the
foregoing, the provisions of Section 7.09(c) shall survive the termination of
this Security Agreement.
Section 7.11 Counterparts, Effectiveness. This Security Agreement
may be executed in two or more counterparts. Each counterpart is deemed an
original, but all such counterparts taken together constitute one and the same
instrument. This Security Agreement becomes effective upon the execution
hereof by Debtor and delivery of the same to Secured Party, and it is not
necessary for Secured Party, the Issuing Banks or any Lender to execute any
acceptance hereof or otherwise signify or express its acceptance hereof.
Section 7.12 Headings Descriptive. All titles or headings to
articles, sections, subsections or other divisions of this Security Agreement
or the exhibits hereto are only for the convenience of the parties and shall
not be construed to have any effect or meaning with respect to the other
content of such articles, sections, subsections or other divisions, such other
content being controlling as to the agreement between the parties hereto.
Section 7.13 Delivery of Copy/Waiver. The Debtor hereby
acknowledges receiving a copy of this Security Agreement. The Debtor waives
all rights to receive from the Secured Party a copy of any financing statement
or financing change statement filed or registered or verification statement
issued at any time in respect of this Security Agreement.
-15-
<PAGE> 17
DEBTOR: TESORO REFINING, MARKETING & SUPPLY COMPANY
By: /s/ William T. VanKleef
----------------------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
Address of Chief Executive Office and
Location of the Collateral:
8700 Tesoro Drive
San Antonio, Texas 78217
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, AS AGENT
By: /s/ P. Stan Burge
----------------------------------------
Name: P. Stan Burge
Title: Vice President
Address:
712 Main Street
Houston, Texas 77002
-16-
<PAGE> 18
FINANCING STATEMENT
This Financing Statement is presented to a filing officer for filing
pursuant to the Uniform Commercial Code.
1. The name and address of the Debtor is:
TESORO REFINING, MARKETING & SUPPLY COMPANY
8700 Tesoro Drive
San Antonio, Texas 78217
Federal Tax Identification No.: 74-2045147
2. The name and address of the Secured Party is:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Agent
712 Main Street
Houston, Texas 77002
Federal Tax Identification No.: 74-0800980
3. This Financing Statement covers the following Collateral:
(a) all of Debtor's accounts and inventory;
(b) (i) any property from time to time delivered to or
deposited with Secured Party by or for the account of Debtor which is
related to any property referred to in clause (a) of this item 3; and
(ii) all certificates of title or other documents evidencing ownership
or possession of or otherwise relating to any property referred to in
clause (a) of this item 3;
(c) (i) all goods which were at any time included in the
Collateral described in clause (a) of this item 3 and which are
returned to or for the account of Debtor following their sale, lease
or other disposition; (ii), all policies of insurance (whether or not
required by Secured Party) covering any property referred to in this
item 3; and (iii), all proceeds, products, replacements, additions
to, substitutions for, accessions of, and property necessary for the
operation of any of the property referred to in this item 3,
including, without limitation, insurance payable as a result of loss
or damage to any of the property referred to in this item 3, refunds
of unearned premiums of any such insurance policy and claims against
third parties;
(d) all books and records related to any of the property
referred to in this item 3, including, without limitation, any and all
books of account, customer lists and other records relating in any way
to the Collateral described in this item 3;
(e) all of Debtor's general intangibles which are related
(but only those related) to any property referred to in this item 3,
including, without limitation, all (i) letters of credit, bonds,
guaranties, purchase or sales agreements and other contractual rights,
rights to performance, and claims for damages, refunds (including tax
refunds) or other monies due or to become due; (ii) orders,
franchises, permits, certificates, licenses, consents, exemptions,
variances, authorizations or other approvals by any governmental
authority; (iii) business records, computer tapes and computer
software; and (iv) other intangible personal property, whether
<PAGE> 19
similar or dissimilar to the other property described or referred to in
clause (a) of this item 3; and
(f) all of Debtor's chattel paper, documents and
instruments related to or arising out of any property referred to in
clause (a) of this item 3.
The Collateral shall not include and shall be exclusive of any
equipment.
DEBTOR: TESORO REFINING, MARKETING & SUPPLY COMPANY
By: /s/ William T. VanKleef
-----------------------------------------
Name: William T. VanKleef
Title: Vice President and Treasurer
-2-
<PAGE> 1
Exhibit 11
TESORO PETROLEUM CORPORATION AND SUBSIDIARIES
Information Supporting Earnings (Loss)
Per Share Computations
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1994 1993
---- ----
<S> <C> <C>
Primary Earnings (Loss) Per Share
Computation:
Earnings (loss) before extraordinary item . . . . . . $ 7,202 ( 2,909)
Extraordinary loss on extinguishment of
debt . . . . . . . . . . . . . . . . . . . . . . . ( 4,752) -
-------- --------
Net earnings (loss) . . . . . . . . . . . . . . . . 2,450 ( 2,909)
Less preferred stock dividend requirements . . . . . 1,889 2,302
-------- --------
Net earnings (loss) applicable to common
stock . . . . . . . . . . . . . . . . . . . . . . $ 561 ( 5,211)
======== ========
Average outstanding common and common equivalent
shares . . . . . . . . . . . . . . . . . . . . . . 19,455 14,070
======== ========
Primary Earnings (Loss) Per Share:
Earnings (loss) before the extraordinary
item . . . . . . . . . . . . . . . . . . . . . . . $ .27 ( .37)
Extraordinary loss on extinguishment
of debt . . . . . . . . . . . . . . . . . . . . . . ( .24) -
-------- --------
Net earnings (loss) . . . . . . . . . . . . . . . . $ .03 ( .37)
======== ========
Fully Diluted Earnings (Loss) Per Share
Computation:
Net earnings (loss) applicable to common
stock . . . . . . . . . . . . . . . . . . . . . . . $ 561 ( 5,211)
Add preferred stock dividend requirements . . . . . . 1,889 2,302
-------- --------
Net earnings (loss) applicable to common
stock - fully diluted . . . . . . . . . . . . . . $ 2,450 ( 2,909)
======== ========
Average outstanding common and common equivalent
shares . . . . . . . . . . . . . . . . . . . . . . . 19,455 14,070
Shares issuable on conversion of preferred
shares . . . . . . . . . . . . . . . . . . . . . . . 3,486 4,775
Other . . . . . . . . . . . . . . . . . . . . . . . . . 77 -
-------- --------
Fully diluted shares . . . . . . . . . . . . . . . . 23,018 18,845
======== ========
Fully Diluted Earnings (Loss) Per Share -
Anti-dilutive . . . . . . . . . . . . . . . . . . . . $ .03 ( .37)
======== ========
</TABLE>
-31-
