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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-9743
ENRON OIL & GAS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 47-0684736
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1400 SMITH STREET, HOUSTON, TEXAS 77002-7369
(Address of principal executive offices) (zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 713-853-6161
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/.
Aggregate market value of the voting stock held by nonaffiliates of the
registrant, based on the closing sale price in the daily composite list for
transactions on the New York Stock Exchange on March 1, 1996 was $1,535,085,875.
As of March 1, 1996, there were 159,976,840 shares of the registrant's Common
Stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE. Certain portions of the registrant's
definitive Proxy Statement for the May 7, 1996 Annual Meeting of Shareholders
("Proxy Statement") are incorporated in Part III by reference.
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TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Business
General................................................................... 1
Business Segments......................................................... 2
Exploration and Production................................................ 2
Marketing................................................................. 5
Wellhead Volumes and Prices, and Lease and Well Expenses.................. 7
Other Natural Gas Marketing Volumes and Prices............................ 8
Competition............................................................... 8
Regulation................................................................ 8
Relationship Between the Company and Enron Corp. ......................... 11
Other Matters............................................................. 13
Current Executive Officers of the Registrant.............................. 15
Item 2. Properties.................................................................. 16
Oil and Gas Exploration and Production Properties and Reserves............ 16
Item 3. Legal Proceedings........................................................... 19
Item 4. Submission of Matters to a Vote of Security Holders......................... 19
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters... 20
Item 6. Selected Financial Data..................................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 22
Item 8. Financial Statements and Supplementary Data................................. 30
Item 9. Disagreements on Accounting and Financial Disclosure........................ 30
PART III
Item 10. Directors and Executive Officers of the Registrant.......................... 30
Item 11. Executive Compensation...................................................... 30
Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 30
Item 13. Certain Relationships and Related Transactions.............................. 30
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K............. 30
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PART I
ITEM 1. BUSINESS
GENERAL
Enron Oil & Gas Company (the "Company"), a Delaware corporation organized
in 1985, is engaged, either directly or through a marketing subsidiary with
regard to domestic operations or through various subsidiaries with regard to
international operations, in the exploration for, and the development,
production and marketing of, natural gas and crude oil primarily in major
producing basins in the United States, as well as in Canada, Trinidad and India
and, to a lesser extent, selected other international areas. The Company's
principal producing areas are further described under "Exploration and
Production" below. At December 31, 1995, the Company's estimated net proved
natural gas reserves were 3,343 billion cubic feet ("Bcf"), including 1,180 Bcf
of proved undeveloped methane reserves in the Big Piney deep Paleozoic
formations and amounts related to a volumetric production payment and estimated
net proved crude oil, condensate and natural gas liquids reserves were 50
million barrels ("MMBbl"). (See "Supplemental Information to Consolidated
Financial Statements"). At such date, approximately 78% of the Company's
reserves (on a natural gas equivalent basis) was located in the United States,
10% in Canada, 8% in Trinidad and 4% in India. As of December 31, 1995, the
Company employed approximately 740 persons.
The Company's business strategy is to maximize the rate of return on
investment of capital by controlling both operating and capital costs and
enhancing the certainty of future revenues through the use of various marketing
mechanisms. This strategy enhances the generation of both income and cash flow
from each unit of production and allows for the growth of production on a
cost-effective basis by optimizing the reinvestment of cash flow. The Company
refocused its 1995 drilling activity away from natural gas deliverability and
toward natural gas reserve enhancement and crude oil exploitation in the United
States in response to the decline in United States natural gas prices in recent
periods. The Company is also focusing on the cost-effective utilization of
advances in technology associated with gathering, processing and interpretation
of 3-D seismic data, developing reservoir simulation models and drilling
operations through the use of new and/or improved drill bits, mud motors, mud
additives, formation logging techniques and reservoir fracturing methods. These
advanced technologies are used, as appropriate, throughout the Company to reduce
the risks associated with all aspects of oil and gas reserve exploration,
exploitation and development. The Company implements its strategy by emphasizing
the drilling of internally generated prospects in order to find and develop low
cost reserves. Achieving and maintaining the lowest possible cost structure are
also important goals in the implementation of the Company's strategy. Consistent
with the Company's desire to optimize the use of its assets, it also maintains a
strategy of selling select oil and gas properties that for various reasons may
no longer fit into future operating plans, or which are not assessed to have
sufficient future growth potential and when the economic value to be obtained by
selling the properties and reserves in the ground is evaluated to be greater
than what would be obtained by holding the properties and producing the reserves
over time. As a result, the Company typically receives each year a varying but
substantial level of proceeds related to such sales which proceeds are available
for general corporate use.
The closing on December 13, 1995 of the sale by Enron Corp. of
approximately 31 million outstanding shares of the common stock of the Company
reduced Enron Corp.'s ownership in the Company from 80% to 61%. (See
"Relationship Between the Company and Enron Corp.").
Unless the context otherwise requires, all references herein to the Company
include Enron Oil & Gas Company, its predecessors and subsidiaries, and any
reference to the ownership of interest or pursuit of operations in any
international areas by the Company recognizes that all such interests are owned
and operations are pursued by subsidiaries of Enron Oil & Gas Company. Unless
the context otherwise requires, all references herein to Enron Corp. include
Enron Corp., its predecessors and affiliates, other than the Company and its
predecessors and subsidiaries.
With respect to information on the Company's working interest in wells or
acreage, "net" oil and gas wells or acreage are determined by multiplying
"gross" oil and gas wells or acreage by the Company's working interest in the
wells or acreage. Unless otherwise defined, all references to wells are gross.
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BUSINESS SEGMENTS
The Company's operations are all natural gas and crude oil exploration and
production related. Accordingly, such operations are classified as one business
segment.
EXPLORATION AND PRODUCTION
NORTH AMERICAN OPERATIONS
The Company's seven principal United States producing areas are the Big
Piney area, South Texas area, East Texas area, Offshore Gulf of Mexico area,
Canyon Trend area, Pitchfork Ranch area and Vernal area. Properties in these
areas comprised approximately 67% of the Company's United States reserves (on a
natural gas equivalent basis) and 90% of the Company's maximum United States net
natural gas deliverability as of December 31, 1995 and are substantially all
operated by the Company.
The Company's other United States natural gas and crude oil producing
properties are located primarily in other areas of Texas, Utah, New Mexico,
Oklahoma, California and Kansas.
At December 31, 1995, 95% of the Company's proved United States reserves,
including the reserves in the Big Piney deep Paleozoic formations, (on a natural
gas equivalent basis) was natural gas and 5% was crude oil, condensate and
natural gas liquids. A substantial portion of the Company's United States
natural gas reserves is in long-lived fields with well-established production
histories. The Company believes that opportunities exist to increase production
in many of these fields through continued infill and other development drilling.
The Company also has natural gas and crude oil producing properties located
in Western Canada, primarily in the provinces of Alberta, Saskatchewan and
Manitoba.
Big Piney Area. The Company's largest reserve accumulation is located in
the Big Piney area in Sublette and Lincoln counties in southwestern Wyoming. The
Company is the holder of the largest productive acreage base in this area, with
approximately 245,000 net acres under lease directly within field limits. The
Company operates approximately 535 natural gas wells in this area in which it
owns an 87% average working interest. Deliveries from the area net to the
Company averaged 90 million cubic feet ("MMcf") per day of natural gas and 2.0
thousand barrels ("MBbl") per day of crude oil, condensate, and natural gas
liquids in 1995. At December 31, 1995, natural gas deliverability net to the
Company was approximately 140 MMcf per day.
The current principal producing intervals are the Frontier and Mesaverde
formations. The Frontier formation, which occurs at 6,500 to 10,000 feet,
contains approximately 54% of the Company's Big Piney proved developed reserves.
The Company drilled 26 wells in the Big Piney area in 1995. Although natural gas
drilling has been curtailed in this area during 1995 in response to market
conditions, numerous drilling opportunities will be available for several years.
In 1995, the Company recorded as proved undeveloped reserves 1,180 Bcf of
methane contained, along with high concentrations of carbon dioxide as well as
small amounts of other gaseous substances, in the deep Wyoming Paleozoic
formation located under acreage leased by the Company and held by production in
the Big Piney area. The Company is actively pursuing the consummation of a
market or markets from several different potential sources to facilitate
realizing the value of these reserves.
South Texas Area. The Company's activities in South Texas are focused in
the Lobo, Wilcox and Frio producing horizons. The principal areas of activity
are in the Lobo and Wilcox Trends which occur primarily in Webb, Zapata and
Starr counties.
The Company operates approximately 320 wells in the South Texas area.
Production is primarily from the Upper Wilcox and Lobo sands at depths ranging
from 5,000 to 13,000 feet. The Company has approximately 197,000 net acres under
lease in this area. Natural gas deliveries net to the Company averaged
approximately 158 MMcf per day in 1995. At December 31, 1995, natural gas
deliverability from this area net to the Company was approximately 155 MMcf per
day which was impacted during 1995 by the sale of selected properties. The
Company drilled 45 wells in the South Texas area in 1995 and participated in a
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sizable 3-D seismic acquisition effort. An active drilling program in this area
is anticipated to continue for several years.
East Texas Area. The Company's activities in the East Texas area are
primarily in the Carthage field, located in Panola County, and the North Milton
field, located in northern Harris County.
The Carthage field is the Company's newest area of concentration. This
field is one of the most prolific fields in East Texas with production primarily
from the Cotton Valley, Travis Peak and Pettit formations. In 1995, properties
were acquired that doubled the Company's acreage position to 17,000 acres. The
Company drilled 36 wells in the East Texas area in 1995 and anticipates an
active drilling program will continue for several years. The Company has an
average 71% working interest in its holdings. The Company has continued its
activity in the North Milton field where it now operates 19 wells and holds a
100% working interest in the acreage. Further drilling is planned for 1996. At
December 31, 1995, deliverability from the East Texas area was approximately 50
MMcf per day of natural gas with almost 1.2 MBbl per day of crude oil,
condensate and natural gas liquids both net to the Company.
Offshore Gulf of Mexico Area. At December 31, 1995, the Company held an
interest in 174 blocks in the Offshore Gulf of Mexico area totaling
approximately 485,000 net acres. Of the 174 blocks, 119 are operated by the
Company. These interests are located predominantly in federal waters offshore
Texas and Louisiana. During 1995, the Company acquired a 50% interest in
essentially all of the Offshore Gulf of Mexico properties previously owned by
Santa Fe Minerals, Inc. complementing the Company's previously owned interests
and adding significantly to the Company's offshore operations. Natural gas
deliveries from this area averaged 124 MMcf per day during 1995 net to the
Company. A substantial portion of such deliveries was from interests in the
Matagorda trend with significant volumes also coming from the Mustang Island
area. Deliverability from this area at December 31, 1995 was 155 MMcf per day
net to the Company sourced principally as noted above. The Company has
maintained an active drilling program in this area during 1995 and anticipates a
similar program to continue for several years.
Canyon Trend Area. The Company's activities in this area have been
concentrated in Crockett, Sutton, Terrell and Val Verde Counties, Texas where
the Company drilled 384 natural gas wells during the period 1992 through 1995.
The Company holds approximately 99,000 net acres and now operates approximately
635 natural gas wells in this area in which it owns a 97% average working
interest. Production is from the Canyon sands and Strawn limestone at depths
from 5,500 to 12,500 feet. In 1995, natural gas deliveries net to the Company
averaged 57 MMcf per day and at December 31, 1995, natural gas deliverability
net to the Company was approximately 50 MMcf per day. The Company has maintained
an active drilling program in the Canyon Trend area during 1995 and expects a
similar program to continue for several years.
Pitchfork Ranch Area. The Pitchfork Ranch area located in Lea County, New
Mexico, produces primarily from the Bone Spring, Atoka and Morrow formations. In
1995, deliveries net to the Company averaged 28 MMcf per day of natural gas and
approximately 2.8 MBbl per day of crude oil, condensate and natural gas liquids.
At December 31, 1995, deliverability net to the Company was approximately 25
MMcf per day of natural gas and 2.6 MBbl per day of crude oil, condensate and
natural gas liquids. The Company holds approximately 31,000 net acres and
recently acquired a 3-D seismic survey over this area. The Company expects to
maintain an active drilling program in this area for several years.
Vernal Area. In the Vernal area, located primarily in Uintah County, Utah,
the Company operates approximately 200 producing wells and presently controls
approximately 75,000 net acres. In 1995, natural gas deliveries net to the
Company from the Vernal area averaged 19 MMcf per day which represents
deliverability. Production is from the Green River and Wasatch formations
located at depths between 4,500 and 8,000 feet. The Company has an average
working interest of approximately 60%. Although the drilling of natural gas
wells was deferred in 1995 in the Vernal area in response to market conditions,
numerous drilling opportunities will be available for several years.
Canada. The Company is engaged in the exploration for and the development,
production and marketing of natural gas and crude oil and the operation of
natural gas processing plants in western Canada, principally in the provinces of
Alberta, Saskatchewan, and Manitoba. The Company conducts operations from
offices in
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Calgary. The Company produces natural gas from seven major areas and crude oil
from four major areas. The Sandhills area in Southwestern Saskatchewan is the
largest single producing area where 75 wells were drilled in 1995 resulting in
deliverability net to the Company from the field of approximately 38 MMcf per
day at December 31, 1995. Canadian natural gas deliverability net to the Company
at December 31, 1995 was approximately 95 MMcf per day, and the Company held
approximately 347,000 net undeveloped acres in Canada. The Company expects to
maintain an active drilling program for several years.
OUTSIDE NORTH AMERICA OPERATIONS
The Company has producing operations offshore Trinidad and India and was
recently awarded by the government of Venezuela the rights to pursue
exploration, exploitation and development of reserves in the Gulf of Paria East
Block offshore the eastern state of Soucre and is conducting exploration in
selected other international areas. Properties offshore Trinidad and India
comprised 100% of the Company's proved reserves and production outside of North
America at year end 1995.
Trinidad. In November 1992, the Company was awarded a 95% working interest
concession in the South East Coast Consortium ("SECC") Block offshore Trinidad,
encompassing three undeveloped fields, previously held by three government-owned
energy companies. The Kiskadee field has been developed, the Ibis field is under
development and the Oil Bird field is anticipated to be developed over the next
three to five years. Existing surplus processing and transportation capacity at
the Pelican field facilities owned and operated by Trinidad and Tobago
government-owned companies is being used to process and transport the
production. Natural gas is being sold into the local market under a take-or-pay
agreement with the National Gas Company of Trinidad and Tobago. In 1995,
deliveries net to the Company averaged 107 MMcf per day of natural gas and 5.1
MBbl per day of crude oil and condensate. At December 31, 1995, natural gas
deliverability net to the Company was approximately 170 MMcf per day and the
Company held approximately 71,000 net undeveloped acres in Trinidad.
In 1995, the Company was awarded the right to develop the U(a) block
adjacent to the SECC Block and is presently negotiating the terms of a
production sharing contract with the Government of Trinidad and Tobago.
India. In December 1994, the Company signed agreements covering profit
sharing, joint operations and product sales and representing a 30% working
interest in and was designated operator of the Tapti, Panna and Mukta Blocks
located offshore Bombay, India. The Company is designated operator of all three
areas. The blocks were previously operated by the Indian national oil company,
Oil & Natural Gas Corporation Limited, which retained a 40% working interest.
The 363,000 acre Tapti Block contains two major proved gas accumulations
delineated by 22 expendable exploration wells that have been plugged. The
Company has initiated a development plan for the Tapti Block accumulations. The
106,000 acre Panna Block and the 192,000 acre Mukta Block are partially
developed with 30 wells producing from five producing platforms located in the
Panna and Mukta fields. The fields were producing approximately 3.3 MBbl per day
of crude oil net to the Company as of December 31, 1995; all associated gas was
being flared. The Company intends to continue development of the accumulations
and to expand processing capacity to allow crude oil production at full
deliverability as well as to permit natural gas sales.
Venezuela. The Company was awarded exploration, exploitation and
development rights for a block offshore the eastern state of Soucre, Venezuela
in early 1996. The Company holds an initial 90 percent working interest in the
joint venture. Plans include the completion of a 3-D seismic survey over the
most prospective portions of the block in 1996 and initiation of drilling in
1997, with production targeted for mid-1998. Total reserves are estimated at 100
to 300 million barrels gross.
Other International. The Company continues to evaluate other selected
conventional natural gas and crude oil opportunities outside North America. The
Company is pursuing other exploitation opportunities in countries where
indigenous natural gas and crude oil reserves have been identified, particularly
where synergies in natural gas transportation, processing and power cogeneration
can be optimized with other Enron Corp. affiliated companies. In early 1995, the
Company, an Enron Corp. affiliate and the Qatar General Petroleum Corporation
signed a nonbinding letter of intent concerning the possible development of a
liquefied
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natural gas project for natural gas to be produced from a block within the North
Dome Field. The Company may jointly hold up to a 40% equity interest in the
joint venture and the Company would drill and develop to-be-agreed-upon
reserves. In addition, the Company signed nonbinding letters of intent in early
1995 with Uzbekneftigaz, the national oil and gas company of Uzbekistan as well
as with Gazprom, the Russian natural gas company, to pursue the feasibility of
joint venture development and marketing of previously discovered hydrocarbon
reserves in Uzbekistan.The Company is also participating in discussions
concerning the potential for conventional oil and gas development opportunities
in China, Mozambique, Jordan and Algeria. The Company also holds nonoperating
working interests in two conventional oil and gas exploration prospects in the
U.K. North Sea.
The Company continues evaluation and assessment of its international
opportunity portfolio in the coalbed methane recovery arena, including projects
in South Wales in the U.K., the Lorraine Basin in France, Galilee Basin in
Australia and the San Jiao area and Hedong Basin in China.
MARKETING
Wellhead Marketing. The Company's North America wellhead natural gas
production is currently being sold on the spot market and under long-term
natural gas contracts at market responsive prices. In many instances, the
long-term contract prices closely approximate the prices received for natural
gas being sold on the spot market. Wellhead natural gas volumes from Trinidad
are sold at prices that are based on a fixed price schedule with annual
escalations. Under terms of the production sharing contract, natural gas volumes
in India are to be sold to the Gas Authority of India, Ltd. under a take-or-pay
contract at a price linked to a basket of world market fuel oil quotations with
floor and ceiling limits. Approximately 30% of the Company's wellhead natural
gas production is currently being sold to pipeline and marketing subsidiaries of
Enron Corp. The Company believes that the terms of its transactions and
agreements with Enron Corp. and/or its affiliates are and intends that future
such transactions and agreements will be at least as favorable to the Company as
could be obtained from third parties.
Substantially all of the Company's wellhead crude oil and condensate is
sold under various terms and arrangements at market responsive prices.
Other Marketing. Enron Oil & Gas Marketing, Inc. ("EOGM"), a wholly-owned
subsidiary of the Company, is a marketing company engaging in various marketing
activities. Both the Company and EOGM contract to provide, under short and
long-term agreements, natural gas to various purchasers and then aggregate the
necessary supplies for the sales with purchases from various sources including
third-party producers, marketing companies, pipelines or from the Company's own
production. In addition, EOGM has purchased and constructed several small
gathering systems in order to facilitate its entry into the gathering business
on a limited basis. Both the Company and EOGM utilize other short and long-term
hedging and trading mechanisms including sales and purchases utilizing
NYMEX-related commodity market transactions. These marketing activities have
provided an effective balance in managing a portion of the Company's exposure to
commodity price risks for both natural gas and crude oil and condensate wellhead
prices. (See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Capital Resources and Liquidity - Hedging
Transactions.")
In September 1992, the Company sold a volumetric production payment for
$326.8 million to a limited partnership. Under the terms of the production
payment agreements, the Company conveyed a real property interest in
approximately 124 billion cubic feet equivalent ("Bcfe") (136 trillion British
thermal units ("TBtu")) of certain natural gas and other hydrocarbons to the
purchaser. Effective October 1, 1993, the agreements were amended providing for
the extension of the original term of the volumetric production payment through
March 31, 1999 and including a revised schedule of daily quantities of
hydrocarbons to be delivered which is approximately one-half of the original
schedule. The revised schedule under the amended agreement totals approximately
89.1 Bcfe (97.8 TBtu) versus approximately 87.9 Bcfe (96.4 TBtu) remaining to be
delivered under the original agreement. Daily quantities of hydrocarbons no
longer required to be delivered under the revised schedule during the period
from October 1, 1993 through June 30, 1996 are
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available for sale by the Company. The Company retains responsibility for its
working interest share of the cost of operations.
In March 1995, in a series of transactions with Enron Corp. and an
affiliate of Enron Corp., the Company exchanged all of its fuel supply and
purchase contracts and related price swap agreements associated with a Texas
City cogeneration plant (the "Cogen Contracts") for certain natural gas price
swap agreements (the "Swap Agreements") of equivalent value. As a result of the
transactions, the Company has been relieved of all performance obligations
associated with the Cogen Contracts. The Company will realize net operating
revenues and receive corresponding cash payments of approximately $91 million
during the period extending through December 31, 1999, under the terms of the
Swap Agreements. The estimated fair value of the Swap Agreements was
approximately $81 million at the date the Swap Agreements were received. The net
effect of this series of transactions has resulted/will result in increases in
net operating revenues and cash receipts for the Company during 1995 and 1996 of
approximately $13 million and $7 million, respectively, with offsetting
decreases in 1998 and 1999 versus that anticipated under the Cogen Contracts.
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WELLHEAD VOLUMES AND PRICES, AND LEASE AND WELL EXPENSES
The following table sets forth certain information regarding the Company's
wellhead volumes of and average prices for natural gas per thousand cubic feet
("Mcf"), crude oil and condensate, and natural gas liquids per barrel ("Bbl"),
and average lease and well expenses per thousand cubic feet equivalent ("Mcfe" -
natural gas equivalents are determined using the ratio of 6.0 Mcf of natural gas
to 1.0 barrel of crude oil and condensate or natural gas liquids) delivered
during each of the three years in the period ended December 31, 1995:
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YEAR ENDED DECEMBER 31,
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1995 1994 1993
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VOLUMES (PER DAY)
Natural Gas (MMcf)
United States(1)............................................ 560 614 649
Canada...................................................... 76 72 58
Trinidad.................................................... 107 63 2
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Total.................................................. 743 749 709
====== ====== ======
Crude Oil and Condensate (MBbl)
United States............................................... 9.1 8.0 6.6
Canada...................................................... 2.4 2.0 2.2
Trinidad.................................................... 5.1 2.5 .1
India....................................................... 2.5 .1 -
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Total.................................................. 19.1 12.6 8.9
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Natural Gas Liquids (MBbl)
United States............................................... 1.0 .3 .2
Canada...................................................... .4 .4 .4
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Total.................................................. 1.4 .7 .6
====== ====== ======
AVERAGE PRICES
Natural Gas ($/Mcf)
United States(2)............................................ $ 1.39 $ 1.71 $ 1.97
Canada...................................................... .97 1.42 1.34
Trinidad.................................................... .97 .93 .89
Composite.............................................. 1.29 1.62 1.92
Crude Oil and Condensate ($/Bbl)
United States............................................... $17.32 $16.06 $16.96
Canada...................................................... 16.22 14.05 14.63
Trinidad.................................................... 16.07 15.50 14.36
India....................................................... 16.81 15.70 -
Composite.............................................. 16.78 15.62 16.37
Natural Gas Liquids ($/Bbl)
United States............................................... $11.88 $12.45 $13.85
Canada...................................................... 9.74 8.45 9.46
Composite.............................................. 11.31 9.90 11.12
LEASE AND WELL EXPENSES ($/MCFE)
United States............................................... $ .19 $ .19 $ .18
Canada...................................................... .35 .34 .48
Trinidad.................................................... .15 .17 1.46
India(3).................................................... 1.25 .13 -
Composite.............................................. .22 .20 .21
</TABLE>
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(1) Includes 48 MMcf per day in 1995 and 1994, and 81 MMcf per day in 1993
delivered under the terms of a volumetric production payment agreement
effective October 1, 1992, as amended.
(2) Includes an average equivalent wellhead value of $.80 per Mcf in 1995,
$1.27 per Mcf in 1994 and $1.57 per Mcf in 1993 for the volumes described
in note (1), net of transportation costs.
(3) Based on expense estimates for nine days of production for 1994. Expenses
for 1995 includes certain nonrecurring startup costs.
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OTHER NATURAL GAS MARKETING VOLUMES AND PRICES
The following table sets forth certain information regarding the Company's
volumes of natural gas delivered under other marketing and volumetric production
payment arrangements, and resulting average per unit gross revenue and per unit
amortization of deferred revenues along with associated costs during each of the
three years in the period ended December 31, 1995. (See "Marketing" for a
discussion of other natural gas marketing arrangements and agreements).
<TABLE>
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YEAR ENDED DECEMBER 31,
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1995 1994 1993
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<S> <C> <C> <C>
Volume (MMcf per day)(1)......................................... 264 324 293
Average Gross Revenue ($/Mcf)(2)................................. $ 1.88 $ 2.38 $ 2.57
Associated Costs ($/Mcf)(3)(4)................................... 1.51 2.06 2.32
------ ------ ------
Margin ($/Mcf)................................................... $ .37 $ .32 $ .25
====== ====== ======
</TABLE>
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(1) Includes 48 MMcf per day in 1995 and 1994 and 81 MMcf per day in 1993
delivered under the terms of volumetric production payment and exchange
agreements effective October 1, 1992, as amended.
(2) Includes per unit deferred revenue amortization for the volumes detailed in
note (1) at an equivalent of $2.46 per Mcf ($2.36 per million British
thermal units ("MMBtu")) in 1995 and 1994 and $2.50 per Mcf ($2.40 per
MMBtu) in 1993.
(3) Includes an average value of $1.57 per Mcf in 1995, $1.92 per Mcf in 1994
and $2.20 per Mcf in 1993, for the volumes detailed in note (1) including
average wellhead value and any transportation costs and exchange
differentials.
(4) Including transportation and exchange differentials.
COMPETITION
The Company actively competes for reserve acquisitions and
exploration/exploitation leases, licenses and concessions, frequently against
companies with substantially larger financial and other resources. To the extent
the Company's exploration budget is lower than that of certain of its
competitors, the Company may be disadvantaged in effectively competing for
certain reserves, leases, licenses and concessions. Competitive factors include
price, contract terms, and quality of service, including pipeline connection
times and distribution efficiencies. In addition, the Company faces competition
from other producers and suppliers, including competition from other world wide
energy supplies, such as natural gas from Canada.
REGULATION
Domestic Regulation of Natural Gas and Crude Oil Production. Natural gas
and crude oil production operations are subject to various types of regulation,
including regulation in the United States by state and federal agencies.
Domestic legislation affecting the oil and gas industry is under constant
review for amendment or expansion. Also, numerous departments and agencies, both
federal and state, are authorized by statute to issue and have issued rules and
regulations which, among other things, require permits for the drilling of
wells, regulate the spacing of wells, prevent the waste of natural gas and
liquid hydrocarbon resources through proration and restrictions on flaring,
require drilling bonds and regulate environmental and safety matters. The
regulatory burden on the oil and gas industry increases its cost of doing
business and, consequently, affects its profitability.
A substantial portion of the Company's oil and gas leases in the Big Piney
area and in the Gulf of Mexico, as well as some in other areas, are granted by
the federal government and administered by the Bureau of Land Management (the
"BLM") and the Minerals Management Service (the "MMS") federal agencies.
Operations conducted by the Company on federal oil and gas leases must comply
with numerous statutory and
8
<PAGE> 11
regulatory restrictions concerning the above and other matters. Certain
operations must be conducted pursuant to appropriate permits issued by the BLM
and the MMS.
Sales of crude oil, condensate and natural gas liquids by the Company are
made at unregulated market prices.
The transportation and sale for resale of natural gas in interstate
commerce are regulated pursuant to the Natural Gas Act of 1938 (the "NGA") and
the Natural Gas Policy Act of 1978 (the "NGPA"). These statutes are administered
by the Federal Energy Regulatory Commission (the "FERC"). Effective January 1,
1993, the Natural Gas Wellhead Decontrol Act of 1989 deregulated natural gas
prices for all "first sales" of natural gas, which includes all sales by the
Company of its own production. Consequently, sales of the Company's natural gas
currently may be made at market prices, subject to applicable contract
provisions.
Since 1985, the FERC has endeavored to make natural gas transportation more
accessible to natural gas buyers and sellers on an open and nondiscriminatory
basis. These efforts have significantly altered the marketing and pricing of
natural gas. Commencing in April 1992, the FERC issued Order Nos. 636, 636A and
636B ("Order No. 636"), which mandate a fundamental restructuring of interstate
natural gas pipeline sales and transportation services, including the
"unbundling" by interstate natural gas pipelines of the sales, transportation,
storage, and other components of their previously existing city-gate sales
service, and to separately state the rates for each unbundled service. Under
Order No. 636, unbundled pipeline sales can be made only in the production
areas. The purpose of Order No. 636 is to further enhance competition in the
natural gas industry by assuring the comparability of pipeline sales service and
services offered by a pipelines' competitors. The FERC issued final orders
accepting most pipelines' Order No. 636 compliance filings, and has commenced a
series of one-year reviews of individual pipeline implementations of Order No.
636. Appeals are pending and these orders may be amended or reversed in whole or
in part. Order No. 636 does not directly regulate the Company's activities, but
has had and will have an indirect effect because of its broad scope. With Order
No. 636 and pending ongoing FERC reviews of individual pipeline restructurings,
subject to court review, it is difficult to predict with precision its effects.
In many instances, however, Order No. 636 has substantially reduced or brought
to an end interstate pipelines' traditional roles as wholesalers of natural gas
in favor of providing only storage and transportation services. Order No. 636
has also substantially increased competition in natural gas markets, even though
there remains significant uncertainty with respect to the marketing and
transportation of natural gas. In spite of this uncertainty, Order No. 636 may
enhance the Company's ability to market and transport its natural gas
production, although it may also subject the Company to more restrictive
pipeline imbalance tolerances and greater penalties for violation of such
tolerances.
In July 1994, the FERC eliminated a regulation that had rendered virtually
all sales of natural gas by pipeline affiliates, such as the Company, to be
deregulated first sales. As a result, only sales by the Company of its own
production now qualify for this status. All other sales of natural gas by the
Company, such as those of natural gas purchased from third parties, are now
jurisdictional sales subject to a blanket sales certificate issued by the FERC
under the NGA. The Company does not anticipate this change will have any
significant current adverse effects in light of the flexible terms and
conditions of the existing blanket certificate. Such sales are subject to the
future possibility of greater federal oversight, however, including the
possibility the FERC might prospectively impose more restrictive conditions on
such sales.
The FERC has extended indefinitely its regulations (Order No. 497
regulations) governing relationships between interstate pipelines and their
marketing affiliates, subject to revisions to delete an out-of-date standard and
revise certain reporting and record keeping requirements. Among other matters,
these new rules require pipelines to post on their electronic bulletin boards,
within 24 hours of gas flow, information concerning discounted transportation
provided to marketing affiliates to enable competing marketers to request
comparable discounts. Order No. 497 does not directly regulate the Company's
activities, although a substantial portion of the Company's natural gas
production is sold to or transported by interstate pipeline affiliates which are
subject to the Order. The Company's activities may therefore be indirectly
affected by these regulations.
9
<PAGE> 12
The Company owns, directly or indirectly, certain natural gas pipelines
that it believes meet the traditional tests the FERC has used to establish a
pipeline's status as a gatherer not subject to FERC jurisdiction under the NGA.
State regulation of gathering facilities generally includes various safety,
environmental, and in some circumstances, nondiscriminatory take requirements,
but does not generally entail rate regulation. Natural gas gathering may receive
greater regulatory scrutiny at both the state and federal levels as the pipeline
restructuring under Order No. 636 is implemented. For example, the State of
Oklahoma in 1995 enacted legislation that essentially requires gatherers to
provide open access, non-discriminatory service. In addition, the FERC has
reiterated that, except in situations in which the gatherer acts in concert with
an interstate pipeline affiliate to frustrate the FERC's transportation
policies, it does not have jurisdiction over natural gas gathering facilities
and services and that such facilities and services are properly regulated by
state authorities. This FERC action may further encourage regulatory scrutiny of
natural gas gathering by state agencies. In addition, the FERC has approved
several transfers by interstate pipelines, including certain of the Company's
pipeline affiliates, of gathering facilities to unregulated independent or
affiliated gathering companies. This could increase competition among gatherers
in the affected areas. Certain of the FERC's orders delineating its new
gathering policy are subject to pending court appeals. The Company's gathering
operations could be adversely affected should they be subject in the future to
the application of state or federal regulation of rates and services.
The FERC has recently announced its intention to reexamine certain of its
transportation-related policies, including the manner in which interstate
pipelines release transportation capacity under Order No. 636, and has announced
new policies concerning the use of alternative, non-cost based methods for
setting rates for interstate natural gas transmission. While any resulting FERC
action would affect the Company only indirectly, these inquiries are intended to
further enhance competition in natural gas markets.
The FERC has also recently initiated a proceeding in which it intends to
evaluate its current regulatory treatment of pipeline facilities constructed in
offshore federal waters. The ultimate outcome of such proceeding cannot be
predicted at this time, but it is possible that it could result in more active
oversight by the FERC of such offshore facilities.
The Company's natural gas gathering operations may be or become subject to
safety and operational regulations relating to the design, installation,
testing, construction, operation, replacement, and management of facilities.
Pipeline safety issues have recently become the subject of increasing focus in
various political and administrative arenas at both the state and federal
levels. For example, federal legislation addressing pipeline safety issues was
considered during 1994 and 1995, which, if enacted, would have included a
federal "one-call" notification system and certain new facilities specifications
applicable to certain new construction. Similar "one call" legislation has been
reintroduced in the U.S. Congress. The Company cannot predict what effect, if
any, the adoption of this or other additional pipeline safety legislation might
have on its operations, but does not believe that any adverse effect would be
material.
The Company cannot predict the effect that any of the aforementioned orders
or the challenges to such orders will ultimately have on the Company's
operations. Additional proposals and proceedings that might affect the natural
gas industry are pending before Congress, the FERC and the courts. The Company
cannot predict when or whether any such proposals or proceedings may become
effective. It should also be noted that the natural gas industry historically
has been very heavily regulated; therefore, there is no assurance that the less
regulated approach currently being pursued by the FERC will continue
indefinitely. Thus, the Company cannot predict the ultimate outcome or
durability of the unbundled regulatory regime mandated by Order No. 636.
Environmental Regulation. Various federal, state and local laws and
regulations covering the discharge of materials into the environment, or
otherwise relating to the protection of the environment, may affect the
Company's operations and costs as a result of their effect on natural gas and
crude oil exploration, development and production operations. It is not
anticipated that the Company will be required in the near future to expend
amounts that are material in relation to its total exploration and development
expenditure program by reason of environmental laws and regulations, but
inasmuch as such laws and regulations are frequently changed, the Company is
unable to predict the ultimate cost of compliance.
10
<PAGE> 13
Canadian Regulation. In Canada, the petroleum industry operates under
federal, provincial and municipal legislation and regulations governing land
tenure, royalties, production rates, pricing, environmental protection, exports
and other matters. The price of natural gas and crude oil in Canada has been
deregulated and is now determined by market conditions and negotiations between
buyers and sellers.
Various matters relating to the transportation and export of natural gas
continue to be subject to regulation by both provincial and federal agencies;
however, the North American Free Trade Agreement has reduced the risk of
altering cross-border commercial transactions.
Canadian governmental regulations may have a material effect on the
economic parameters for engaging in oil and gas activities in Canada and may
have a material effect on the advisability of investments in Canadian oil and
gas drilling activities. The Company is monitoring political, regulatory and
economic developments in Canada.
Other International Regulation. The Company's exploration and production
operations outside North America are subject to various types of regulations
imposed by the respective governments of the countries in which the Company's
operations are conducted, and may affect the Company's operations and costs
within that country. The Company currently has producing operations offshore
Trinidad and India and exploration activities in other selected international
areas.
RELATIONSHIP BETWEEN THE COMPANY AND ENRON CORP.
Ownership of Common Stock. Through its ability to elect all of the
directors of the Company, Enron Corp. has the ability to control all matters
relating to the management of the Company, including any determination with
respect to acquisition or disposition of Company assets, future issuance of
common stock or other securities of the Company and any dividends payable on the
common stock. Enron Corp. also has the ability to control the Company's
exploration, development, acquisition and operating expenditure plans. There is
no agreement between Enron Corp. and the Company that would prevent Enron Corp.
from acquiring additional shares of common stock of the Company.
The closing on December 13, 1995 of the sale by Enron Corp. of
approximately 31 million outstanding shares of the common stock of the Company
reduced Enron Corp.'s ownership interest in the Company from 80% to 61% with the
result that (i) the Company ceased, effective December 14, 1995, to be included
in the consolidated federal income tax return filed by Enron Corp. and (ii) the
tax allocation agreement previously in effect between the Company and Enron
Corp. was terminated. In addition, effective December 14, 1995, the Company and
its subsidiaries and Enron Corp. entered into a new tax allocation agreement
pursuant to which, among other things, Enron Corp. has agreed (in exchange for
the payment of $13.0 million by the Company) to be liable for, and indemnify the
Company against, all U.S. federal and state income taxes and certain foreign
taxes imposed on the Company for periods prior to the date Enron Corp. reduced
its ownership in the Company to less than 80%. The Company does not believe that
the cessation of consolidated tax reporting with Enron Corp., the termination of
the tax allocation agreement concurrent with deconsolidation and the signing of
the new tax allocation agreement with Enron Corp. will have a material adverse
effect on its financial condition or results of operations.
Contractual Arrangements. The Company entered into a Services Agreement
(the "Services Agreement") with Enron Corp. effective January 1, 1994, pursuant
to which Enron Corp. provides various services, such as maintenance of certain
employee benefit plans, provision of telecommunications and computer services,
lease of office space and the provision of purchasing and operating services and
certain other corporate staff and support services. Such services historically
have been supplied to the Company by Enron Corp., and the Services Agreement
provides for the further delivery of such services substantially identical in
nature and quality to those services previously provided. The Company has agreed
to a fixed rate for the rental of office space and to reimburse Enron Corp. for
all other direct costs incurred in rendering services to the Company under the
contract and to pay Enron Corp. for allocated indirect costs incurred in
rendering such services up to a maximum of approximately $7 million in 1995 and
$6.7 million for 1994. The limit on cost for the allocated indirect services
provided by Enron Corp. to the Company will increase in subsequent years for
inflation and certain changes in the Company's allocation bases, but such
increase will not exceed 7.5% per
11
<PAGE> 14
year. The Services Agreement is for an initial term of five years through
December 1998 and will continue thereafter until terminated by either party.
In March 1995, in a series of transactions with Enron Corp. and an
affiliate of Enron Corp., the Company exchanged all of its fuel supply and
purchase contracts and related price swap agreements associated with a Texas
City cogeneration plant (the "Cogen Contracts") for certain natural gas price
swap agreements (the "Swap Agreements") of equivalent value. As a result of the
transactions, the Company has been relieved of all performance obligations
associated with the Cogen Contracts. The Company will realize net operating
revenues and receive corresponding cash payments of approximately $91 million
during the period extending through December 31, 1999 under the terms of the
Swap Agreements. The estimated fair value of the Swap Agreements was
approximately $81 million at the date the Swap Agreements were received. The net
effect of this series of transactions has resulted/will result in increases in
net operating revenues and cash receipts for the Company during 1995 and 1996 of
approximately $13 million and $7 million, respectively, with offsetting
decreases in 1998 and 1999 versus that anticipated under the Cogen Contracts.
Prior to December 14, 1995, the Company was included in the consolidated
federal income tax return filed by Enron Corp. as the common parent for itself
and its subsidiaries, excluding any foreign subsidiaries, and the resulting
taxes, including taxes for any state or other taxing jurisdiction that required
or permitted a consolidated, combined, or unitary tax return to be filed and in
which the Company and/or any of its subsidiaries was included, were apportioned
as between the Company and/or any of its subsidiaries and Enron Corp. based on
the terms of the tax allocation agreement in effect prior to December 14, 1995.
Effective December 14, 1995, the Company and its subsidiaries and Enron
Corp. entered into a new tax allocation agreement (See "Ownership of Common
Stock").
Conflicts of Interest. The nature of the respective businesses of the
Company and Enron Corp. and its affiliates is such as to potentially give rise
to conflicts of interest between the two companies. Conflicts could arise, for
example, with respect to transactions involving purchases, sales and
transportation of natural gas and other business dealings between the Company
and Enron Corp. and its affiliates, potential acquisitions of businesses or oil
and gas properties, the issuance of additional shares of voting securities, the
election of directors or the payment of dividends by the Company.
Circumstances may also arise that would cause Enron Corp. to engage in the
exploration for and/or development and production of natural gas and crude oil
in competition with the Company. For example, opportunities might arise which
would require financial resources greater than those available to the Company,
which are located in areas or countries in which the Company does not intend to
operate or which involve properties that the Company would be unwilling to
acquire. Also, Enron Corp. might acquire a competing oil and gas business as
part of a larger acquisition. In addition, as part of Enron Corp.'s strategy of
securing supplies of natural gas or capital, Enron Corp. may from time to time
acquire producing properties or interests in entities owning producing
properties, and thereafter engage in exploration, development and production
activities with respect to such properties or indirectly engage in such
activities through such companies. Enron Corp. subsidiaries provide or arrange
financing, including debt or equity financing, for exploration and production
companies that compete with the Company. In connection with such activities,
Enron Corp. affiliates may make investments in the debt or equity of such
companies. There are currently no such transactions under consideration that
would result in voting control by Enron Corp. or any of its affiliates, other
than the transaction described below. In its financing activities, Enron Corp.
or an entity in which it has an interest may make loans secured by oil and gas
properties or securities of oil and gas companies, may acquire production
payments or may receive interests in oil and gas properties as equity components
of lending transactions. As a result of its lending activities, Enron Corp. may
also acquire oil and gas properties or companies upon foreclosure of secured
loans or as part of a borrower's rearrangement of its obligations. Such
acquisition, exploration, development and production activities may directly or
indirectly compete with the Company's business. There can be no assurances that
Enron Corp. will not engage directly or indirectly through entities other than
the Company, in the natural gas and crude oil exploration, development and
production business in competition with the Company.
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<PAGE> 15
Joint Energy Development Investments Limited Partnership ("JEDI"), a
limited partnership in which Enron Capital & Trade Resources Corp. ("ECT"), a
wholly-owned subsidiary of Enron Corp., owns a 50% general partner interest, has
entered into an agreement to acquire a controlling interest in Coda Energy, Inc.
("Coda"). Coda is engaged in the exploration for, and the development,
production and marketing of, natural gas and crude oil primarily in North Texas
and Oklahoma. Crude oil accounts for approximately 86% of Coda's proved
reserves. At December 31, 1994, Coda reported estimated proved natural gas
reserves of 39,808 MMcf and estimated proved crude oil, condensate and natural
gas liquids reserves of 39,207 MBbls. Enron Corp. anticipates that the
transaction will be consummated in early 1996, subject to Coda stockholder
approval and other conditions. Conflicts may arise between Coda and JEDI, and if
the acquisition of Coda occurs Enron Corp. will be required to resolve such
conflicts in a manner that is consistent with its fiduciary and contractual
duties to other investors in Coda and JEDI and its fiduciary duties to the
Company. ECT has entered into an agreement with JEDI and other investors in Coda
designed to minimize certain conflicts of interest that may arise and providing,
among other things, that the Company has no obligation to offer any business
opportunities to Coda.
The Company and Enron Corp. and its affiliates have in the past entered
into material intercompany transactions and agreements incident to their
respective businesses, and the Company and Enron Corp. and its affiliates may be
expected to enter into material transactions and agreements from time to time in
the future. Such transactions and agreements have related to, among other
things, the purchase and sale of natural gas and crude oil, the financing of
exploration and development efforts by the Company, and the provision of certain
corporate services. (See "Marketing" and the Consolidated Financial Statements
and notes thereto). The Company believes that its existing transactions and
agreements with Enron Corp. and its affiliates have been at least as favorable
to the Company as could be obtained from third parties, and the Company intends
that the terms of any future transactions and agreements between the Company and
Enron Corp. and its affiliates will be at least as favorable to the Company as
could be obtained from third parties.
OTHER MATTERS
Energy Prices. Since the Company is primarily a natural gas company, it is
more significantly impacted by changes in natural gas prices than in the prices
for crude oil, condensate and natural gas liquids. During recent periods,
domestic natural gas has been priced significantly below parity with crude oil,
condensate and natural gas liquids based on the energy equivalency of, and
differences in transportation and processing costs associated with, the
respective products. This imbalance in parity has been primarily driven by,
among other things, a supply of domestic natural gas volumes in excess of demand
requirements. The Company is unable to predict when this supply imbalance may be
resolved due to the significant impacts of factors such as general economic
conditions, technology developments, weather and other international energy
supplies over which the Company has no control.
Average North America wellhead natural gas prices have fluctuated, at times
rather dramatically, during the last three years. While these fluctuations
resulted in an increase in average wellhead natural gas prices realized by the
Company of 22% from 1992 to 1993, the average North America natural gas price
received by the Company decreased 13% from 1993 to 1994 and 20% from 1994 to
1995. Wellhead natural gas volumes from Trinidad are sold at prices that are
based on a fixed schedule with periodic escalations. While natural gas
deliveries in India are not expected to commence until 1997 under the terms of
the Production Sharing Contract, the price of such deliveries, when initiated,
is to be indexed to a basket of world market fuel oil quotations structured to
include floor and ceiling limits. Due to the many uncertainties associated with
the world political environment, the availabilities of other world wide energy
supplies and the relative competitive relationships of the various energy
sources in the view of the consumers, the Company is unable to predict what
changes may occur in natural gas prices in the future.
Substantially all of the Company's wellhead crude oil and condensate is
sold under various terms and arrangements at market responsive prices. Crude oil
and condensate prices also have fluctuated during the last three years. Due to
the many uncertainties associated with the world political environment, the
availabilities of other world wide energy supplies and the relative competitive
relationships of the various energy sources in the
13
<PAGE> 16
view of the consumers, the Company is unable to predict what changes may occur
in crude oil and condensate prices in the future.
To mitigate the risk of market price fluctuations, the Company engages in
certain price risk management activities to hedge commodity prices associated
with a portion of the Company's sales and purchases of natural gas and crude
oil. (See "Management's Discussion and Analysis of Financial Condition and
Results of Operations").
Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption.
Federal United States tax law provides a tax credit for production of certain
fuels produced from nonconventional sources (including natural gas produced from
tight formations), subject to a number of limitations. Fuels qualifying for the
credit must be produced from a well drilled or a facility placed in service
after November 5, 1990 and before January 1, 1993, and must be sold before
January 1, 2003.
The credit, which is currently approximately $.52 per MMBtu of natural gas,
is computed by reference to the price of crude oil, and is phased out as the
price of crude oil exceeds $23.50 in 1980 dollars (adjusted for inflation) with
complete phaseout if such price exceeds $29.50 in 1980 dollars (similarly
adjusted). Under this formula, the commencement of phaseout would be triggered
if the average price for crude oil rose above approximately $45 per barrel in
current dollars. Significant benefits from the tax credit are accruing to the
Company since a portion (and in some cases a substantial portion) of the
Company's natural gas production from new wells drilled after November 5, 1990,
and before January 1, 1993, on the Company's leases in several of the Company's
significant producing areas qualify for this tax credit.
Natural gas production from wells spudded or completed after May 24, 1989
and before September 1, 1996 in tight formations in a certain state qualifies
for a ten-year exemption, ending August 31, 2001, from severance taxes, subject
to certain limitations. In 1995, the drilling qualification period was extended
in a modified and somewhat reduced form from September 1996 through August 2002.
Consequently, new qualifying production will be added prospectively to that
presently qualified.
Other. All of the Company's oil and gas activities are subject to the risks
normally incident to the exploration for and development and production of
natural gas and crude oil, including blowouts, cratering and fires, each of
which could result in damage to life and property. Offshore operations are
subject to usual marine perils, including hurricanes and other adverse weather
conditions, and governmental regulations as well as interruption or termination
by governmental authorities based on environmental and other considerations. In
accordance with customary industry practices, insurance is maintained by the
Company against some, but not all, of the risks. Losses and liabilities arising
from such events could reduce revenues and increase costs to the Company to the
extent not covered by insurance.
The Company's operations outside of North America are subject to certain
risks, including expropriation of assets, risks of increases in taxes and
government royalties, renegotiation of contracts with foreign governments,
political instability, payment delays, limits on allowable levels of production
and current exchange and repatriation losses, as well as changes in laws,
regulations and policies governing operations of foreign companies generally.
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<PAGE> 17
CURRENT EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers of the Company and their names and ages are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Forrest E. Hoglund................... 62 Chairman of the Board, President and
Chief Executive Officer; Director
Joe Michael McKinney................. 56 President - International Operations
Dennis M. Ulak....................... 42 President - International Operations
Mark G. Papa......................... 49 President - North American Operations
Lewis P. Chandler, Jr................ 56 Senior Vice President, Law
Walter C. Wilson..................... 53 Senior Vice President and Chief
Financial Officer
Ben B. Boyd.......................... 54 Vice President and Controller
</TABLE>
Forrest E. Hoglund joined the Company as Chairman of the Board, Chief
Executive Officer and Director in September 1987. Since May 1990, he has also
served as President of the Company. Mr. Hoglund was a director of USX
Corporation from February 1986 until September 1987. He joined Texas Oil & Gas
Corp. ("TXO") in 1977 as president, was named Chief Operating Officer in 1979,
Chief Executive Officer in 1982, and served TXO in those capacities until
September 1987. Mr. Hoglund is also a director of Texas Commerce Bancshares,
Inc.
Joe Michael McKinney has been President - International Operations since
February 1994, a dual position shared with Mr. Ulak effective January 1996, with
responsibilities for exploration, drilling, production and engineering
activities for the Company's ventures outside North America. Mr. McKinney joined
the Company and was named Senior Vice President of Operations for Enron Oil &
Gas International, Inc., a wholly-owned subsidiary of the Company, in December
1991. He was elected President and Chief Operating Officer of Enron Oil & Gas
International, Inc. in April 1993, a capacity in which he continues to serve
jointly with Mr. Ulak effective January 1996. Prior to joining the Company, Mr.
McKinney held operations management positions with Union Texas Petroleum
Company, The Superior Oil Company and Exxon Company, USA.
Dennis M. Ulak has been President - International Operations, a dual
position shared with Mr. McKinney, since January 1996 with responsibilities for
exploration, drilling, production and engineering activities for the Company's
ventures outside North America. Mr. Ulak also serves jointly with Mr. McKinney
as President and Chief Operating Officer of Enron Oil & Gas International, Inc.
Mr. Ulak joined the Company in March 1987 as Senior Counsel and was named
Assistant General Counsel for the Company's international operations in February
1989, Assistant General Counsel for the Company in August 1990 and Vice
President and General Counsel for the Company in March 1992. Prior to joining
the Company, Mr. Ulak held various legal positions with Enron Corp. and Northern
Natural Gas Company.
Mark G. Papa has been President - North American Operations since February
1994. From May 1986 through January 1994, Mr. Papa served as Senior Vice
President - Operations. Mr. Papa joined Belco Petroleum Corporation, a
predecessor of the Company, in 1981 as Division Production Coordinator and
served as Senior Vice President - Drilling and Production, BelNorth Petroleum
Corporation from May 1984 until May 1986.
Lewis P. Chandler, Jr. has been Senior Vice President, Law since March
1992. Mr. Chandler joined the Company in December 1973 and has since served in a
number of positions in the Company's legal department. He was appointed Vice
President and General Counsel for BelNorth Petroleum Corp. in June 1983 and was
named Vice President and General Counsel for the Company in January 1987. From
May 1991 until March 1992, he was Senior Vice President and General Counsel for
the Company.
Walter C. Wilson has been Senior Vice President and Chief Financial Officer
since May 1991. Mr. Wilson joined the Company in November 1987 as Vice President
and Controller and was named Senior
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<PAGE> 18
Vice President - Finance in October 1988. Prior to joining the Company Mr.
Wilson held financial management positions with Exxon Company, USA for 16 years
and The Superior Oil Company for 4 years.
Ben B. Boyd has been Vice President and Controller since March 1991. Mr.
Boyd joined the Company in March 1989 as Director of Accounting and was named
Controller in May 1990. Prior to joining the Company, Mr. Boyd held financial
management positions with DeNovo Oil & Gas, Inc., Scurlock Oil Company and
Coopers & Lybrand.
ITEM 2. PROPERTIES
OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES
Reserve Information. For estimates of the Company's net proved and proved
developed reserves of natural gas and liquids, including crude oil, condensate
and natural gas liquids, see "Supplemental Information to Consolidated Financial
Statements."
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
producer. The reserve data set forth in Supplemental Information to Consolidated
Financial Statements represent only estimates. Reserve engineering is a
subjective process of estimating underground accumulations of natural gas and
liquids, including crude oil, condensate and natural gas liquids, that cannot be
measured in an exact manner. The accuracy of any reserve estimate is a function
of the amount and quality of available data and of engineering and geological
interpretation and judgment. As a result, estimates of different engineers
normally vary. In addition, results of drilling, testing and production
subsequent to the date of an estimate may justify revision of such estimate.
Accordingly, reserve estimates are often different from the quantities
ultimately recovered. The meaningfulness of such estimates is highly dependent
upon the accuracy of the assumptions upon which they were based.
In general, the volume of production from oil and gas properties owned by
the Company declines as reserves are depleted. Except to the extent the Company
acquires additional properties containing proved reserves or conducts successful
exploration and development activities, or both, the proved reserves of the
Company will decline as reserves are produced. Volumes generated from future
activities of the Company are therefore highly dependent upon the level of
success in acquiring or finding additional reserves and the costs incurred in
doing so.
The Company's estimates of reserves filed with other federal agencies agree
with the information set forth in Supplemental Information to Consolidated
Financial Statements.
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<PAGE> 19
Acreage. The following table summarizes the Company's developed and
undeveloped acreage at December 31, 1995. Excluded is acreage in which the
Company's interest is limited to owned royalty, overriding royalty and other
similar interests.
<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED TOTAL
-------------------- --------------------- ---------------------
GROSS NET GROSS NET GROSS NET
--------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
United States
California................ 10,215 6,368 638,199 637,454 648,414 643,822
Offshore Gulf of Mexico... 315,745 132,505 455,133 352,577 770,878 485,082
Texas..................... 454,256 221,207 272,990 214,233 727,246 435,440
Wyoming................... 161,867 117,815 316,330 246,758 478,197 364,573
Oklahoma.................. 214,363 72,279 106,074 58,162 320,437 130,441
New Mexico................ 75,487 35,056 88,013 47,924 163,500 82,980
Utah...................... 57,820 46,512 35,863 30,365 93,683 76,877
Kansas.................... 14,176 9,498 25,055 22,766 39,231 32,264
Colorado.................. 9,153 1,447 35,006 16,755 44,159 18,202
Michigan.................. 11 10 14,213 13,650 14,224 13,660
Mississippi............... 2,490 1,853 12,171 8,445 14,661 10,298
Montana................... 1,301 1,169 2,082 1,075 3,383 2,244
Other..................... 15,225 2,831 10,986 5,204 26,211 8,035
--------- --------- ---------- ---------- ---------- ----------
Total............. 1,332,109 648,550 2,012,115 1,655,368 3,344,224 2,303,918
Canada
Alberta................... 364,328 168,503 192,429 146,739 556,757 315,242
Saskatchewan.............. 179,343 155,588 222,975 199,604 402,318 355,192
Manitoba.................. 11,531 9,702 480 480 12,011 10,182
British Columbia.......... 656 164 - - 656 164
--------- --------- ---------- ---------- ---------- ----------
Total Canada...... 555,858 333,957 415,884 346,823 971,742 680,780
Other International
Australia................. - - 9,600,000 4,800,000 9,600,000 4,800,000
China..................... - - 1,208,805 604,403 1,208,805 604,403
Russia.................... - - 1,425,000 712,500 1,425,000 712,500
France.................... - - 1,063,925 1,063,925 1,063,925 1,063,925
India..................... 60,000 18,000 602,207 180,662 662,207 198,662
Trinidad.................. 4,200 3,990 74,851 71,108 79,051 75,098
United Kingdom............ - - 173,600 86,800 173,600 86,800
--------- --------- ---------- ---------- ---------- ----------
Total Other
International... 64,200 21,990 14,148,388 7,519,398 14,212,588 7,541,388
--------- --------- ---------- ---------- ---------- ----------
Total........ 1,952,167 1,004,497 16,576,387 9,521,589 18,528,554 10,526,086
========= ========= ========== ========== ========== ==========
</TABLE>
Producing Well Summary. The following table reflects the Company's
ownership in gas and oil wells located in Texas, the Gulf of Mexico, Oklahoma,
New Mexico, Utah, Wyoming, and various other states, Canada, Trinidad and India
at December 31, 1995. Gross oil and gas wells include 205 with multiple
completions.
<TABLE>
<CAPTION>
PRODUCTIVE
WELLS
---------------
GROSS NET
----- -----
<S> <C> <C>
Gas.................................................. 4,627 3,170
Oil.................................................. 774 435
----- -----
Total...................................... 5,401 3,605
===== =====
</TABLE>
17
<PAGE> 20
Drilling and Acquisition Activities. During the years ended December 31,
1995, 1994 and 1993 the Company spent approximately $513.8, $493.9 and $430.1
million, respectively, for exploratory and development drilling and acquisition
of leases and producing properties. The Company drilled, participated in the
drilling of or acquired wells as set out in the table below for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
GROSS NET GROSS NET GROSS NET
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Development Wells Completed
Domestic
Gas....................................... 220 146.38 308 244.23 352 279.00
Oil....................................... 60 49.93 34 29.57 45 19.01
Dry....................................... 47 37.33 41 32.15 59 46.83
--- ------ --- ------ --- ------
Total................................ 327 233.64 383 305.95 456 344.84
International
Gas....................................... 117 107.53 250 190.30 227 190.10
Oil....................................... 12 8.08 11 5.10 4 3.50
Dry....................................... 15 12.83 13 11.50 11 7.60
--- ------ --- ------ --- ------
Total................................ 144 128.44 274 206.90 242 201.20
--- ------ --- ------ --- ------
Total Development............................ 471 362.08 657 512.85 698 546.04
--- ------ --- ------ --- ------
Exploratory Wells Completed
Domestic
Gas....................................... 4 3.14 13 9.80 14 10.03
Oil....................................... 7 3.28 3 2.57 3 2.50
Dry....................................... 15 10.29 23 18.17 32 22.08
--- ------ --- ------ --- ------
Total................................ 26 16.71 39 30.54 49 34.61
International
Gas....................................... 7 5.89 9 7.90 14 11.40
Oil....................................... 1 .33 1 .50 2 .90
Dry....................................... 6 2.99 14 12.50 10 7.35
--- ------ --- ------ --- ------
Total................................ 14 9.21 24 20.90 26 19.65
--- ------ --- ------ --- ------
Total Exploratory............................ 40 25.92 63 51.44 75 54.26
--- ------ --- ------ --- ------
Total................................ 511 388.00 720 564.29 773 600.30
Wells in Progress at end of period............. 52 32.71 45 28.79 82 61.09
--- ------ --- ------ --- ------
Total................................ 563 420.71 765 593.08 855 661.39
=== ====== === ====== === ======
Wells Acquired
Gas....................................... 277 101.70* 41 40.90* 44 26.44*
Oil....................................... 5 .46 60 38.99* - 12.80*
--- ------ --- ------ --- ------
Total................................ 282 102.16 101 79.89 44 39.24
=== ====== === ====== === ======
</TABLE>
- ---------------
* Includes the acquisition of additional interests in certain wells in which the
Company previously held an interest.
All of the Company's drilling activities are conducted on a contract basis
with independent drilling contractors. The Company owns no drilling equipment.
18
<PAGE> 21
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries and related companies are named defendants
in numerous lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business. While the outcome of lawsuits or
other proceedings against the Company cannot be predicted with certainty,
management does not expect these matters to have a material adverse effect on
the financial condition or results of operations of the Company. On November 19,
1992, TransAmerican Natural Gas Corporation ("TransAmerican") filed a petition
against the Company alleging breach of contract, tortious interference with
contract, misappropriation of trade secrets and violation of state antitrust
laws. The petition, as amended, sought actual damages of at least $100 million
plus exemplary damages of $300 million. The Company filed counterclaims against
TransAmerican and a third-party claim against its sole shareholder, John R.
Stanley, alleging fraud, negligent misrepresentation and breach of state
antitrust laws. On October 16, 1995, the Company, TransAmerican and Stanley
entered into an agreement which resolved all claims. The settlement terms did
not have a materially adverse effect on the Company's financial condition or
results of operations. The suit was dismissed with prejudice as to all parties
by order entered in November 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1995.
19
<PAGE> 22
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The following table sets forth, for the periods indicated, the high and low
sale prices per share for the common stock of the Company, as reported on the
New York Stock Exchange Composite Tape, and the amount of cash dividends paid
per share. The 1993 and First and Second Quarter 1994 sales prices and cash
dividends per share have been restated to reflect a two-for-one stock split on
May 31, 1994.
<TABLE>
<CAPTION>
PRICE RANGE
----------------- CASH
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
1993
First Quarter......................................... $20.31 $13.38 $.030
Second Quarter........................................ 22.50 17.88 .030
Third Quarter......................................... 26.81 19.88 .030
Fourth Quarter........................................ 27.00 17.06 .030
1994
First Quarter......................................... $23.75 $19.31 $.030
Second Quarter........................................ 24.63 22.38 .030
Third Quarter......................................... 23.00 18.50 .030
Fourth Quarter........................................ 22.75 17.38 .030
1995
First Quarter......................................... $24.88 $17.13 $.030
Second Quarter........................................ 24.75 20.25 .030
Third Quarter......................................... 25.38 20.00 .030
Fourth Quarter........................................ 24.88 18.75 .030
</TABLE>
As of March 1, 1996, there were approximately 275 record holders of the
Company's common stock, including individual participants in security position
listings. There are an estimated 9,000 beneficial owners of the Company's common
stock, including shares held in street name.
Following the initial public offering and sale of its common stock in
October 1989, the Company paid quarterly dividends of $0.025 per share beginning
with an initial dividend paid in January 1990 with respect to the fourth quarter
of 1989. Beginning in January 1993 with respect to the fourth quarter of 1992,
the Company has paid quarterly dividends of $0.03 per share. The Company
currently intends to continue to pay quarterly cash dividends on its outstanding
shares of common stock. However, the determination of the amount of future cash
dividends, if any, to be declared and paid will depend upon, among other things,
the financial condition, funds from operations, level of exploration and
development expenditure opportunities and future business prospects of the
Company.
20
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net operating revenues....... $ 648,702 $ 625,823 $ 581,020 $ 459,026 $ 402,588
Operating expenses
Lease and well............. 69,463 60,384 59,344 49,406 49,922
Exploration................ 42,044 41,811 36,921 33,278 31,470
Dry hole................... 12,911 17,197 18,355 10,764 14,698
Impairment of unproved oil
and gas properties...... 23,715 24,936 20,467 15,136 12,791
Depreciation, depletion and
amortization............ 216,047 242,182 249,704 179,839 160,885
General and
administrative.......... 56,626 51,418 45,274 36,648 36,216
Taxes other than income.... 32,587 28,254 35,396 28,346 18,222
--------- --------- --------- --------- ---------
Total.............. 453,393 466,182 465,461 353,417 324,204
--------- --------- --------- --------- ---------
Operating income............. 195,309 159,641 115,559 105,609 78,384
Other income, net............ 669 2,783 6,635 (3,476) (3,215)
Interest expense (net of
interest capitalized)...... 11,924 8,489 9,921 22,289 29,500
--------- --------- --------- --------- ---------
Income before income taxes... 184,054 153,935 112,273 79,844 45,669
Income tax provision
(benefit)(1)............... 41,936(2) 5,937(3) (25,752)(4) (17,736) (2,247)
--------- --------- --------- --------- ---------
Net income................... $ 142,118 $ 147,998 $ 138,025 $ 97,580 $ 47,916
========= ========= ========= ========= =========
Earnings per share of common
stock(5)................... $ .89 $ .93 $ .86 $ .63 $ .32
========= ========= ========= ========= =========
Average number of common
shares(5).................. 159,917 159,845 159,966 154,533 151,800
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Oil and gas
properties - net........... $1,881,545 $1,684,811 $1,546,045 $1,468,011 $1,339,666
Total assets................. 2,147,258 1,861,867 1,811,162 1,731,012 1,455,608
Long-term debt
Affiliate.................. 141,520 25,000 - -(6) 132,836
Other...................... 147,559 165,337 153,000 150,000(6) 289,556
Deferred revenue............. 205,453 184,183 227,528 301,395(6) -
Shareholders' equity......... 1,163,659 1,043,419 933,073 826,986(6) 643,185
</TABLE>
- ---------------
(1) Includes benefits of approximately $22 million, $36 million, $65 million,
$43 million and $17 million in 1995, 1994, 1993, 1992 and 1991,
respectively, relating to tight gas sand federal income tax credits and $7
million in 1991 associated with the utilization of a net operating loss
carryforward.
(2) Includes a benefit of approximately $14 million associated with the
successful resolution on audit of federal income taxes for prior years.
(3) Includes a benefit of approximately $8 million related to reduced estimated
state income taxes and certain franchise taxes, a portion of which is
treated as income tax under Statement of Financial Accounting Standards
("SFAS") No. 109 - "Accounting for Income Taxes", and a $5 million benefit
21
<PAGE> 24
from the reduction of the Company's deferred federal income tax liability
resulting from a reevaluation of deferred tax requirements.
(4) Includes a benefit of $12 million from the reduction of the Company's
deferred federal income tax liability resulting from a reevaluation of
deferred tax requirements partially offset by an approximate $7 million
predominantly noncash charge primarily to adjust the Company's accumulated
deferred federal income tax liability for the increase in the corporate
federal income tax rate from 34% to 35%.
(5) In May 1994, the Board of Directors declared a two-for-one split of the
common stock of the Company to be effected as a nontaxable dividend of one
share for each share outstanding. Shares were issued on June 15, 1994 to
shareholders of record as of May 31, 1994. All per share amounts presented
herein are reflected on a post-split basis.
(6) In August 1992, the Company completed the sale of an additional 8.2 million
shares of common stock resulting in aggregate net proceeds to the Company
of approximately $112 million used primarily to repay long-term debt. In
September 1992, the Company completed the sale of a volumetric production
payment, resulting in net proceeds of approximately $327 million used to
repay long-term debt and for other general corporate purposes.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following review of operations for each of the three years in the
period ended December 31, 1995 should be read in conjunction with the
consolidated financial statements of the Company and notes thereto beginning
with page F-1.
RESULTS OF OPERATIONS
Net Operating Revenues. Wellhead volume and price statistics for the
specified years were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Natural Gas Volumes (MMcf per day)
North America(1)....................................... 636 686 707
Trinidad............................................... 107 63 2
------ ------ ------
Total.......................................... 743 749 709
====== ====== ======
Average Natural Gas Prices ($/Mcf)
North America(2)....................................... $ 1.34 $ 1.68 $ 1.92
Trinidad............................................... .97 .93 .89
Composite...................................... 1.29 1.62 1.92
Crude/Condensate Volumes (MBbl per day)
North America.......................................... 11.5 10.0 8.8
Trinidad............................................... 5.1 2.5 .1
India.................................................. 2.5 .1 -
------ ------ ------
Total.......................................... 19.1 12.6 8.9
====== ====== ======
Average Crude/Condensate Prices ($/Bbl)
North America.......................................... $17.09 $15.65 $16.39
Trinidad............................................... 16.07 15.50 14.36
India.................................................. 16.81 15.70 -
Composite...................................... 16.78 15.62 16.37
</TABLE>
- ---------------
(1) Includes 48 MMcf per day in 1995 and 1994, and 81 MMcf per day in 1993
delivered under the terms of volumetric production payment and exchange
agreements effective October 1, 1992, as amended.
(2) Includes an average equivalent wellhead value of $.80 per Mcf in 1995,
$1.27 per Mcf in 1994 and $1.57 per Mcf in 1993 for the volumes detailed
in note (1), net of transportation costs.
22
<PAGE> 25
1995 compared to 1994. During 1995, net operating revenues increased $23
million to $649 million as compared to 1994.
Average wellhead natural gas prices for 1995 were down approximately 20%
from 1994 reducing net operating revenues by approximately $89 million. In
addition, a decrease of 1% in wellhead natural gas volumes from 1994 reduced net
operating revenues by approximately $4 million. The Company voluntarily
curtailed its United States wellhead natural gas delivered volumes by an average
of approximately 105 MMcf per day during 1995 compared to approximately 70 MMcf
per day during 1994 due to significantly lower United States wellhead natural
gas prices. In addition, the impact of reduced drilling for U.S. natural gas
deliverability and the sales of oil and gas reserves and related assets (net of
purchases of similar assets) resulted in a reduction of approximately 20 MMcf
per day in U.S. delivered volumes for 1995 as compared to 1994. The Company
refocused its 1995 drilling activity away from natural gas deliverability and
toward natural gas reserve enhancement and crude oil exploitation in the United
States in response to the significant decline in United States wellhead natural
gas prices, in the latter part of 1994 and early 1995, resulting in the drilling
of 189 fewer net natural gas wells and 24 more net oil wells during 1995 as
compared to 1994. Wellhead crude oil and condensate average prices increased 7%
adding approximately $8 million to net operating revenues compared to 1994.
Crude oil and condensate wellhead volumes increased 52% adding approximately $37
million to net operating revenues compared to a year ago primarily reflecting
new production on stream offshore India and higher volumes offshore Trinidad and
in North America.
Gains on sales of reserves and related assets during 1995 increased $9
million to $63 million when compared to 1994 which increase was attributable to
the Company's continuing efforts in optimizing the value of its assets.
Other marketing activities associated with sales and purchases of natural
gas, natural gas price swap transactions, other commodity price hedging of
natural gas and crude oil and condensate prices utilizing NYMEX-related
commodity market transactions and volumetric production payment-related margins
added approximately $105 million to net operating revenues during 1995, an
increase of approximately $55 million from 1994. This increase primarily
resulted from a gain of $65 million on natural gas commodity price hedging
activities utilizing NYMEX-related commodity market transactions in 1995
compared to an $11 million gain during 1994. The average associated costs of
natural gas marketing, price swap and volumetric production payment
transactions, including, where appropriate, average wellhead value,
transportation costs and exchange differentials, decreased $.55 per Mcf. The
average price received for these transactions decreased $.50 per Mcf. Related
other natural gas marketing volumes decreased 19%. The reduction in other
natural gas marketing volumes and prices relates primarily to the exchange of
the fuel contracts noted below, lower wellhead market prices and decreased other
marketing activities. The reduction in other natural gas marketing volumes,
partially offset by the $.05 per Mcf margin increase, resulted in a decrease in
net operating revenues of approximately $2 million compared to 1994. The Company
realized an $11 million gain in 1995 related to certain natural gas commodity
price swap transactions with an Enron Corp. affiliated company that were
designated for trading purposes in late 1994. This gain was partially offset by
a loss of approximately $3 million related to call option transactions and a
loss of $6 million associated with certain NYMEX-related natural gas commodity
market transactions that were marked-to-market due to loss of correlation
between the NYMEX and the wellhead natural gas prices that such transactions
were designated to hedge. (See "Capital Resources and Liquidity - Hedging
Transactions.")
In March 1995, the Company exchanged existing fuel supply and purchase
contracts and related price swap agreements associated with a Texas City
cogeneration plant for certain natural gas price swap agreements of equivalent
value issued by an Enron Corp. affiliated company. As a result of these
transactions, the Company realized a $13 million increase in net operating
revenues in 1995 over the amount realized from the exchanged fuel supply and
purchase contracts in 1994. (See "Relationship Between the Company and Enron
Corp. - Contractual Agreements".)
23
<PAGE> 26
1994 compared to 1993. During 1994, net operating revenues increased to
$626 million, up $45 million as compared to 1993.
Average wellhead natural gas volumes increased approximately 6% compared to
1993 primarily reflecting the effects of development activities in Trinidad and
Canada partially offset by voluntary curtailments of production in the United
States in 1994. The volume reductions in the United States as a result of
voluntary curtailments were more than offset by the new natural gas deliveries
from the Kiskadee field offshore Trinidad and increased deliveries in Canada.
The increase in wellhead natural gas volumes added $28 million to net operating
revenues. Average wellhead natural gas prices were down significantly from 1993
reducing net operating revenues by approximately $83 million. This 16% reduction
in average wellhead natural gas prices reflects the overall decline in the
United States natural gas markets during the last half of 1994 and increased
volumes from Trinidad sold under a long-term contract at a price considerably
below North American spot market prices. A 42% increase in wellhead crude oil
and condensate volumes over 1993 added $22 million to net operating revenues
primarily reflecting development activities in Trinidad and increased production
in the United States. A 5% decrease in wellhead crude oil and condensate average
prices decreased net operating revenues by approximately $3 million.
Gains on sales of selected oil and gas reserves and related assets were $54
million in 1994 as compared to $13 million in 1993. While the quantity of
equivalent reserves sold in 1994 was slightly less than 1993, higher average
proceeds received per equivalent unit in 1994 as compared to 1993 primarily
contributed to the increased gain recognition. In continuing its strategy of
fully utilizing its assets in optimizing profitability, cash flow and return on
investments, the Company expects to continue the sale of similar properties from
time to time.
Other marketing activities associated with sales and purchases of natural
gas, natural gas and crude oil price swap transactions, other commodity price
hedging of natural gas and crude oil prices utilizing NYMEX-related commodity
market transactions, and margins relating to the volumetric production payment
added $50 million to net operating revenues during 1994. This increase of $42
million from the same period in 1993 primarily results from a gain of $11
million on natural gas commodity price hedging activities utilizing
NYMEX-related commodity market transactions in 1994 versus an $18 million loss
during 1993 and increased margins associated with other natural gas marketing
activities. The average associated costs of natural gas marketing, price swap
and volumetric production payment transactions, including, where appropriate,
average wellhead value, transportation costs and exchange differentials,
decreased $.26 per Mcf. The average price received for these transactions
decreased $.19 per Mcf. Related other natural gas marketing volumes increased
10%.
The impact of these other marketing activities, a substantial portion of
which serve as hedges of commodity price risks for a portion of wellhead
deliveries, are more than offset by increases or reductions in revenues
associated with market responsive prices for wellhead deliveries. (See Note 2 to
Consolidated Financial Statements.)
Operating Expenses
1995 as compared to 1994. During 1995, operating expenses of $453 million
were $13 million lower than the $466 million incurred in 1994. Lease and well
expenses increased approximately $9 million to $69 million primarily due to
expanded international operations including the initiation of operations in
India in late December 1994 and certain nonrecurring costs incurred related to
those operations during 1995. Depreciation, depletion and amortization ("DD&A")
expense decreased $26 million to $216 million reflecting a decrease in the
average DD&A rate from $.80 per Mcfe in 1994 to $.68 per Mcfe in 1995. The DD&A
rate decrease is primarily attributable to an overall decrease of $.09 per Mcfe
in certain North America DD&A rates and an increase in the proportion of
production from international operations with lower average DD&A rates than
incurred in North America operations. General and administrative expenses
increased approximately $5 million to $57 million primarily due to expanded
international activities. Taxes other than income were $4 million higher in 1995
compared to 1994 primarily due to higher production related taxes associated
with new production in India in 1995.
24
<PAGE> 27
The Company reduced its total per unit operating costs for lease and well
expense, DD&A, general and administrative expense, interest expense, and taxes
other than income by $.07 per Mcfe, averaging $1.22 per Mcfe during 1995
compared to $1.29 per Mcfe in 1994. This decrease is primarily attributable to
the reduction in the average DD&A rate as noted above partially offset by slight
increases in per unit lease and well, general and administrative expenses, and
taxes other than income which increase reflects primarily lower volumes
associated with the curtailment of natural gas volumes in the U. S. due to the
reduction in wellhead natural gas prices.
1994 as compared to 1993. During 1994, total operating expenses of $466
million were approximately $1 million higher than the $465 million incurred in
1993. Lease and well expenses of $60 million were approximately $1 million
higher than the prior year primarily due to increased expenses related to new
operations offshore Trinidad partially offset by cost reductions in North
America. Exploration expenses of $42 million increased $5 million from the
previous year primarily due to an increased level of exploration activities.
Impairment of unproved oil and gas properties increased $4 million from 1993
primarily due to impairments associated with certain offshore Gulf of Mexico
leases. DD&A expense decreased from $250 million in 1993 to $242 million in 1994
reflecting a $.09 per Mcfe decrease in the average DD&A rate including a $.03
per Mcfe reduction in the North American operations DD&A rate. General and
administrative expenses increased $6 million to $51 million primarily due to
overall higher costs associated with expanded international and domestic
operations. Taxes other than income decreased approximately $7 million from 1993
primarily due to lower taxable United States wellhead volumes and prices and
reductions included in 1994 related to revisions of certain prior year
production taxes. Included in 1994 and 1993 are benefits associated with
reductions in state franchise taxes of $4 million and $3 million, respectively.
The Company continues to benefit from certain state severance tax exemptions
allowed on high cost natural gas volumes.
Total per unit operating costs for lease and well expense, DD&A, general
and administrative expense, interest expense, and taxes other than income
decreased $.14 per Mcfe, averaging $1.29 per Mcfe during 1994 compared to $1.43
per Mcfe for 1993. The decrease was primarily due to per unit reductions in DD&A
and taxes other than income as discussed above.
Other Income. Other income for 1993 includes $4 million in interest income
associated with the investment of funds temporarily surplus to the Company (See
Note 4 to Consolidated Financial Statements) and $4 million associated with
settlements related to the termination of certain long-term natural gas
contracts.
Interest Expense
Net interest expense in 1995 was up $3 million as compared to 1994
reflecting primarily a higher level of debt outstanding during 1995. (See Note
13 to Consolidated Financial Statements).
Net interest expense in 1994 decreased approximately $1 million to $8
million as compared to 1993 primarily due to favorable interest rates on new
financing acquired by a subsidiary of the Company in Trinidad and the retirement
of higher interest rate debt. The estimated fair value of outstanding interest
rate swap agreements at December 31, 1994 was a negative $0.5 million based on
termination values obtained from third parties.
Income Taxes
Income tax provision increased $36 million for 1995 as compared to 1994
primarily resulting from higher income before income taxes, higher foreign
income taxed at rates in excess of the U.S. rate and lower benefits associated
with tight gas sand federal income tax credits utilized in 1995 as compared to
1994 partially offset by a $14 million benefit associated with the successful
resolution on audit of federal income taxes for certain prior years.
Income tax provision in 1994 includes a benefit of approximately $36
million associated with tight gas sand federal income tax credit utilization, a
benefit of approximately $8 million related to reduced estimated state income
taxes and a portion of certain franchise taxes which is treated as income tax
under SFAS
25
<PAGE> 28
No. 109, and a $5 million benefit from the reduction of the Company's deferred
federal income tax liability resulting from a reevaluation of deferred tax
requirements.
CAPITAL RESOURCES AND LIQUIDITY
Cash Flow. The primary sources of cash for the Company during the
three-year period ended December 31, 1995 included funds generated from
operations, proceeds from the sale of selected oil and gas reserves and related
assets and the issuance of new debt. Primary cash outflows included funds used
in operations, exploration and development expenditures, dividends, and the
repayment of debt.
Discretionary cash flow, a frequently used measure of performance for
exploration and production companies, is generally derived by adjusting net
income to eliminate the effects of depreciation, depletion and amortization,
impairment of unproved oil and gas properties, deferred taxes, gains on sales of
oil and gas reserves and related assets, certain other miscellaneous non-cash
amounts, except for amortization of deferred revenue, and exploration and dry
hole expenses. However, based on the continuing practice of the Company of
selling selected oil and gas reserves and related assets in furtherance of its
strategy of fully utilizing its assets in optimizing profitability, cash flow
and return on investments, it believes that net proceeds from these transactions
should also be considered as available discretionary cash flow and, accordingly,
is presenting those values for all periods shown. The Company generated
discretionary cash flow of approximately $525 million in 1995, $514 million in
1994 and $521 million in 1993. The 1995 and 1993 amounts include $11 million and
$50 million, respectively, associated with federal income tax refunds resulting
from the settlement on audit of federal income taxes paid in certain prior
years.
Net operating cash flows for each of the years in the three-year period
ended December 31, 1995 have been revised to reflect the elimination of the
amortization of deferred revenues related to the sale of a volumetric production
payment during 1992 as net operating cash flows rather than as investing cash
flows as previously reported. Net operating cash flows of $335 million for 1995
decreased approximately $47 million as compared to 1994 primarily reflecting
higher accounts receivable arising from international activities, and the
settlement in December 1995 of January 1996 NYMEX-related natural gas commodity
positions. Net operating cash flows were approximately $383 million in 1994 and
$406 million in 1993. Decreased 1994 net operating cash flows were primarily due
to the receipt of a refund on settlement of an audit of federal income taxes
paid in certain prior years. In accordance with the requirements of SFAS No.
95 - "Statement of Cash Flows", net proceeds from the sale of selected oil and
gas reserves and related assets are not included in the determination of net
operating cash flows.
Sale of Selected Oil and Gas Reserves and Related Assets. During 1995, the
Company received proceeds of $102 million from the sale of selected oil and gas
reserves and related assets compared to $91 million received in 1994. Taxable
gains from the 1995 sales generated federal income taxes of $24 million, leaving
net proceeds of $78 million compared to net proceeds after federal income taxes
in 1994 of $71 million. The 1994 proceeds of $91 million compared to $42 million
received in 1993. While the quantity of equivalent reserves sold in 1994 was
slightly less than 1993, higher average proceeds received per equivalent unit of
reserves sold in 1994 as compared to 1993 resulted in significantly higher 1994
proceeds.
Sale of Volumetric Production Payment. In September 1992, the Company sold
a volumetric production payment for $326.8 million to a limited partnership.
(See "Business - Marketing - Other Marketing" and Note 5 to Consolidated
Financial Statements). Under the terms of the production payment agreements, the
Company conveyed a real property interest in approximately 124 Bcfe (136 TBtu)
of certain natural gas and other hydrocarbons to the purchaser. Effective
October 1, 1993, the agreements were amended providing for the extension of the
original term of the volumetric production payment through March 31, 1999 and
including a revised schedule of daily quantities of hydrocarbons to be delivered
which is approximately one-half of the original schedule. The revised schedule
will total approximately 89.1 Bcfe (97.8 TBtu) versus approximately 87.9 Bcfe
(96.4 TBtu) remaining to be delivered under the original agreement. Daily
quantities of hydrocarbons no longer required to be delivered under the revised
schedule during the period from October 1, 1993 through June 30, 1996 are
available for sale by the Company. The Company retains responsibility for its
working interest share of the cost of operations. In accordance with generally
accepted
26
<PAGE> 29
accounting principles, the Company accounted for the proceeds received in the
transaction as deferred revenue which is being amortized into revenue and income
as natural gas and other hydrocarbons are produced and delivered to the
purchaser during the term, as revised, of the volumetric production payment
thereby matching those revenues with the depreciation of asset values which
remained on the balance sheet following the sale and the operating expenses
incurred for which the Company retained responsibility. The Company expects the
above transaction, as amended, to have minimal impact on future earnings.
However, cash made available by the sale of the volumetric production payment
has provided considerable financial flexibility for the pursuit of investment
alternatives.
Exploration and Development Expenditures. The table below sets out
components of actual exploration and development expenditures for the years
ended December 31, 1995, 1994 and 1993, along with those budgeted for the year
1996.
<TABLE>
<CAPTION>
ACTUAL
-------------------- BUDGETED
EXPENDITURE CATEGORY 1995 1994 1993 1996
-------------------- ---- ---- ---- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Capital
Drilling and Facilities........................... $303 $342 $331
Leasehold Acquisitions............................ 22 52 29
Producing Property Acquisitions................... 127 34 9
Capitalized Interest and Other.................... 12 14 14
---- ---- ----
Total..................................... 464 442 383
Exploration Expenses................................ 55 59 55
---- ---- ----
Total............................................... $519 $501 $438 $500-$550
==== ==== ==== =========
</TABLE>
Exploration and development expenditures increased $18 million in 1995 as
compared to 1994. Differences in components reflect a significant increase in
producing property acquisitions to complement existing United States producing
areas. One such property acquisition was for non-cash consideration of $19
million of redeemable preferred stock of a subsidiary of the Company. (See Note
6 to Consolidated Financial Statements). (See "Business - Exploration and
Production" for additional information detailing the specific geographic
locations of the Company's drilling programs and "Outlook" below for a
discussion related to 1996 exploration and development expenditure plans).
Exploration and development expenditures increased $63 million, or 14%, in
1994 compared to 1993. The increase primarily reflects the acquisitions of
selected properties to complement existing North American producing areas and
the addition of new international activities in India.
Hedging Transactions. With the objective of enhancing the certainty of
future revenues, the Company enters into NYMEX-related commodity price swaps
from time to time. Using NYMEX-related commodity price swaps, the Company
receives a fixed price for the respective commodity hedged and pays a floating
market price, as defined for each transaction, to the counterparty at
settlement. In 1995, prices for approximately 35% of the natural gas delivered
volumes were hedged using NYMEX-related commodity price swaps.
The NYMEX-related natural gas commodity price swaps are priced based on a
Henry Hub, Louisiana delivery point. The Henry Hub price has historically had a
high degree of correlation with the wellhead price received by the Company which
has made such transactions effective natural gas price hedges. During December
1995, there was a loss of correlation between the prices paid under the natural
gas commodity price swaps and the wellhead natural gas prices ultimately
received for a portion of the Company's hedged natural gas production. This loss
of correlation resulted in the recognition of a $6 million pre-tax loss in 1995.
With the preliminary indication of a possible change in the overall natural
gas market environment at year-end 1995 signaling potentially improving industry
conditions, the Company closed substantially all its open NYMEX-related
positions regarding natural gas commodity price swaps to participate in this
potential upside. While the removal of the hedges has resulted in a deferred net
loss of approximately $4 million to be
27
<PAGE> 30
recognized during 1996, the Company expects the net reductions to be more than
offset by revenue associated with increases in wellhead natural gas prices
throughout 1996. Included in the $4 million net loss is a $21 million pre-tax
loss related to the first quarter of 1996.
Financing. The Company's long-term debt-to-total-capital ratio was 20% and
15% as of December 31, 1995 and 1994, respectively. The Company has entered into
an agreement with Enron Corp. pursuant to which the Company may borrow funds
from Enron Corp. at a representative market rate of interest on a revolving
basis. During 1995, the average of the daily balances of funds borrowed by the
Company under the agreement was $15 million and the balance at December 31, 1995
was $142 million. During 1994, there were no funds borrowed by the Company under
this agreement. Under a promissory note effective January 1, 1993 at a fixed
interest rate of 7%, the Company may advance funds temporarily surplus to the
Company to Enron Corp. for investment purposes. Daily outstanding balances of
funds advanced to Enron Corp. under the note averaged $154,000 during 1995 and
$69 million during 1994 with no balance outstanding at December 31, 1995 and
1994. There was no balance outstanding at December 31, 1995 and $7 million
outstanding at December 31, 1994, under a commercial paper program initiated in
1990. Proceeds from the commercial paper program were used to fund current
transactions. During 1995, total long-term debt increased $99 million to $289
million as a result of borrowings related to certain international drilling
activities and certain producing property acquisitions. (See Note 4 to the
Consolidated Financial Statements). The estimated fair value of the Company's
long-term debt at December 31, 1995 and 1994 was $294 million and $186 million,
respectively, based upon quoted market prices and, where such prices were not
available, upon interest rates currently available to the Company at year end.
(See Note 13 to the Consolidated Financial Statements).
Outlook. Uncertainty continues to exist as to the direction of future North
America natural gas price trends, and there is a rather wide divergence in the
opinions held by some in the industry. This divergence in opinion is caused by
various factors including improvements in the technology used in drilling and
completing oil and gas wells that are tending to mitigate the impacts of fewer
oil and gas wells being drilled, the deregulation of the natural gas market
under Federal Energy Regulatory Commission Order 636 and subsequent related
orders, improvements being realized in the availability and utilization of
natural gas storage capacity and colder weather experienced in the early portion
of the 1995/1996 winter season than in recent years. However, the continually
increasing recognition of natural gas as a more environmentally friendly source
of energy along with the availability of significant domestically sourced
supplies should result in further increases in demand and a
supporting/strengthening of the overall natural gas market over time. Being
primarily a natural gas producer, the Company is more significantly impacted by
changes in natural gas prices than by changes in crude oil and condensate
prices. (See "Business - Other Matters - Energy Prices"). Based on the portion
of the Company's anticipated natural gas volumes for which prices have not, in
effect, been hedged using NYMEX-related commodity market transactions, long-term
marketing contracts and the sale of a volumetric production payment, the
Company's net income and cash flow sensitivity to changing natural gas prices is
approximately $16 million for each $.10 per Mcf change in average wellhead
natural gas prices.
The Company plans to continue to focus a substantial portion of its
development and exploration expenditures in its major producing areas in North
America. However, based on the continuing uncertainty associated with North
America natural gas prices and the continuing weakness in that market, and as a
result of the recent success realized in Trinidad, the opportunities available
to the Company in conjunction with the late 1994 signing of agreements in India
and the recent winning of a concession in Venezuela, the Company anticipates
expending an increasing portion of its available funds in the further
development of these opportunities outside North America. In addition, the
Company expects to conduct limited exploratory activity in other areas outside
of North America in its expenditure plans and will continue to evaluate the
potential for involvement in other exploitation type opportunities. (See
"Business - Exploration and Production" for additional information detailing the
specific geographic locations of the related drilling programs). Early-in-year
activity will be managed within an annual expected expenditure level of
approximately $500-$550 million for 1996. This early-in-year planning will
address the continuing uncertainty with regard to the future of the North
America natural gas price environment and will be structured to maintain the
flexibility necessary under the Company's continuing strategy of funding
exploration, exploitation, development and acquisition activities primarily from
available internally generated cash flow. The continuation of expenditures
28
<PAGE> 31
in other areas outside of North America in the near term is expected to be
primarily for the evaluation of conventional oil and gas exploration and
exploitation opportunities in the U.K. North Sea and China, respectively, and
coalbed methane recovery prospects in Australia and China. Other prospects in
various locations will also attract the expenditure of some funds.
Other factors representing positive impacts that are more certain continue
to hold good potential for the Company in future periods. While the drilling
qualification period for the tight gas sand federal income tax credit expired as
of December 31, 1992, the Company continued in 1995, and should continue in the
future, to realize significant benefits associated with production from wells
drilled during the qualifying period as it will be eligible for the federal
income tax credit through the year 2002. However, all other factors remaining
equal, the annual benefit, which was approximately $22 million in 1995 and is
estimated to be approximately $14 million for 1996, is expected to continue to
decline in future periods as production from the qualified wells declines. The
drilling qualification period for a certain state severance tax exemption
available on qualifying high cost natural gas revenues continues through August
1996 in its current form and in a modified and somewhat reduced form from that
point through August 2002. Consequently, new qualifying production will be added
prospectively to that presently qualified. (See "Business - Other
Matters - Tight Gas Sand Tax Credit (Section 29) and Severance Tax Exemption").
Other natural gas marketing activities are also expected to continue to
contribute meaningfully to financial results. The Company completed a fairly
significant restructure of its other natural gas marketing portfolio during 1992
with the sale of a volumetric production payment of approximately 124 Bcfe (136
TBtu) for $326.8 million that was subsequently revised in 1993 (See
"Business - Marketing - Other Marketing" and Note 5 to Consolidated Financial
Statements) and elimination of most delivery obligations under four long-term
fixed price marketing contracts. The proceeds from the sale of the volumetric
production payment added substantially to the financial flexibility of the
Company supporting future development while the combined effect of all elements
of the restructuring on net income has not been, and is not expected in the
future to be, significant. These factors are expected to contribute
significantly to earnings, cash flow, and the ability of the Company to pursue
the continuation of an active exploration, exploitation, development and
selective acquisition program.
The level of exploration and development expenditures may vary in 1996 and
will vary in future periods depending on energy market conditions and other
related economic factors. Based upon existing economic and market conditions,
the Company believes net operating cash flow and available financing
alternatives in 1996 will be sufficient to fund its net investing cash
requirements for the year. However, the Company has significant flexibility with
respect to its financing alternatives and adjustment of its exploration,
exploitation, development and acquisition expenditure plans if circumstances
warrant. While the Company has certain continuing commitments associated with
expenditure plans related to operations in India and anticipates having such in
Venezuela, they are not anticipated to be material when considered in relation
to the total financial capacity of the Company.
Other. The cost of environmental compliance has not been material to the
Company.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (the "Standard"). The Standard requires, among other
things, that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company will adopt the Standard in the first quarter of 1996.
The effect of adoption of the Standard is anticipated to result in a non-cash
impairment charge of less than $5 million pre-tax.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 - "Accounting for Stock-Based Compensation". SFAS No. 123 encourages
companies to account for stock-based compensation awards based on the fair value
of the awards at the date they are granted. The resulting compensation cost
would be shown as an expense in the statement of income. Companies can choose
not to apply the new accounting method and continue to apply current accounting
requirements; however, disclosure will be required as to what net income and
earnings per share would have been had the new accounting method been followed.
SFAS No. 123 is effective for calendar year 1996.
29
<PAGE> 32
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
its goals will be achieved. Important factors that could cause actual results to
differ materially from those in the forward looking statements herein include,
but are not limited to, the extent of the Company's success in acquiring oil and
gas properties and in discovering, developing and producing reserves, the timing
and extent of changes in commodity prices for natural gas, crude oil and
condensate and natural gas liquids, political developments in foreign countries
and conditions in the capital markets and equity markets during the periods
covered by the forward looking statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required hereunder is included in this report as set forth
in the "Index to Financial Statements" on page F-1.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item regarding directors is set forth in
the Proxy Statement under the caption entitled "Election of Directors", and is
incorporated herein by reference.
See list of "Current Executive Officers of the Registrant" in Part I
located elsewhere herein.
There are no family relationships among the officers listed, and there are
no arrangements or understandings pursuant to which any of them were elected as
officers. Officers are appointed or elected annually by the Board of Directors
at its first meeting following the Annual Meeting of Shareholders, each to hold
office until the corresponding meeting of the Board in the next year or until a
successor shall have been elected, appointed or shall have qualified.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the Proxy Statement
under the caption "Compensation of Directors and Executive Officers", and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in the Proxy Statement
under the captions "Election of Directors" and "Compensation of Directors and
Executive Officers", and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the Proxy Statement
under the caption "Certain Transactions", and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(A)(1) AND (2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
See "Index to Financial Statements" set forth on page F-1.
(A)(3) EXHIBITS
See pages E-1 through E-7 for a listing of the exhibits.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the last quarter of
1995.
30
<PAGE> 33
INDEX TO FINANCIAL STATEMENTS
ENRON OIL & GAS COMPANY
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated Financial Statements:
Management's Responsibility for Financial Reporting............................... F-2
Reports of Independent Public Accountants......................................... F-3
Consolidated Statements of Income for Each of the Three Years in the Period Ended
December 31, 1995.............................................................. F-4
Consolidated Balance Sheets - December 31, 1995 and 1994.......................... F-5
Consolidated Statements of Shareholders' Equity for Each of the Three Years in the
Period Ended December 31, 1995................................................. F-6
Consolidated Statements of Cash Flows for Each of the Three Years in the Period
Ended December 31, 1995........................................................ F-7
Notes to Consolidated Financial Statements........................................ F-8
Supplemental Information to Consolidated Financial Statements....................... F-23
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts and Reserves...................... S-1
Other financial statement schedules have been omitted because they are
inapplicable or the information required therein is included elsewhere in
the consolidated financial statements or notes thereto.
</TABLE>
F-1
<PAGE> 34
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The following consolidated financial statements of Enron Oil & Gas Company
and its subsidiaries were prepared by management which is responsible for their
integrity, objectivity and fair presentation. The statements have been prepared
in conformity with generally accepted accounting principles and, accordingly,
include some amounts that are based on the best estimates and judgments of
management.
Arthur Andersen LLP, independent public accountants, was engaged to audit
the consolidated financial statements of Enron Oil & Gas Company and its
subsidiaries and issue a report thereon. In the conduct of the audit, Arthur
Andersen LLP was given unrestricted access to all financial records and related
data including minutes of all meetings of shareholders, the Board of Directors
and committees of the Board. Management believes that all representations made
to Arthur Andersen LLP during the audit were valid and appropriate. Their audits
of the years presented included developing an overall understanding of the
Company's accounting systems, procedures and internal controls, and conducting
tests and other auditing procedures sufficient to support their opinion on the
financial statements. Arthur Andersen LLP was also engaged to examine and report
on management's assertion about the effectiveness of the system of internal
controls of Enron Oil & Gas Company and its subsidiaries. The reports of Arthur
Andersen LLP appear on the following page.
The system of internal controls of Enron Oil & Gas Company and its
subsidiaries is designed to provide reasonable assurance as to the reliability
of financial statements and the protection of assets from unauthorized
acquisition, use or disposition. This system includes, but is not limited to,
written policies and guidelines including a published code for the conduct of
business affairs, conflicts of interest and compliance with laws regarding
antitrust, antiboycott and foreign corrupt practices policies, the careful
selection and training of qualified personnel, and a documented organizational
structure outlining the separation of responsibilities among management
representatives and staff groups.
The adequacy of financial controls of Enron Oil & Gas Company and its
subsidiaries and the accounting principles employed in financial reporting by
the Company are under the general oversight of the Audit Committee of the Board
of Directors. No member of this committee is an officer or employee of the
Company. The independent public accountants have direct access to the Audit
Committee and meet with the committee from time to time to discuss accounting,
auditing and financial reporting matters. It should be recognized that there are
inherent limitations to the effectiveness of any system of internal control,
including the possibility of human error and circumvention or override.
Accordingly, even an effective system can provide only reasonable assurance with
respect to the preparation of reliable financial statements and safeguarding of
assets. Furthermore, the effectiveness of an internal control system can change
with circumstances.
It is management's opinion that, considering the criteria for effective
internal control over financial reporting and safeguarding of assets which
consists of interrelated components including the control environment, risk
assessment process, control activities, information and communication systems,
and monitoring, the Company maintained an effective system of internal control
as to the reliability of financial statements and the protection of assets
against unauthorized acquisition, use or disposition for the year ended December
31, 1995.
<TABLE>
<S> <C> <C>
BEN B. BOYD WALTER C. WILSON FORREST E. HOGLUND
Vice President and Senior Vice President and Chairman of the Board,
Controller Chief Financial Officer President and Chief
Executive Officer
</TABLE>
Houston, Texas
February 16, 1996
F-2
<PAGE> 35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Enron Oil & Gas Company:
We have examined management's assertion that the system of internal control
of Enron Oil & Gas Company and its subsidiaries for the year ended December 31,
1995 was adequate to provide reasonable assurance as to the reliability of
financial statements and the protection of assets against unauthorized
acquisition, use or disposition, included in the accompanying report on
Management's Responsibility for Financial Reporting.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
obtaining an understanding of the system of internal control, testing and
evaluating the design and operating effectiveness of the system of internal
control and such other procedures as we considered necessary in the
circumstances. We believe that our examination provides a reasonable basis for
our opinion.
Because of inherent limitations in any system of internal control, errors
or irregularities may occur and not be detected. Also, projections of any
evaluation of the system of internal control to future periods are subject to
the risk that the system of internal control may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, management's assertion that the system of internal control
of Enron Oil & Gas Company and its subsidiaries for the year ended December 31,
1995 was adequate to provide reasonable assurance as to the reliability of
financial statements and the protection of assets against unauthorized
acquisition, use or disposition is fairly stated in all material respects, based
upon current standards of control criteria.
ARTHUR ANDERSEN LLP
Houston, Texas
February 16, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Enron Oil & Gas Company:
We have audited the accompanying consolidated balance sheets of Enron Oil &
Gas Company (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Enron Oil & Gas Company and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule listed
in the index to financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Houston, Texas
February 16, 1996
F-3
<PAGE> 36
ENRON OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
NET OPERATING REVENUES
Natural Gas
Associated Companies.................................... $229,997 $267,997 $279,921
Trade................................................... 222,118 221,896 225,241
Crude Oil, Condensate and Natural Gas Liquids
Associated Companies.................................... 58,233 46,782 38,953
Trade................................................... 66,145 29,556 16,881
Gains on Sales of Reserves and Related Assets.............. 62,821 54,014 13,318
Other...................................................... 9,388 5,578 6,706
-------- -------- --------
Total.............................................. 648,702 625,823 581,020
OPERATING EXPENSES
Lease and Well............................................. 69,463 60,384 59,344
Exploration................................................ 42,044 41,811 36,921
Dry Hole................................................... 12,911 17,197 18,355
Impairment of Unproved Oil and Gas Properties.............. 23,715 24,936 20,467
Depreciation, Depletion and Amortization................... 216,047 242,182 249,704
General and Administrative................................. 56,626 51,418 45,274
Taxes Other Than Income.................................... 32,587 28,254 35,396
-------- -------- --------
Total.............................................. 453,393 466,182 465,461
-------- -------- --------
OPERATING INCOME............................................. 195,309 159,641 115,559
OTHER INCOME, NET............................................ 669 2,783 6,635
-------- -------- --------
INCOME BEFORE INTEREST EXPENSE AND TAXES..................... 195,978 162,424 122,194
INTEREST EXPENSE
Incurred
Affiliate............................................... 1,360 629 -
Other................................................... 17,054 13,984 15,378
Capitalized................................................ (6,490) (6,124) (5,457)
-------- -------- --------
Net Interest Expense.................................... 11,924 8,489 9,921
-------- -------- --------
INCOME BEFORE INCOME TAXES................................... 184,054 153,935 112,273
INCOME TAX PROVISION (BENEFIT)............................... 41,936 5,937 (25,752)
-------- -------- --------
NET INCOME................................................... $142,118 $147,998 $138,025
======== ======== ========
EARNINGS PER SHARE OF COMMON STOCK........................... $ .89 $ .93 $ .86
======== ======== ========
AVERAGE NUMBER OF COMMON SHARES.............................. 159,917 159,845 159,966
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 37
ENRON OIL & GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents........................................ $ 23,039 $ 5,810
Accounts Receivable
Associated Companies.......................................... 60,777 57,352
Trade......................................................... 107,737 68,781
Inventories...................................................... 11,697 15,731
Other............................................................ 14,582 8,744
----------- -----------
Total.................................................... 217,832 156,418
OIL AND GAS PROPERTIES (Successful Efforts Method)................. 3,380,924 3,015,435
Less: Accumulated Depreciation, Depletion and Amortization....... (1,499,379) (1,330,624)
----------- -----------
Net Oil and Gas Properties............................... 1,881,545 1,684,811
OTHER ASSETS....................................................... 47,881 20,638
----------- -----------
TOTAL ASSETS....................................................... $ 2,147,258 $ 1,861,867
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable
Associated Companies.......................................... $ 12,902 $ 13,353
Trade......................................................... 120,756 117,791
Accrued Taxes Payable............................................ 19,595 17,631
Dividends Payable................................................ 4,795 4,800
Other............................................................ 11,249 11,026
----------- -----------
Total.................................................... 169,297 164,601
LONG-TERM DEBT
Affiliate........................................................ 141,520 25,000
Other............................................................ 147,559 165,337
OTHER LIABILITIES.................................................. 11,629 10,035
DEFERRED INCOME TAXES.............................................. 308,141 269,292
DEFERRED REVENUE................................................... 205,453 184,183
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS' EQUITY
Common Stock, $.01 Par, 160,000,000 Shares Authorized and
Issued........................................................ 201,600 201,600
Additional Paid In Capital....................................... 399,379 403,488
Cumulative Foreign Currency Translation Adjustment............... (10,747) (15,298)
Retained Earnings................................................ 576,740 453,810
Common Stock Held in Treasury, 150,045 shares at December 31,
1995 and 9,173 shares at December 31, 1994.................... (3,313) (181)
----------- -----------
Total Shareholders' Equity............................... 1,163,659 1,043,419
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................... $ 2,147,258 $ 1,861,867
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 38
ENRON OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN COMMON
ADDITIONAL CURRENCY STOCK TOTAL
COMMON PAID IN TRANSLATION RETAINED HELD IN SHAREHOLDERS'
STOCK CAPITAL ADJUSTMENT EARNINGS TREASURY EQUITY
-------- ---------- ----------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992... $200,800 $ 421,747 $ (1,726) $206,165 $ - $ 826,986
Net Income................... - - - 138,025 - 138,025
Dividends Paid/Declared, $.12
Per Share................. - - - (19,195) - (19,195)
Translation Adjustment....... - - (5,129) - - (5,129)
Treasury Stock Purchased..... - - - - (16,698) (16,698)
Treasury Stock Issued Under
Stock Option Plans........ - (4,216) - - 13,300 9,084
-------- -------- -------- -------- -------- ----------
Balance at December 31, 1993... 200,800 417,531 (6,855) 324,995 (3,398) 933,073
Net Income................... - - - 147,998 - 147,998
Two-for-One Stock Split...... 800 (800) - - - -
Dividends Paid/Declared, $.12
Per Share................. - - - (19,183) - (19,183)
Translation Adjustment....... - - (8,443) - - (8,443)
Treasury Stock Purchased/
Tendered.................. - - - - (35,960) (35,960)
Treasury Stock Issued Under
Stock Option Plans........ - (13,243) - - 39,177 25,934
-------- -------- -------- -------- -------- ----------
Balance at December 31, 1994... 201,600 403,488 (15,298) 453,810 (181) 1,043,419
Net Income................... - - - 142,118 - 142,118
Dividends Paid/Declared, $.12
Per Share................. - - - (19,188) - (19,188)
Translation Adjustment....... - - 4,551 - - 4,551
Treasury Stock Purchased..... - - - - (17,855) (17,855)
Treasury Stock Issued Under
Stock Option Plans........ - (4,109) - - 14,438 10,329
Other........................ - - - - 285 285
-------- -------- -------- -------- -------- ----------
Balance at December 31, 1995... $201,600 $ 399,379 $ (10,747) $576,740 $ (3,313) $1,163,659
======== ======== ======== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 39
ENRON OIL & GAS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Operating Cash Inflows:
Net Income................................................. $142,118 $147,998 $138,025
Items Not Requiring (Providing) Cash
Depreciation, Depletion and Amortization................... 216,047 242,182 249,704
Impairment of Unproved Oil and Gas Properties.............. 23,715 24,936 20,467
Deferred Income Taxes...................................... 45,173 1,788 25,612
Other, Net................................................. 2,910 (2,735) 1,768
Exploration Expenses....................................... 42,044 41,811 36,921
Dry Hole Expenses.......................................... 12,911 17,197 18,355
Gains On Sales of Reserves and Related Assets.............. (62,821) (54,014) (13,318)
Other, Net................................................. 720 4,490 1,242
Changes in Components of Working Capital and
Other Liabilities
Accounts Receivable..................................... (17,525) (883) (24,586)
Inventories............................................. 4,034 (2,163) (4,548)
Accounts Payable........................................ 2,514 (25,648) 26,208
Accrued Taxes Payable................................... 1,964 277 7,443
Other Liabilities....................................... 1,544 1,086 772
Other, Net.............................................. (18,791) (1,463) (44,443)
Amortization of Deferred Revenue........................... (43,344) (43,345) (73,867)
Changes in Components of Working Capital Associated with
Investing and Financing Activities...................... (17,858) 31,038 40,042
-------- -------- --------
NET OPERATING CASH INFLOWS................................... 335,355 382,552 405,797
INVESTING CASH FLOWS
Additions to Oil and Gas Properties........................ (445,047) (442,078) (383,064)
Exploration Expenses....................................... (42,044) (41,811) (36,921)
Dry Hole Expenses.......................................... (12,911) (17,197) (18,355)
Proceeds from Sales of Reserves and Related Assets (Note
10)..................................................... 102,006 90,515 41,815
Changes in Components of Working Capital Associated with
Investing Activities.................................... 18,391 (32,120) (37,256)
Other, Net................................................. (11,689) (8,758) (4,905)
-------- -------- --------
NET INVESTING CASH OUTFLOWS.................................. (391,294) (451,449) (438,686)
FINANCING CASH FLOWS
Long-Term Debt
Affiliate............................................... 116,520 25,000 -
Other................................................... (16,100) (25,300) 33,000
Dividends Paid............................................. (19,193) (19,178) (19,200)
Treasury Stock Purchased................................... (17,855) (14,139) (16,698)
Proceeds from Sales of Treasury Stock...................... 10,329 4,113 9,084
Other, Net................................................. (533) 1,082 (2,786)
-------- -------- --------
NET FINANCING CASH INFLOWS (OUTFLOWS)........................ 73,168 (28,422) 3,400
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............. 17,229 (97,319) (29,489)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR.................................................... 5,810 103,129 132,618
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR..................... $ 23,039 $ 5,810 $103,129
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 40
ENRON OIL & GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements of Enron
Oil & Gas Company (the "Company"), 61% of the outstanding common stock of which
is owned by Enron Corp., include the accounts of all domestic and foreign
subsidiaries. All material intercompany accounts and transactions have been
eliminated. Certain reclassifications have been made to the consolidated
financial statements for prior years to conform with the current presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash Equivalents. The Company records as cash equivalents all highly liquid
short-term investments with maturities of three months or less. (See Note 4
"Long-Term Debt - Financing Arrangements with Enron Corp.")
Oil and Gas Operations. The Company accounts for its natural gas and crude
oil exploration and production activities under the successful efforts method of
accounting.
Oil and gas lease acquisition costs are capitalized when incurred. Unproved
properties with significant acquisition costs are assessed quarterly on a
property-by-property basis, and any impairment in value is recognized.
Amortization of any remaining costs of such leases begins at a point prior to
the end of the lease term depending upon the length of such term. Unproved
properties with acquisition costs that are not individually significant are
aggregated, and the portion of such costs estimated to be nonproductive, based
on historical experience, is amortized over the average holding period. If the
unproved properties are determined to be productive, the appropriate related
costs are transferred to proved oil and gas properties. Lease rentals are
expensed as incurred.
Oil and gas exploration costs, other than the costs of drilling exploratory
wells, are charged to expense as incurred. The costs of drilling exploratory
wells are capitalized pending determination of whether they have discovered
proved commercial reserves. If proved commercial reserves are not discovered,
such drilling costs are expensed. The costs of all development wells and related
equipment used in the production of natural gas and crude oil are capitalized.
Depreciation, depletion and amortization of the cost of proved oil and gas
properties is calculated using the unit-of-production method. Estimated future
dismantlement, restoration and abandonment costs (classified as long-term
liabilities), net of salvage values, are taken into account. Certain other
assets are depreciated on a straight-line basis.
Inventories, consisting primarily of tubular goods and well equipment held
for use in the exploration for, and development and production of natural gas
and crude oil reserves, are carried at cost with adjustments made from time to
time to recognize changes in condition value.
Natural gas revenues are recorded on the entitlement method based on the
Company's percentage ownership of current production. Each working interest
owner in a well generally has the right to a specific percentage of production,
although actual production sold may differ from an owner's ownership percentage.
Under entitlement accounting, a receivable is recorded when underproduction
occurs and a payable when overproduction occurs.
Gains and losses associated with the sale in place of natural gas and crude
oil reserves and related assets are classified as net operating revenues in the
consolidated statements of income based on the Company's strategy of continuing
such sales in maximizing the economic value of its assets.
F-8
<PAGE> 41
Accounting for Interest and Price Risk Management. The Company engages in
price and interest rate risk management activities for primarily non-trading
purposes. Such activities consist of transactions to hedge commodity prices
associated with the sales of natural gas and crude oil in order to mitigate the
risk of market price fluctuations and interest rate swap agreements to
effectively convert portions of floating rate debt to a fixed rate basis,
thereby reducing the impact of interest rate changes on future income. Changes
in the market value of commodity price and interest rate swap transactions
entered into as hedges are deferred so that the gain or loss is recognized in
the period in which the revenues or expenses associated with the hedged
transactions are applicable.
In certain situations, the Company has designated portions of and may in
the future designate certain commodity price swap transactions or portions
thereof as for trading purposes. These transactions are accounted for using the
mark-to-market method of accounting. Under this method, unrealized gains or
losses resulting from the impact of price movements are recognized as net gains
or losses in net operating revenues in the consolidated statements of income.
Capitalized Interest Costs. Certain interest costs have been capitalized as
a part of the historical cost of unproved oil and gas properties. Interest costs
capitalized during each of the three years in the period ended December 31, 1995
are set out in the consolidated statements of income.
Income Taxes. The closing on December 13, 1995 of the sale by Enron Corp.
of approximately 31 million outstanding shares of the common stock of the
Company reduced Enron Corp.'s ownership interest in the Company from 80% to 61%
with the result that (i) the Company ceased, effective December 14, 1995, to be
included in the consolidated federal income tax return filed by Enron Corp. and
(ii) a tax allocation agreement previously in effect between the Company and
Enron Corp. was terminated. In addition, effective December 14, 1995, the
Company and its subsidiaries and Enron Corp. entered into a new tax agreement
pursuant to which, among other things, Enron Corp. has agreed (in exchange for
the payment of $13.0 million by the Company) to be liable for, and indemnify the
Company against all U.S. federal and state income taxes and certain foreign
taxes imposed on the Company for periods prior to the date Enron Corp. reduced
its ownership in the Company to less than 80%. The Company does not believe that
the cessation of consolidated tax reporting with Enron Corp., the termination of
the tax allocation agreement concurrent with deconsolidation and the signing of
the new tax agreement with Enron Corp. will have a material adverse effect on
its financial condition or results of operations.
Prior to December 14, 1995, the Company was included in the consolidated
federal income tax return filed by Enron Corp. as the common parent for itself
and its subsidiaries and the resulting taxes, including taxes for any state or
other taxing jurisdiction that required or permitted a consolidated, combined,
or unitary tax return to be filed and in which the Company and/or any of its
subsidiaries was included, were apportioned as between the Company and/or any of
its subsidiaries and Enron Corp. based on the terms of the tax allocation
agreement in effect prior to December 14, 1995.
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109 - "Accounting for Income Taxes".
SFAS No. 109 requires the asset and liability approach for accounting for income
taxes. Under this approach, deferred tax assets and liabilities are recognized
based on anticipated future tax consequences attributable to differences between
financial statement carrying amounts of assets and liabilities and their
respective tax bases (See Note 8 "Income Taxes").
Foreign Currency Translation. For subsidiaries whose functional currency is
deemed to be other than the U.S. dollar, asset and liability accounts are
translated at year-end exchange rates and revenue and expenses are translated at
average exchange rates prevailing during the year. Translation adjustments are
included as a separate component of shareholders' equity.
Earnings Per Share. Earnings per share is computed on the basis of the
average number of common shares outstanding during the periods.
F-9
<PAGE> 42
2. NATURAL GAS AND CRUDE OIL, CONDENSATE AND NATURAL GAS LIQUIDS NET OPERATING
REVENUES
Natural Gas Net Operating Revenues are comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Wellhead Natural Gas Revenues
Associated Companies(1)(2)....................... $173,864 $279,339 $340,508
Trade............................................ 174,732 162,553 156,301
-------- -------- --------
Total.................................... $348,596 $441,892 $496,809
======== ======== ========
Other Natural Gas Marketing Activities
Gross Revenues from:
Associated Companies.......................... $ 78,985 $159,726 $139,576
Trade(3)...................................... 102,904 121,965 135,606
-------- -------- --------
Total.................................... 181,889 281,691 275,182
Associated Costs from:
Associated Companies(1)(4)(5)................. 90,121 181,756 182,456
Trade......................................... 56,221 62,513 66,273
-------- -------- --------
Total.................................... 146,342 244,269 248,729
-------- -------- --------
Net...................................... 35,547 37,422 26,453
Commodity Price Transaction Gain (Loss)
Trading....................................... 2,688(6) - -
Non-Trading(7)................................ 65,284 10,579 (18,100)
-------- -------- --------
Total.................................... 67,972 10,579 (18,100)
-------- -------- --------
Total.................................... $103,519 $ 48,001 $ 8,353
======== ======== ========
</TABLE>
Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues are
comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Wellhead Crude Oil, Condensate and Natural Gas
Liquids Revenues
Associated Companies............................. $ 56,681 $ 44,979 $ 38,953
Trade............................................ 66,145 29,556 16,881
-------- -------- --------
Total.................................... $122,826 $ 74,535 $ 55,834
======== ======== ========
Other Crude Oil and Condensate Marketing Activities
Commodity Price Hedging Gain(7).................. $ 1,552 $ 1,803 $ -
======== ======== ========
</TABLE>
- ---------------
(1) Wellhead Natural Gas Revenues in 1995, 1994 and 1993 include $80,369,
$126,783 and $129,504, respectively, associated with deliveries by Enron Oil
& Gas Company to Enron Oil & Gas Marketing, Inc., a wholly-owned subsidiary,
reflected as a cost in Other Natural Gas Marketing Activities - Associated
Costs.
(2) Includes $14,022, $22,434 and $46,358 in 1995, 1994 and 1993, respectively,
associated with the equivalent wellhead value of volumes delivered under the
terms of a volumetric production payment agreement effective October 1,
1992, as amended, net of transportation.
(3) Includes $43,344, $43,345 and $73,867 in 1995, 1994 and 1993, respectively,
associated with the amortization of deferred revenues under the terms of
volumetric production payment and exchange agreements effective October 1,
1992, as amended.
(4) Includes the effect of a price swap agreement with a third party which in
effect fixed the price of certain purchases through February 1995.
F-10
<PAGE> 43
(5) Includes $27,549, $33,779 and $65,042 in 1995, 1994 and 1993, respectively,
for volumes delivered under volumetric production payment and exchange
agreements effective October 1, 1992, as amended, including equivalent
wellhead value, any applicable transportation costs and exchange
differentials.
(6) Includes an $11,255 gain associated with certain NYMEX-related commodity
market transactions designated for trading purposes partially offset by a
$2,567 loss related to call option transactions and a $6,000 loss associated
with certain NYMEX-related natural gas commodity market transactions that
were marked-to-market due to loss of correlation between the NYMEX and the
wellhead natural gas prices that the positions were designated to hedge.
(See Note 13 "Price and Interest Rate Risk Management").
(7) Represents gain or loss associated with commodity price swap transactions
primarily with Enron Corp. affiliated companies based on NYMEX-related
commodity prices in effect on dates of execution, less customary transaction
fees. These transactions serve as price hedges for a portion of wellhead
sales.
In March 1995, in a series of transactions with Enron Corp. and an
affiliate of Enron Corp., the Company exchanged all of its fuel supply and
purchase contracts and related price swap agreements associated with a Texas
City cogeneration plant (the "Cogen Contracts") for certain natural gas price
swap agreements of equivalent value issued by the affiliate that are designated
as hedges (the "Swap Agreements"). Such Swap Agreements were closed on March 31,
1995. As a result of the transactions, the Company has been relieved of all
performance obligations associated with the Cogen Contracts. Such operating
revenues and associated costs through February 28, 1995 were classified as Other
Natural Gas Marketing Activities-Gross Revenues and Associated Costs from
Associated Companies. The Company will realize net operating revenues classified
as Other Natural Gas Marketing Activities-Commodity Price Transaction Gain
(Loss), Non-Trading, and receive corresponding cash payments of approximately
$91 million during the period extending through December 31, 1999, under the
terms of the closed Swap Agreements. The estimated fair value of the Swap
Agreements was approximately $81 million at the date the Swap Agreements were
received in exchange for the Cogen Contracts. The net effect of this series of
transactions has resulted/will result in increases in net operating revenues and
cash receipts for the Company during 1995 and 1996 of approximately $13 million
and $7 million, respectively, with offsetting decreases in 1998 and 1999 versus
those anticipated under the Cogen Contracts. The total cash payments receivable
under the terms of the Swap Agreements, approximately $60 million at December
31, 1995, are presented in the accompanying balance sheet as Accounts
Receivable - Associated Companies for the $25 million current portion and as
Other Assets for the $35 million noncurrent portion. The corresponding total
future revenue of approximately $63 million is classified as Deferred Revenue.
(See Note 13 "Price and Interest Rate Risk Management").
3. OTHER ASSETS
Other Assets at December 31, 1994 includes an investment in 349,387 shares
of Enron Corp. common stock purchased for $10 million, at an average of $28.62
per share from Enron Corp. (the fair market value of such shares on the dates of
acquisition). In August 1995, the purchase of an additional 283,946 shares of
Enron Corp. common stock for $9.3 million, at an average of $32.71 per share was
completed, resulting in a total of 633,333 shares at a total cost of $19.3
million. The Enron Corp. common stock was subsequently exchanged in November
1995 for redeemable preferred stock issued in March 1995 by a subsidiary of the
Company. (See Note 6 "Shareholders' Equity").
4. LONG-TERM DEBT
Revolving Credit Agreement. The Company is a party to a Revolving Credit
Agreement dated as of March 11, 1994, among the Company and the banks named
therein (the "Credit Agreement"). The Credit Agreement provides for aggregate
borrowings of up to $100 million, with provisions for increases, at the option
of the Company, up to $300 million. Advances under the Credit Agreement bear
interest, at the option of the Company, based on a base rate, an adjusted CD
rate or a Eurodollar rate. Each advance under the Credit Agreement matures on a
date selected by the Company at the time of the advance, but in no event after
F-11
<PAGE> 44
January 15, 1998. There were no advances outstanding under the Credit Agreement
at December 31, 1995 or 1994.
Financing Arrangements With Enron Corp. The Company engages in various
transactions with Enron Corp. that are characteristic of a consolidated group
under common control. Activities of the Company not internally funded from
operations have been and may be funded from time to time by advances from Enron
Corp. The Company entered into an agreement with Enron Corp., effective October
12, 1989 (as amended effective September 29, 1992) and payable on demand no
later than September 29, 1995, under which the Company could borrow funds from
Enron Corp. at a representative market rate of interest on a revolving basis.
During 1995 and 1994, there were no funds borrowed by the Company under this
agreement. Effective as of September 29, 1995, this agreement was replaced with
another agreement with Enron Corp. providing for borrowings by the Company of up
to $200 million under substantially the same terms as the previous agreement.
Advances under this agreement which amounted to $141.5 million at December 31,
1995 are payable on demand on or before December 31, 1998. Such balance was
classified as long-term based on the Company's intent and ability to replace
such amount with other long-term debt. In January 1996, $105 million was retired
using the proceeds from new long-term financings. (See "Long-Term Debt, Other").
In July 1994, the Company prepaid $25 million of loans payable due in April
1995 with proceeds from a promissory note payable to Enron Corp. which note was
in the same amount and with essentially the same terms as the loan prepaid. The
promissory note was classified as long-term based on the Company's intent and
ability to refinance such note upon maturity with other long-term debt. The
interest rate swap agreement which effectively fixed the interest rate of the
original loan payable at 8.98% through maturity remained in effect for the
promissory note payable to Enron Corp. The note was paid in April 1995.
The Company also entered into an agreement with Enron Corp., effective
October 12, 1989 (as amended effective September 29, 1992), which provides the
Company the option of depositing any excess funds that may be available from
time to time with Enron Corp. with interest at a representative market rate
during the periods the funds were held by Enron Corp. Effective January 1, 1993,
the Company executed a promissory note at a fixed interest rate of 7% with Enron
Corp. providing for the investment of funds temporarily surplus to the Company
from time to time with Enron Corp. Daily outstanding balances of funds advanced
to Enron Corp. under this note averaged $154,000 and $68.8 million during 1995
and 1994, respectively. There were no advances outstanding at December 31, 1995
or 1994 under this agreement. Interest income recorded in 1995 and 1994 under
the terms of this note totaled $11 thousand and $4.7 million, respectively.
Effective as of September 29, 1995, the Company entered into a new credit
agreement which replaces the October 12, 1989 credit agreement, as amended, and
supplements the promissory note entered into on January 1, 1993. Such new
agreement provides the Company the option of depositing any excess funds that
may be available from time to time in excess of those advanced under the January
1, 1993 promissory note with Enron Corp. up to a combined total of $200 million
under substantially the same terms as included in the October 12, 1989
agreement, as amended, and with a maturity date of December 31, 1998.
Long-Term Debt, Other. Long-Term Debt, Other at December 31 consisted of
the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Senior Notes...................................... $ 70,000 $ 70,000
Promissory Notes.................................. 71,600 56,000
Commercial Paper.................................. - 6,700
Loan Payable...................................... - 25,000
Capitalized Lease Obligation...................... 5,959 7,637
-------- --------
Total........................................... $147,559 $165,337
======== ========
</TABLE>
The Senior Notes bear interest at 9.1% with principal repayments of $30
million due on February 15, 1996 and $20 million due in 1997 and 1998. The $30
million repayment due on February 15, 1996 is classified as long-term based on
the Company's intent and ability to replace such amount upon maturity with other
long-term debt.
F-12
<PAGE> 45
The Promissory Notes represent advances to a subsidiary of the Company. Two
advances aggregating $31 million were received in March 1994 under a credit
agreement dated as of March 8, 1994 between the subsidiary and a financial
institution. One of the advances is in the amount of $16 million, bears interest
at a fixed rate of 4.52% and is due in 1998. The other advance is in the amount
of $15 million, bears interest at a floating rate that resets quarterly, is
equal to 84% of the London Interbank Bid Rate and is due in 1998. Both advances
are collateralized with a letter of credit issued by a bank on behalf of the
subsidiary and guaranteed by the Company. The advances were used to partially
repay a promissory note payable to a bank by the subsidiary. In May 1994 and
January 1995, the subsidiary received other advances of $25 million and $15
million, respectively, evidenced by promissory notes, under a credit agreement
dated May 27, 1994 between the subsidiary and a financial institution. The
credit agreement provides for aggregate borrowings of up to $44 million and is
due in 1999. The advances bear interest based on various interest rate options,
as defined in the credit agreement, which ranged from 5.27% to 5.57% during
1995. The advances are guaranteed by the Company and were used to partially
repay temporary advances from the Company to the subsidiary for qualified
development costs.
The Commercial Paper outstanding at December 31, 1994 was issued under a
commercial paper program the proceeds of which are used to fund current
transactions and are classified as long-term based on the Company's intent and
ability to replace such obligation with other long-term debt.
The Loan Payable was retired in April 1995 using the proceeds from other
long-term financings. Interest was at a variable rate based on the London
Interbank Offered Rate which had, in effect, been converted to a fixed interest
rate of 8.92% through maturity using an interest rate swap agreement in
equivalent dollar amounts. The note was classified as long-term based on the
Company's intent and ability to replace such loan upon maturity with other
long-term debt.
Certain of the borrowings described above contain covenants requiring the
maintenance of certain financial ratios and limitations on liens, debt issuance
and dispositions of assets. In 1991, the Company filed with the Securities and
Exchange Commission a registration statement providing for the issuance and sale
from time to time of up to $250 million of debt securities to the public. As of
December 31, 1995, no debt securities had been issued under this registration
statement.
Subsequent to year-end, a subsidiary of the Company entered into a Credit
Agreement dated as of January 16, 1996 among the subsidiary and the banks named
therein and received advances under the agreement, evidenced by promissory
notes, aggregating $105 million. Each note matures in January 2001 and bears
interest at a floating rate based on the London Interbank Offered Rate for
periods selected by the subsidiary. The notes are guaranteed by the Company, the
proceeds of which were ultimately used to partially repay advances to the
Company by Enron Corp.
Fair Value Of Long-Term Debt. At December 31, 1995 and 1994, the Company
had $289 million and $190 million, respectively, of long-term debt. The
estimated fair value of such debt at December 31, 1995 and 1994 was
approximately $294 million and $186 million, respectively. The fair value of
long-term debt is the value the Company would have to pay to retire the debt,
including any premium or discount to the debtholder for the differential between
the stated interest rate and the year-end market rate. The fair value of
long-term debt is based upon quoted market prices and, where such quotes were
not available, upon interest rates available to the Company at year-end.
5. VOLUMETRIC PRODUCTION PAYMENT
In September 1992, the Company sold a volumetric production payment for
$326.8 million to a limited partnership. Under the terms of the production
payment agreements, the Company conveyed a real property interest of
approximately 124 billion cubic feet equivalent ("Bcfe") (136 trillion British
thermal units ("TBtu")) of certain natural gas and other hydrocarbons to the
purchaser. Effective October 1, 1993, the agreements were amended providing for
the extension of the original term of the volumetric production payment through
March 31, 1999 and including a revised schedule of daily quantities of
hydrocarbons to be delivered which is approximately one-half of the original
schedule. The revised schedule will total approximately 89.1 Bcfe (97.8 TBtu)
versus approximately 87.9 Bcfe (96.4 TBtu) remaining to be delivered under
F-13
<PAGE> 46
the original agreement. Daily quantities of hydrocarbons no longer required to
be delivered under the revised schedule during the period from October 1, 1993
through June 30, 1996 are available for sale by the Company. The Company retains
responsibility for its working interest share of the cost of operations. A
portion of the proceeds of the sale was used to repay a portion of the Company's
long-term debt, with surplus funds advanced to Enron Corp. under a note
agreement which facilitates the deposit of funds temporarily surplus to the
Company. The Company accounted for the proceeds received in the transaction as
deferred revenue which is being amortized into revenue and income as natural gas
and other hydrocarbons are produced and delivered during the term, as revised,
of the volumetric production payment agreement. Annual remaining amortization of
deferred revenue, based on revised scheduled deliveries under the volumetric
production payment agreement, as amended, at December 31, 1995 was as follows:
<TABLE>
<S> <C>
1996....................................................... $ 43,463
1997....................................................... 43,344
1998....................................................... 43,344
1999....................................................... 10,688
--------
Total............................................ $140,839
========
</TABLE>
6. SHAREHOLDERS' EQUITY
The Board of Directors of the Company approved in December 1992, as amended
in September 1994, the purchasing and holding in treasury at any time of up to
500,000 shares of common stock of the Company for, but not limited to, meeting
obligations associated with stock option grants to qualified employees pursuant
to the Company's stock option plans. (See Note 9 "Commitments and
Contingencies - Stock Option Plans"). At December 31, 1995 and 1994, 150,045
shares and 9,173 shares, respectively, were held in treasury under this
authorization.
On May 3, 1994, the shareholders of the Company approved and the Board of
Directors subsequently declared a two-for-one split of the common stock of the
Company to be effected as a nontaxable dividend of one share for each share
outstanding. Shares were issued on June 15, 1994 to shareholders of record as of
May 31,1994. At such time, an amendment to the Restated Certificate of
Incorporation of the Company to increase the total number of authorized shares
of the common stock of the Company from 80 million to 160 million shares and to
change the par value of common stock from no par to $.01 par per share was filed
with the Secretary of State of Delaware. All share and per share amounts in the
financial statements and supplemental financial information have been restated
to consider the effect of the two-for-one stock split.
In March 1995, a subsidiary of the Company issued to an unrelated third
party 19,000 shares of the subsidiary's non-voting redeemable preferred stock,
with a liquidation/redemption value of $1,000 per share and dividends payable
semi-annually at an annual rate of $70.00 per share, in exchange for certain oil
and gas properties. (See Note 3 "Other Assets").
In February 1996, the Board of Directors authorized submission of a
resolution to shareholders for approval at their annual meeting in May 1996 that
would amend the Restated Certificate of Incorporation of the Company to increase
the total number of authorized shares of the common stock of the Company from
160 million to 320 million shares. Such charter amendment, if adopted, will
become effective when the appropriate Certificate of Amendment to the Company's
Restated Certificate of Incorporation is filed with the Secretary of State of
Delaware.
7. TRANSACTIONS WITH ENRON CORP. AND RELATED PARTIES
Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net Operating
Revenues. Wellhead Natural Gas and Crude Oil, Condensate and Natural Gas Liquids
Revenues and Other Natural Gas and Other Crude Oil and Condensate Marketing
Activities include revenues from and associated costs paid to various
subsidiaries and affiliates of Enron Corp. pursuant to contracts which, in the
opinion of management, are no less favorable than could be obtained from third
parties. Other Natural Gas and Other Crude Oil and Condensate Marketing
Activities also include certain commodity price swap and NYMEX-related commod-
F-14
<PAGE> 47
ity transactions with Enron Corp. affiliated companies which, in the opinion of
management, are no less favorable than could be obtained from third parties.
(See Note 2 "Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net
Operating Revenues").
General and Administrative Expenses. The Company is charged by Enron Corp.
for all direct costs associated with its operations. Such direct charges,
excluding benefit plan charges (See Note 9 "Commitments and
Contingencies - Employee Benefit Plans"), totaled $17.2 million, $13.7 million
and $11.5 million for the years ended December 31, 1995, 1994 and 1993,
respectively. Management believes that these charges are reasonable.
Additionally, certain administrative costs not directly charged to any
Enron Corp. operations or business segments are allocated to the entities of the
consolidated group. Allocation percentages are generally determined utilizing
weighted average factors derived from property gross book value, net operating
revenues and payroll costs. Effective January 1, 1994, the Company entered into
an agreement with Enron Corp. with an initial term of five years through
December 1998, which agreement replaced a similar previous agreement, providing
for services substantially identical in nature and quality to those services
previously provided and for allocated indirect costs incurred in rendering such
services up to a maximum of approximately $7 million in 1995 and $6.7 million
for 1994. The limit on cost for the allocated indirect services provided by
Enron Corp. to the Company will increase in subsequent years for inflation and
certain changes in the Company's allocation bases, but such increase will not
exceed 7.5% per year. Management believes the indirect allocated charges for the
numerous types of support services provided by the corporate staff are
reasonable. Approximately $6.8 million, $6.6 million and $7.9 million were
charged to the Company for indirect general and administrative expenses for the
years ended December 31, 1995, 1994 and 1993, respectively.
Financing. See Note 4 "Long-Term Debt - Financing Arrangements with Enron
Corp." for a discussion of financing arrangements with Enron Corp.
8. INCOME TAXES
The principal components of the Company's net deferred income tax liability
at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred Income Tax Assets
Non-Producing Leasehold Costs................................. $ 8,469 $ 7,685
Seismic Costs Capitalized for Tax............................. 5,316 4,683
Other......................................................... 1,460 4,194
-------- --------
Total Deferred Income Tax Assets...................... 15,245 16,562
Deferred Income Tax Liabilities
Oil and Gas Exploration and Development Costs Deducted for Tax
Over Book Depreciation, Depletion and Amortization......... 274,219 252,599
Capitalized Interest.......................................... 6,265 5,763
Volumetric Production Payment Book Revenue Over Income
for Tax.................................................... 40,591 26,777
Other......................................................... 2,311 715
-------- --------
Total Deferred Income Tax Liabilities................. 323,386 285,854
-------- --------
Net Deferred Income Tax Liability..................... $308,141 $269,292
======== ========
</TABLE>
The components of income (loss) before income taxes were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
United States....................................... $157,174 $125,510 $117,460
Foreign............................................. 26,880 28,425 (5,187)
-------- -------- --------
Total..................................... $184,054 $153,935 $112,273
======== ======== ========
</TABLE>
F-15
<PAGE> 48
Total income tax provision (benefit) was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal.......................................... $ (6,983) $ 113 $(52,555)
State............................................ 130 2,745 5
Foreign.......................................... 3,616 1,291 1,186
-------- -------- --------
Total.................................... (3,237) 4,149 (51,364)
Deferred:
Federal.......................................... 24,733 3,818 20,845
State............................................ 855 (14,414) 4,357
Foreign.......................................... 19,585 12,384 410
-------- -------- --------
Total.................................... 45,173 1,788 25,612
-------- -------- --------
Income Tax Provision (Benefit)..................... $ 41,936 $ 5,937 $(25,752)
======== ======== ========
</TABLE>
The differences between taxes computed at the U.S. federal statutory tax
rate and the Company's effective rate were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Statutory Federal Income Tax Rate.................. 35.00% 35.00% 35.00%
State Income Tax, Net of Federal Benefit........... 0.35 (4.93) 2.53
Income Tax Related to Foreign Operations........... 7.21 3.44 3.08
Tight Gas Sand Federal Income Tax Credits.......... (12.19) (23.71) (58.05)
Revision of Prior Years' Tax Estimates............. (6.52) (3.25) (10.73)
Amended Return Recoveries.......................... (1.09) (2.62) -
Federal Tax Rate Increase.......................... - - 5.23
Other.............................................. 0.02 (0.07) -
------ ------ ------
Effective Income Tax Rate................ 22.78% 3.86% (22.94)%
====== ====== ======
</TABLE>
Current income tax receivable from (payable to) Enron Corp. at December 31,
1995, 1994 and 1993 amounted to $458, $(506) and $(6,892), respectively. The
current taxes payable to the Internal Revenue Service for the short-period of
December 14, 1995 through December 31, 1995 are not material.
The Company's $2.7 million alternative minimum tax credit carryforward was
eliminated when taxes were reallocated between Enron Corp. and the Company after
completion of the 1988-1991 Internal Revenue Service audit. The Company's
foreign subsidiaries' undistributed earnings of approximately $84 million at
December 31, 1995 are considered to be indefinitely invested outside the U.S.
and, accordingly, no U.S. federal or state income taxes have been provided
thereon. Upon distribution of those earnings in the form of dividends, the
Company may be subject to both foreign withholding taxes and U.S. income taxes,
net of allowable foreign tax credits. Determination of any potential amount of
unrecognized deferred income tax liabilities is not practicable.
9. COMMITMENTS AND CONTINGENCIES
Employee Benefit Plans. Employees of the Company are covered by various
retirement, stock purchase and other benefit plans of Enron Corp. During each of
the years ended December 31, 1995, 1994 and 1993, the Company was charged $6.6
million, $5.1 million and $4.5 million, respectively, for all such benefits,
including pension expense totaling $0.8 million, $0.3 million and $0.5 million,
respectively, by Enron Corp.
As of September 30, 1995, the most recent valuation date, the plan net
assets of the Enron Corp. defined benefit plan in which the employees of the
Company participate was less than the actuarial present value of projected plan
benefit obligations by approximately $19.3 million. The assumed discount rate,
rate of return on
F-16
<PAGE> 49
plan assets and rate of increases in wages used in determining the actuarial
present value of projected plan benefits were 7.5%, 10.5% and 4.0%,
respectively.
The Company also has in effect pension and savings plans related to its
Canadian, Trinidadian and Indian subsidiaries. Activity related to these plans
is not material relative to the Company's operations.
The Company provides certain medical, life insurance and dental benefits to
eligible employees who retire under the Enron Corp. Retirement Plan and their
eligible surviving spouses. Benefits are provided under the provisions of a
contributory defined dollar benefit plan. The Company accrues the cost of these
post-retirement benefits over the service lives of the employees expected to be
eligible to receive such benefits. The transition obligation existing at January
1, 1993 is being amortized over an average period of 19 years. The accumulated
post-retirement benefit obligation ("APBO") existing at December 31, 1995
totaled $131.1 million, of which $114.3 million is applicable to current
retirees and current employees eligible to retire. The measurement of the APBO
assumes a 7.5% discount rate and a health care cost trend rate of 11.7% in 1995
decreasing to 5% by the year 2006 and beyond. A 1% increase in the health care
cost trend rate would have the effect of increasing the APBO and the net
periodic expense by approximately $8.8 million and $0.6 million, respectively.
The Company does not currently intend to prefund its obligations under its
post-retirement welfare benefit plans.
Stock Option Plans. The Company has various stock option plans ("the
Plans") under which employees of the Company and its subsidiaries and
non-employee members of the Board of Directors have been or may be granted
rights to purchase shares of common stock of the Company generally at a price
not less than the market price of the stock at the date of grant. Options
granted under the Plans vest over a period of time based on the nature of the
grants and as defined in the individual grant agreements.
The following table sets forth the transactions for the Plans for the years
ended December 31:
<TABLE>
<CAPTION>
NUMBER OF STOCK OPTIONS
-------------------------------------
1995 1994 1993
-------- --------- --------
<S> <C> <C> <C>
Outstanding at January 1....................... 7,214,555 4,124,800 3,908,050
Granted...................................... 1,650,030(1) 5,128,095(1) 920,600
Exercised.................................... (621,927) (1,967,920) (671,850)
Forfeited.................................... (223,893) (70,420) (32,000)
--------- --------- ---------
Outstanding at December 31 (Grant Prices of
$9.25 - $24.38 per Share).................... 8,018,765 7,214,555 4,124,800
========= ========= =========
Available for Grant at December 31............. 3,792,038 3,218,175 1,075,850
========= ========= =========
</TABLE>
- ---------------
(1) Includes 170,985 and 1,920,275 options granted on December 29, 1995 and
December 30, 1994, respectively, under all employee stock option grants.
At December 31, 1995, 4,716,320 options outstanding were vested. Of the
remaining unvested options, 1,054,292, 895,977, 751,227, 566,752 and 34,197 vest
in the years 1996, 1997, 1998, 1999 and 2000, respectively.
During 1995, 1994 and 1993, the Company purchased or was tendered 762,799,
1,817,093 and 831,850 of its common shares, respectively, and delivered such
shares upon the exercise of stock options, except for shares held in treasury at
December 31, 1995, 1994 and 1993 as set out below. The difference between the
cost of the treasury shares and the exercise price of the options, net of
federal income tax benefit of $2.2 million, $7.2 million and $2.8 million for
the years 1995, 1994 and 1993, respectively, is reflected as an adjustment to
Additional Paid In Capital. In October 1993, as amended in September 1994, the
Company commenced a stock repurchase program authorized by the Board of
Directors to facilitate the availability of treasury shares of common stock for,
but not limited to, the settlement of employee stock option exercises pursuant
to the Plans. At December 31, 1995 and 1994, 150,045 and 9,173 shares,
respectively, were held in treasury under this authorization. (See Note 6
"Shareholders' Equity").
F-17
<PAGE> 50
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123 - "Accounting for Stock-Based Compensation". SFAS No. 123 encourages
companies to account for stock-based compensation awards based on the fair value
of the awards at the date they are granted. The resulting compensation cost
would be shown as an expense in the statement of income. Companies can choose
not to apply the new accounting method and continue to apply current accounting
requirements; however, disclosure will be required as to what net income and
earnings per share would have been had the new accounting method been followed.
SFAS No. 123 is effective for calendar year 1996.
Letters Of Credit. At December 31, 1995 and 1994, the Company had letters
of credit outstanding totaling approximately $32 million issued in connection
with a loan between one of the Company's subsidiaries and a trust.
Contingencies. There are various suits and claims against the Company
having arisen in the ordinary course of business. However, management does not
believe these suits and claims will individually or in the aggregate have a
material adverse effect on the Company's financial condition or results of
operations. On November 19, 1992, TransAmerican Natural Gas Corporation
("TransAmerican") filed a petition against the Company alleging breach of
contract, tortious interference with contract, misappropriation of trade secrets
and violation of state antitrust laws. The petition, as amended, sought actual
damages of at least $100 million plus exemplary damages of $300 million. The
Company filed counterclaims against TransAmerican and a third-party claim
against its sole shareholder, John R. Stanley, alleging fraud, negligent
misrepresentation and breach of state antitrust laws. On October 16, 1995, the
Company, TransAmerican and Stanley entered into an agreement which resolved all
claims. The settlement terms did not have a materially adverse effect on the
Company's financial condition or results of operations. The suit was dismissed
with prejudice as to all parties by order entered in November 1995. The Company
has been named as a potentially responsible party in certain Comprehensive
Environmental Response Compensation and Liability Act proceedings. However,
management does not believe that any potential assessments resulting from such
proceedings will individually or in the aggregate have a materially adverse
effect on the financial condition or results of operations of the Company.
10. CASH FLOW INFORMATION
Gains on sales of certain oil and gas reserves and related assets in the
amount of $62.8 million, $54.0 million and $13.3 million for the years ended
December 31, 1995, 1994 and 1993, respectively, are required by current
accounting guidelines to be removed from net income in connection with
determining net operating cash inflows while the related proceeds are required
to be classified as investing cash flows. The Company believes that proceeds
from the sales of reserves and related assets should be considered in analyzing
the elements of operating cash flows. The current federal income tax impact of
these sales transactions was calculated by the Company to be $24.4 million,
$19.8 million and $8.2 million for the years ended December 31, 1995, 1994 and
1993, respectively, which entered into the overall calculation of current
federal income tax. The Company believes that this federal income tax impact
should also be considered in analyzing the elements of the cash flow statement.
The consolidated statements of cash flows for 1994 and 1993 have been
revised to reflect the elimination of the non-cash amortization of deferred
revenue from net operating cash flows rather than investing cash flows as
previously reported.
Non-cash investing and financing activities for 1995 include the issuance
by a subsidiary of the Company of redeemable preferred stock with a
liquidation/redemption value of $19 million in exchange for certain oil and gas
properties (See Note 6 "Shareholders' Equity"). An approximate $7 million
step-up in property basis was made relating to deferred tax liabilities
associated with the difference between the tax and book bases of acquired
properties as required by SFAS No. 109 for a nontaxable business combination.
F-18
<PAGE> 51
Cash paid for interest and paid (received) for income taxes was as follows
for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Interest (net of amount capitalized).................... $11,307 $10,436 $ 10,517
Income taxes............................................ 10,140 1,352 (65,543)
</TABLE>
Included in 1995 income taxes paid is $13 million paid to Enron Corp. for
the indemnification of any future liability associated with all federal and
state income taxes and certain foreign taxes imposed on the Company for periods
prior to the date Enron Corp. reduced its ownership in the Company from 80% to
61%.
11. BUSINESS SEGMENT INFORMATION
The Company's operations are all natural gas and crude oil exploration and
production related. Accordingly, such operations are classified as one business
segment. Financial information by geographic area is presented below for the
years ended December 31, or at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Gross Operating Revenues
United States.............................. $ 582,993 $ 656,546 $ 653,929
Foreign.................................... 131,682 86,763 46,316
---------- ---------- ----------
Total(1).............................. $ 714,675 $ 743,309 $ 700,245
========== ========== ==========
Operating Income (Loss)
United States.............................. $ 162,652 $ 138,001 $ 126,410
Foreign.................................... 32,657 21,640 (10,851)
---------- ---------- ----------
Total................................. $ 195,309 $ 159,641 $ 115,559
========== ========== ==========
Identifiable Assets
United States.............................. $1,693,293 $1,505,926 $1,564,330
Foreign.................................... 453,965 355,941 246,832
---------- ---------- ----------
Total................................. $2,147,258 $1,861,867 $1,811,162
========== ========== ==========
</TABLE>
- ---------------
(1) Not deducted are natural gas associated costs of $65,973, $117,486 and
$119,225 in 1995, 1994 and 1993, respectively.
12. OTHER INCOME, NET
Other income, net consisted of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Interest Income................................. $ 556 $ 4,990 $ 5,789
Reserve Accruals................................ 379 (3,143) (2,520)
Contract Settlements............................ - - 4,248
Other, Net...................................... (266) 936 (882)
---------- ---------- ----------
Total................................. $ 669 $ 2,783 $ 6,635
========== ========== ==========
</TABLE>
13. PRICE AND INTEREST RATE RISK MANAGEMENT
Periodically, the Company enters into certain trading and non-trading
activities including NYMEX-related commodity market transactions and other
contracts. The non-trading portions of these activities have been designated to
hedge the impact of market price fluctuations on anticipated commodity delivery
volumes or other contractual commitments.
F-19
<PAGE> 52
Trading Activities. The Company realized an $11.3 million gain in 1995
related to certain natural gas commodity price swap transactions with an Enron
Corp. affiliated company that were designated for trading purposes in December
1994 and closed in the first quarter of 1995.
In 1995, the Company sold a call option with a notional volume of 50
billion British thermal units ("BBtu") per day at a strike price of $2.10 per
million British thermal units ("MMBtu") for each month in the period January
1996 through December 1996. At December 31, 1995 the approximate market value of
the outstanding call option was $1.8 million. The Company recognized a $2.6
million loss in 1995 related to this call option.
In the first quarter of 1996, the Company purchased a call option with a
notional volume of 50 BBtu per day at a strike price of $2.10 per MMBtu for the
period February 1996 through December 1996 for $3.0 million to offset the call
option discussed above. The purchase resulted in a $1.2 million loss to be
recognized in the first quarter of 1996.
There were no trading gains or losses in 1993 or 1994.
The following table summarizes the estimated fair value of financial
instruments held for trading purposes:
<TABLE>
<CAPTION>
1995
--------------------------
CARRYING AVERAGE
AMOUNT FAIR VALUE(1)
-------- -------------
(IN MILLIONS)
<S> <C> <C>
Options Written............................................. $ (1.8) $ (.3)
NYMEX-related Commodity Market Positions.................... - .4
</TABLE>
- ---------------
(1) Estimated fair values have been determined by using available market data
and valuation methodologies. Judgment is necessarily required in
interpreting market data and the use of different market assumptions or
estimation methodologies may affect the estimated fair value amounts.
Interest Rate Swap Agreements. At December 31, 1995, there were no interest
rate swap agreements outstanding. At December 31, 1994, the Company had
outstanding interest rate swap agreements with notional principal amounts of $50
million which terminated in April 1995. The interest rate swap agreements were
entered into to hedge certain floating rate obligations and effectively fix the
interest rate on the notional amount of debt at 8.98% and 8.92%. The estimated
fair value of the outstanding swap agreements at December 31, 1994 was a
negative $0.5 million. The fair value of interest rate swap agreements is based
upon termination values obtained from third parties.
Foreign Currency Contracts. The Company enters into foreign currency
contracts from time to time to hedge specific currency exposure from commercial
transactions. At December 31, 1995 and 1994, there were no foreign currency
contracts outstanding. Subsequent to year-end, a subsidiary of the Company and
the Company entered into offsetting foreign currency and interest rate swap
agreements with an aggregate notional principal amount of $210 million. Such
swap agreements are scheduled to terminate in 2001.
Hedging Transactions. With the objective of enhancing the certainty of
future revenues, the Company enters into NYMEX-related commodity price swaps
from time to time. Using NYMEX-related commodity price swaps, the Company
receives a fixed price for the respective commodity hedged and pays a floating
market price, as defined for each transaction, to the counterparty at
settlement.
The NYMEX-related natural gas commodity price swaps are priced based on a
Henry Hub, Louisiana delivery point. The Henry Hub price has historically had a
high degree of correlation with the wellhead price received by the Company which
has made such transactions effective natural gas price hedges. During December
1995, there was a loss of correlation between the prices paid under the natural
gas commodity price swaps and the wellhead natural gas prices ultimately
received for a portion of the Company's hedged natural gas production. This loss
of correlation resulted in the recognition of a $6 million loss in 1995.
F-20
<PAGE> 53
At December 31, 1995, the Company had outstanding positions covering
notional volumes of approximately 169 TBtu of natural gas for 1996 and 11 TBtu
of natural gas for each of the years 1997 through 2005 and approximately 3.6
million barrels ("MMBbl"), 2.8 MMBbl, 2.8 MMBbl, 2.2 MMBbl, and .9 MMBbl of
crude oil and condensate for the years 1996 through 2000, respectively. The fair
value of the positions was a positive $16.0 million at December 31, 1995. The
Company closed substantially all of its NYMEX-related natural gas commodity
price swaps by entering into offsetting positions during the first quarter of
1996 resulting in a deferred net pre-tax loss of approximately $4 million that
will be recognized during 1996, including a $21 million loss related to the
first quarter of 1996.
In 1995, the Company also issued options exercisable at one time by the
counterparty on or before December 17, 1996, covering notional volumes of
approximately 73 TBtu of natural gas for each of the years 1997 and 1998. The
fair value of the option was a positive $8.3 million at December 31, 1995. Such
options were embedded in NYMEX-related natural gas commodity price swaps
designated as hedges.
The following table summarizes the estimated fair value of financial
instruments and related transactions for non-trading activities at December 31,
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------- -------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE(1) AMOUNT FAIR VALUE(1)
-------- ------------- -------- -------------
(IN MILLIONS) (IN MILLIONS)
<S> <C> <C> <C> <C>
Long-Term Debt(2)........................ $289.1 $ 294.0 $190.3 $ 185.7
Energy Commodity Price Swaps(3)(4)....... - - - (103.7)
Related Fixed Price Sales
Contract(3)(4)......................... - - - 170.8
Swap Agreements(4)....................... 62.8 58.8 - -
NYMEX-Related Commodity Market
Positions.............................. (5.1) 10.9 - 30.7
</TABLE>
- ---------------
(1) Estimated fair values have been determined by using available market data
and valuation methodologies. Judgment is necessarily required in
interpreting market data and the use of different market assumptions or
estimation methodologies may affect the estimated fair value amounts.
(2) See Note 4 "Long-Term Debt."
(3) The fair value of the Energy Commodity Price Swaps should be considered
with the fair value of the Related Fixed Price Sales Contract in
determining the overall market risk of these related business transactions.
(4) See Note 2 "Natural Gas and Crude Oil, Condensate and Natural Gas Liquids
Net Operating Revenues".
Credit Risk. While notional contract amounts are used to express the
magnitude of price and interest rate swap agreements, the amounts potentially
subject to credit risk, in the event of nonperformance by the other parties, are
substantially smaller. The Company does not anticipate nonperformance by the
other parties.
14. CONCENTRATION OF CREDIT RISK
Substantially all of the Company's accounts receivable at December 31, 1995
and 1994 result from crude oil and natural gas sales and/or joint interest
billings to affiliate and third party companies in the oil and gas industry.
This concentration of customers and joint interest owners may impact the
Company's overall credit risk, either positively or negatively, in that these
entities may be similarly affected by changes in economic or other conditions.
In determining whether or not to require collateral from a customer or joint
interest owner, the Company analyzes the entity's net worth, cash flows,
earnings, and credit ratings. Receivables are generally not collateralized.
Historical credit losses incurred on receivables by the Company have been
immaterial.
F-21
<PAGE> 54
15. OTHER
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (the "Standard"). The Standard requires, among other
things, that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company will adopt the Standard in the first quarter of 1996.
The effect of adoption of the Standard is anticipated to result in a non-cash
impairment charge of less than $5 million pre-tax.
F-22
<PAGE> 55
ENRON OIL & GAS COMPANY
SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE INDICATED)
(UNAUDITED EXCEPT FOR RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING
ACTIVITIES)
OIL AND GAS PRODUCING ACTIVITIES
The following disclosures are made in accordance with SFAS No. 69 -
"Disclosures about Oil and Gas Producing Activities":
Oil and Gas Reserves. Users of this information should be aware that the
process of estimating quantities of "proved" and "proved developed" crude oil
and natural gas reserves is very complex, requiring significant subjective
decisions in the evaluation of all available geological, engineering and
economic data for each reservoir. The data for a given reservoir may also change
substantially over time as a result of numerous factors including, but not
limited to, additional development activity, evolving production history, and
continual reassessment of the viability of production under varying economic
conditions. Consequently, material revisions to existing reserve estimates occur
from time to time. Although every reasonable effort is made to ensure that
reserve estimates reported represent the most accurate assessments possible, the
significance of the subjective decisions required and variances in available
data for various reservoirs make these estimates generally less precise than
other estimates presented in connection with financial statement disclosures.
Proved reserves represent estimated quantities of crude oil, condensate,
natural gas and natural gas liquids that geological and engineering data
demonstrate, with reasonable certainty, to be recoverable in future years from
known reservoirs under economic and operating conditions existing at the time
the estimates were made.
Proved developed reserves are proved reserves expected to be recovered,
through wells and equipment in place and under operating methods being utilized
at the time the estimates were made.
Canadian provincial royalties are determined based on a graduated
percentage scale which varies with prices and production volumes. Canadian
reserves, as presented on a net basis, assume prices and royalty rates in
existence at the time the estimates were made, and the Company's estimate of
future production volumes. Future fluctuations in prices, production rates, or
changes in political or regulatory environments could cause the Company's share
of future production from Canadian reserves to be materially different from that
presented.
Estimates of proved and proved developed reserves at December 31, 1995,
1994 and 1993 were based on studies performed by the engineering staff of the
Company for reserves in the United States, Canada, Trinidad and India. Opinions
by DeGolyer and MacNaughton, independent petroleum consultants, for the years
ended December 31, 1995, 1994 and 1993 covering producing areas containing 73%,
59% and 65%, respectively, of proved reserves of the Company on a
net-equivalent-cubic-feet-of-gas basis, indicate that the estimates of proved
reserves prepared by the Company's engineering staff for the properties reviewed
by DeGolyer and MacNaughton, when compared in total on a
net-equivalent-cubic-feet-of-gas basis, do not differ materially from the
estimates prepared by DeGolyer and MacNaughton. Such estimates by DeGolyer and
MacNaughton in the aggregate varied by not more than 5% from those prepared by
the engineering staff of the Company. All reports by DeGolyer and MacNaughton
were developed utilizing geological and engineering data provided by the
Company.
The presentation of estimated proved reserves has been restated to exclude,
for each of the years presented, those quantities attributable to future
deliveries required under a volumetric production payment. In order to calculate
such amounts, the Company has assumed that deliveries under the volumetric
production payment are made as scheduled at expected British thermal unit
factors, and that delivery commitments are satisfied through delivery, as
scheduled, of the related volumes.
The Company has also presented, as additional information, proved reserves
including quantities attributable to future deliveries required under the
volumetric production payment. The Company believes that this information is
informative to readers of its financial statements as the related oil and gas
properties costs and deferred revenue are included in the Company's balance
sheets for each of the years presented. This additional information is not
required to be presented in accordance with SFAS No. 69; however, the Company
believes this additional information is useful in assessing its reserve and
financial position on a comprehensive basis.
No major discovery or other favorable or adverse event subsequent to
December 31, 1995 is believed to have caused a material change in the estimates
of proved or proved developed reserves as of that date.
F-23
<PAGE> 56
The following table sets forth the Company's net proved and proved
developed reserves at December 31 for each of the four years in the period ended
December 31, 1995, and the changes in the net proved reserves for each of the
three years in the period then ended as estimated by the engineering staff of
the Company.
NET PROVED AND PROVED DEVELOPED RESERVE SUMMARY
<TABLE>
<CAPTION>
UNITED STATES CANADA TRINIDAD INDIA TOTAL
------------- ------ -------- ------ -------
<S> <C> <C> <C> <C> <C>
Natural Gas (Bcf)(1)
Net proved reserves at December 31,
1992.................................. 1,326.1 232.5 - - 1,558.6
Revisions of previous estimates....... (31.3) 11.0 - - (20.3)
Purchases in place.................... 9.2 2.6 - - 11.8
Extensions, discoveries and other
additions........................... 234.9 47.7 101.3 - 383.9
Sales in place........................ (13.7) (1.5) - - (15.2)
Production............................ (212.0) (21.3) (.8) - (234.1)
------- ------ ------ ------ -------
Net proved reserves at December 31,
1993.................................. 1,313.2 271.0 100.5 - 1,684.7
Additional disclosures:
Volumes attributable to volumetric
production payment.................. 87.5 - - - 87.5
------- ------ ------ ------ -------
Net proved reserves at December 31, 1993,
including volumes attributable to
volumetric production payment......... 1,400.7 271.0 100.5 - 1,772.2
======= ====== ====== ====== =======
Net proved reserves at December 31,
1993.................................. 1,313.2 271.0 100.5 - 1,684.7
Revisions of previous estimates....... (17.1) (6.5) 15.0 - (8.6)
Purchases in place.................... 18.8 9.2 - 29.3 57.3
Extensions, discoveries and other
additions........................... 233.8 50.2 113.9 - 397.9
Sales in place........................ (29.3) (1.0) - - (30.3)
Production............................ (212.0) (26.3) (23.2) - (261.5)
------- ------ ------ ------ -------
Net proved reserves at December 31,
1994.................................. 1,307.4 296.6 206.2 29.3 1,839.5
Additional disclosures:
Volumes attributable to volumetric
production payment.................. 70.9 - - - 70.9
------- ------ ------ ------ -------
Net proved reserves at December 31, 1994,
including volumes attributable to
volumetric production payment......... 1,378.3 296.6 206.2 29.3 1,910.4
======= ====== ====== ====== =======
Net proved reserves at December 31,
1994.................................. 1,307.4 296.6 206.2 29.3 1,839.5
Revisions of previous estimates....... 10.1 (8.1) 17.5 (29.3) (9.8)
Purchases in place.................... 174.8 - - - 174.8
Extensions, discoveries and other
additions........................... 1,391.6(2) 54.8 60.8 75.0 1,582.2
Sales in place........................ (38.1) (1.7) - - (39.8)
Production............................ (191.7) (27.7) (39.0) - (258.4)
------- ------ ------ ------ -------
Net proved reserves at December 31,
1995.................................. 2,654.1(2) 313.9 245.5 75.0 3,288.5
Additional disclosures:
Volumes attributable to volumetric
production payment.................. 54.2 - - - 54.2
------- ------ ------ ------ -------
Net proved reserves at December 31, 1995,
including volumes attributable to
volumetric production payment......... 2,708.3(2) 313.9 245.5 75.0 3,342.7
======= ====== ====== ====== =======
</TABLE>
(Table continued on following page)
F-24
<PAGE> 57
<TABLE>
<CAPTION>
UNITED STATES CANADA TRINIDAD INDIA TOTAL
------------- ------ -------- ------ -------
<S> <C> <C> <C> <C> <C>
Liquids (MBbl)(3)(4)
Net proved reserves at December 31,
1992.................................. 13,865 5,358 - - 19,223
Revisions of previous estimates....... 1,490 (536) - - 954
Purchases in place.................... 15 489 - - 504
Extensions, discoveries and other
additions........................... 3,552 1,115 2,251 - 6,918
Sales in place........................ (3,230) (23) - - (3,253)
Production............................ (2,520) (932) (33) - (3,485)
------------- ------ -------- ------ -------
Net proved reserves at December 31,
1993.................................. 13,172 5,471 2,218 - 20,861
Revisions of previous estimates....... 2,179 (177) 455 - 2,457
Purchases in place.................... 358 - - 7,617 7,975
Extensions, discoveries and other
additions........................... 5,332 2,848 2,687 - 10,867
Sales in place........................ (257) - - - (257)
Production............................ (2,997) (905) (931) (32) (4,865)
------------- ------ -------- ------ -------
Net proved reserves at December 31,
1994.................................. 17,787 7,237 4,429 7,585 37,038
Revisions of previous estimates....... (413) (351) 396 4,874 4,506
Purchases in place.................... 4,264 - - - 4,264
Extensions, discoveries and other
additions........................... 8,703 729 3,896 - 13,328
Sales in place........................ (1,241) (9) - - (1,250)
Production............................ (3,701) (1,021) (1,851) (917) (7,490)
------------- ------ -------- ------ -------
Net proved reserves at December 31,
1995.................................. 25,399 6,585 6,870 11,542 50,396
========== ====== ====== ====== ======
Net proved developed reserves at
Natural Gas (Bcf)
December 31, 1992................... 1,054.1 194.4 - - 1,248.5
December 31, 1993................... 1,079.8 250.6 71.4 - 1,401.8
December 31, 1994................... 1,128.2 288.3 206.2 - 1,622.7
December 31, 1995................... 1,218.1 310.1 233.9 - 1,762.1
Liquids (MBbl)(4)
December 31, 1992................... 12,762 5,329 - - 18,091
December 31, 1993................... 11,165 5,409 1,591 - 18,165
December 31, 1994................... 16,770 7,073 4,429 7,585 35,857
December 31, 1995................... 19,977 6,505 5,607 11,542 43,631
Net proved developed reserves, including
amounts attributable to volumetric
production payment at
Natural Gas (Bcf)
December 31, 1992................... 1,168.4 194.4 - - 1,362.8
December 31, 1993................... 1,167.3 250.6 71.4 - 1,489.3
December 31, 1994................... 1,199.1 288.3 206.2 - 1,693.6
December 31, 1995................... 1,272.3 310.1 233.9 - 1,816.3
</TABLE>
- ---------------
(1) Billion cubic feet.
(2) Includes 1,180.0 Bcf of proved undeveloped methane reserves contained, along
with high concentrations of carbon dioxide and other gases in deep Wyoming
Paleozoic formations in the Big Piney area of Wyoming. The Company is
actively pursuing the consummation of a market or markets from several
different potential sources to facilitate realizing the value of these
reserves.
(3) Thousand barrels.
(4) Includes crude oil, condensate and natural gas liquids.
F-25
<PAGE> 58
Capitalized Costs Relating to Oil and Gas Producing Activities. The
following table sets forth the capitalized costs relating to the Company's
natural gas and crude oil producing activities at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Proved Properties......................................... $ 3,253,593 $ 2,889,242
Unproved Properties....................................... 127,331 126,193
----------- -----------
Total........................................... 3,380,924 3,015,435
Accumulated depreciation, depletion and amortization...... (1,499,379) (1,330,624)
----------- -----------
Net capitalized costs..................................... $ 1,881,545 $ 1,684,811
=========== ===========
</TABLE>
Costs Incurred in Oil and Gas Property Acquisition, Exploration and
Development Activities. The acquisition, exploration and development costs
disclosed in the following tables are in accordance with definitions in SFAS No.
19 - "Financial Accounting and Reporting by Oil and Gas Producing Companies".
Acquisition costs include costs incurred to purchase, lease, or otherwise
acquire property.
Exploration costs include exploration expenses, additions to exploration
wells in progress, and depreciation of support equipment used in exploration
activities.
Development costs include additions to production facilities and equipment,
additions to development wells in progress and related facilities, and
depreciation of support equipment and related facilities used in development
activities.
F-26
<PAGE> 59
The following tables set forth costs incurred related to the Company's oil
and gas activities for the years ended December 31:
<TABLE>
<CAPTION>
FOREIGN
--------------------------------------
UNITED STATES CANADA TRINIDAD INDIA OTHER TOTAL
------------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1995
Acquisition Costs of
Properties
Unproved.................... $ 16,196 $ 4,645 $ - $ - $ 1,482 $ 22,323
Proved...................... 122,369 116 - 5,000 - 127,485
--------- ------- -------- ------- ------- --------
Total............... 138,565 4,761 - 5,000 1,482 149,808
Exploration Costs............. 47,463 7,197 374 (98) 17,948 72,884
Development Costs............. 217,674 28,611 32,692 16,756 577 296,310
--------- ------- -------- ------- ------- --------
Total............... $ 403,702 $40,569 $ 33,066 $21,658 $20,007 $519,002
========= ======= ======== ======= ======= ========
1994
Acquisition Costs of
Properties
Unproved.................... $ 45,776 $ 6,618 $ - $ - $ (17) $ 52,377
Proved...................... 17,367 4,523 - 12,300 - 34,190
--------- ------- -------- ------- ------- --------
Total............... 63,143 11,141 - 12,300 (17) 86,567
Exploration Costs............. 70,669 8,210 850 2,302 11,242 93,273
Development Costs............. 223,241 35,896 60,778 767 564 321,246
--------- ------- -------- ------- ------- --------
Total............... $ 357,053 $55,247 $ 61,628 $15,369 $11,789 $501,086
========= ======= ======== ======= ======= ========
1993
Acquisition Costs of
Properties
Unproved.................... $ 23,686 $ 4,556 $ - $ - $ 887 $ 29,129
Proved...................... 6,625 2,598 - - - 9,223
--------- ------- -------- ------- ------- --------
Total............... 30,311 7,154 - - 887 38,352
Exploration Costs............. 53,918 9,096 1,367 - 18,595 82,976
Development Costs............. 247,705 28,045 41,262 - - 317,012
--------- ------- -------- ------- ------- --------
Total............... $ 331,934 $44,295 $ 42,629 $ - $19,482 $438,340
========= ======= ======== ======= ======= ========
</TABLE>
F-27
<PAGE> 60
Results of Operations for Oil and Gas Producing Activities(1). The
following tables set forth results of operations for oil and gas producing
activities for the years ended December 31:
<TABLE>
<CAPTION>
FOREIGN
---------------------------------------------
UNITED STATES CANADA TRINIDAD INDIA OTHER TOTAL
------------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1995
Operating Revenues
Associated Companies..................... $ 223,652 $ 6,893 $ - $ - $ - $230,545
Trade.................................... 122,567 36,815 71,686 15,411 - 246,479
Gains on Sales of Reserves and
Related Assets......................... 62,737 84 - - - 62,821
--------- ------- ------- ------- -------- --------
Total.............................. 408,956 43,792 71,686 15,411 - 539,845
Exploration Expenses, including Dry Hole... 35,298 3,839 374 (98) 15,542 54,955
Production Costs........................... 63,734 13,825 8,176 10,553 - 96,288
Impairment of Unproved Oil and Gas
Properties............................... 21,981 1,734 - - - 23,715
Depreciation, Depletion and
Amortization............................. 180,788 19,533 14,633 335 368 215,657
--------- ------- ------- ------- -------- --------
Income (Loss) before Income Taxes.......... 107,155 4,861 48,503 4,621 (15,910) 149,230
Income Tax Provision (Benefit)............. 1,226 1,133 26,677 2,311 (1,335) 30,012
--------- ------- ------- ------- -------- --------
Results of Operations...................... $ 105,929 $ 3,728 $21,826 $ 2,310 $(14,575) $119,218
========= ======= ======= ======= ======== ========
1994
Operating Revenues
Associated Companies..................... $ 315,866 $ 8,452 $ - $ - $ - $324,318
Trade.................................... 115,375 42,017 35,908 509 - 193,809
Gains on Sales of Reserves and
Related Assets......................... 54,026 (12) - - - 54,014
--------- ------- ------- ------- -------- --------
Total.............................. 485,267 50,457 35,908 509 - 572,141
Exploration Expenses, including Dry Hole... 42,242 4,503 836 2,302 9,125 59,008
Production Costs........................... 68,998 12,776 5,083 26 - 86,883
Impairment of Unproved Oil and Gas
Properties............................... 23,862 1,074 - - - 24,936
Depreciation, Depletion and
Amortization............................. 218,433 16,572 6,572 - 281 241,858
--------- ------- ------- ------- -------- --------
Income (Loss) before Income Taxes.......... 131,732 15,532 23,417 (1,819) (9,406) 159,456
Income Tax Provision (Benefit)............. (8,617) 6,175 12,804 (910) (2,873) 6,579
--------- ------- ------- ------- -------- --------
Results of Operations...................... $ 140,349 $ 9,357 $10,613 $ (909) $ (6,533) $152,877
========= ======= ======= ======= ======== ========
1993
Operating Revenues
Associated Companies..................... $ 369,824 $ 9,637 $ - $ - $ - $379,461
Trade.................................... 140,552 33,228 1,209 - - 174,989
Gains on Sales of Reserves and
Related Assets......................... 13,724 (406) - - - 13,318
--------- ------- ------- ------- -------- --------
Total.............................. 524,100 42,459 1,209 - - 567,768
Exploration Expenses, including Dry Hole... 35,029 6,657 1,367 - 12,223 55,276
Production Costs........................... 75,767 14,063 1,496 - - 91,326
Impairment of Unproved Oil and Gas
Properties............................... 19,499 968 - - - 20,467
Depreciation, Depletion and
Amortization............................. 234,292 14,630 387 - 154 249,463
--------- ------- ------- ------- -------- --------
Income (Loss) before Income Taxes.......... 159,513 6,141 (2,041) - (12,377) 151,236
Income Tax Provision (Benefit)............. (15,525) 2,265 (1,020) - (1,742) (16,022)
--------- ------- ------- ------- -------- --------
Results of Operations...................... $ 175,038 $ 3,876 $(1,021) $ - $(10,635) $167,258
========= ======= ======= ======= ======== ========
</TABLE>
- ---------------
(1) Excludes net revenues associated with other marketing activities, interest
charges, general corporate expenses and certain gathering and handling fees
for each of the three years in the period ended December 31, 1995. The
gathering and handling fees and other marketing net revenues are directly
associated with oil and gas operations with regard to segment reporting as
defined in SFAS No. 14 - "Financial Reporting for Segments of a Business
Enterprise", but are not part of Disclosures about Oil and Gas Producing
Activities as defined in SFAS No. 69.
F-28
<PAGE> 61
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves. The following information has been developed utilizing
procedures prescribed by SFAS No. 69 and based on crude oil and natural gas
reserve and production volumes estimated by the engineering staff of the
Company. It may be useful for certain comparison purposes, but should not be
solely relied upon in evaluating the Company or its performance. Further,
information contained in the following table should not be considered as
representative of realistic assessments of future cash flows, nor should the
Standardized Measure of Discounted Future Net Cash Flows be viewed as
representative of the current value of the Company.
The future cash flows presented below are based on sales prices, cost
rates, and statutory income tax rates in existence as of the date of the
projections. It is expected that material revisions to some estimates of crude
oil and natural gas reserves may occur in the future, development and production
of the reserves may occur in periods other than those assumed, and actual prices
realized and costs incurred may vary significantly from those used.
Management does not rely upon the following information in making
investment and operating decisions. Such decisions are based upon a wide range
of factors, including estimates of probable as well as proved reserves, and
varying price and cost assumptions considered more representative of a range of
possible economic conditions that may be anticipated.
The presentation of the standardized measure of discounted future net cash
flows and changes therein has been restated to exclude, for each of the years
presented, amounts attributable to future deliveries required under a volumetric
production payment at the equivalent wellhead value. In order to calculate such
amounts, the Company has assumed that deliveries under the volumetric production
payment are made as scheduled and that production costs corresponding to the
volumes delivered are incurred by the Company at average rates for the
properties subject to the production payment. This restatement was made
following discussions with the Staff of the Securities and Exchange Commission.
The Company has also presented, as additional information, the standardized
measure of discounted future net cash flows and changes therein including
amounts attributable to future deliveries required under the volumetric
production payment. The Company believes that this information is informative to
readers of its financial statements because the related oil and gas properties
costs and deferred revenue are shown in the Company's balance sheets for each of
the years presented. This additional information is not required to be presented
in accordance with SFAS No. 69; however, the Company believes this additional
information is useful in assessing its reserve and financial position on a
comprehensive basis.
F-29
<PAGE> 62
The following table sets forth the standardized measure of discounted
future net cash flows from projected production of the Company's crude oil and
natural gas reserves at December 31, for the years ended December 31:
<TABLE>
<CAPTION>
UNITED
STATES CANADA TRINIDAD INDIA TOTAL
----------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
1995
Future cash inflows(1)............................... $ 3,996,029 $ 502,803 $ 395,328 $ 396,130 $ 5,290,290
Future production costs.............................. (747,064) (203,906) (152,287) (202,410) (1,305,667)
Future development costs............................. (297,859) (7,153) (3,610) (13,500) (322,122)
----------- --------- --------- --------- -----------
Future net cash flows before income taxes............ 2,951,106 291,744 239,431 180,220 3,662,501
Future income taxes.................................. (695,843) (46,310) (105,188) (81,349) (928,690)
----------- --------- --------- --------- -----------
Future net cash flows................................ 2,255,263 245,434 134,243 98,871 2,733,811
Discount to present value at 10% annual rate......... (1,015,123) (68,861) (19,217) (45,470) (1,148,671)
----------- --------- --------- --------- -----------
Standardized measure of discounted future net cash
flows relating to proved oil and gas reserves...... 1,240,140 176,573 115,026 53,401 1,585,140
Additional disclosures:
Amounts attributable to volumetric production
payment.......................................... 35,957 - - - 35,957
----------- --------- --------- --------- -----------
Total discounted future net revenues, including
amounts attributable to volumetric production
payment.......................................... $ 1,276,097 $ 176,573 $ 115,026 $ 53,401 $ 1,621,097
=========== ========= ========= ========= ===========
1994
Future cash inflows(1)............................... $ 2,315,215 $ 487,050 $ 317,758 $ 168,370 $ 3,288,393
Future production costs.............................. (606,932) (196,275) (87,479) (105,840) (996,526)
Future development costs............................. (135,768) (9,596) (1,781) (4,500) (151,645)
----------- --------- --------- --------- -----------
Future net cash flows before income taxes............ 1,572,515 281,179 228,498 58,030 2,140,222
Future income taxes.................................. (208,163) (57,220) (102,171) (22,482) (390,036)
----------- --------- --------- --------- -----------
Future net cash flows................................ 1,364,352 223,959 126,327 35,548 1,750,186
Discount to present value at 10% annual rate......... (401,547) (67,018) (22,897) (14,730) (506,192)
----------- --------- --------- --------- -----------
Standardized measure of discounted future net cash
flows relating to proved oil and gas reserves...... 962,805 156,941 103,430 20,818 1,243,994
Additional disclosures:
Amounts attributable to volumetric production
payment.......................................... 60,269 - - - 60,269
----------- --------- --------- --------- -----------
Total discounted future net revenues, including
amounts attributable to volumetric production
payment.......................................... $ 1,023,074 $ 156,941 $ 103,430 $ 20,818 $ 1,304,263
=========== ========= ========= ========= ===========
1993
Future cash inflows(1)............................... $ 3,154,790 $ 592,845 $ 147,542 $ - $ 3,895,177
Future production costs.............................. (639,760) (230,230) (45,385) - (915,375)
Future development costs............................. (165,473) (21,001) (7,582) - (194,056)
----------- --------- --------- --------- -----------
Future net cash flows before income taxes............ 2,349,557 341,614 94,575 - 2,785,746
Future income taxes.................................. (487,017) (91,718) (35,477) - (614,212)
----------- --------- --------- --------- -----------
Future net cash flows................................ 1,862,540 249,896 59,098 - 2,171,534
Discount to present value at 10% annual rate......... (600,172) (90,125) (9,519) - (699,816)
----------- --------- --------- --------- -----------
Standardized measure of discounted future net cash
flows relating to proved oil and gas reserves...... 1,262,368 159,771 49,579 - 1,471,718
Additional disclosures:
Amounts attributable to volumetric production
payment.......................................... 105,323 - - - 105,323
----------- --------- --------- --------- -----------
Total discounted future net revenues, including
amounts attributable to volumetric production
payment.......................................... $ 1,367,691 $ 159,771 $ 49,579 $ - $ 1,577,041
=========== ========= ========= ========= ===========
</TABLE>
- ---------------
(1) Based on year end market prices determined at the point of delivery from the
producing unit.
F-30
<PAGE> 63
Changes in Standardized Measure of Discounted Future Net Cash Flows. The
following table sets forth the changes in the standardized measure of discounted
future net cash flows at December 31, for each of the three years in the period
ended December 31, 1995.
<TABLE>
<CAPTION>
UNITED
STATES CANADA TRINIDAD INDIA TOTAL
----------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves at December 31,
1992.................................................... $ 1,183,692 $125,419 $ - $ - $1,309,111
Additional disclosures:
Amounts attributable to volumetric production payment... 127,724 - - - 127,724
----------- -------- -------- -------- ----------
Total discounted future net revenues relating to proved
oil and gas reserves, including amounts attributable
to volumetric production payment, at December 31,
1992.................................................. $ 1,311,416 $125,419 $ - $ - $1,436,835
=========== ======== ======== ======== ==========
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves at December 31,
1992.................................................... $ 1,183,692 $125,419 $ - $ - $1,309,111
Sales and transfers of oil and gas produced, net of
production costs...................................... (388,251) (28,802) 287 - (416,766)
Net changes in prices and production costs.............. 158,102 28,400 - - 186,502
Extensions, discoveries, additions and improved recovery
net of related costs.................................. 275,722 27,785 74,191 - 377,698
Development costs incurred.............................. 58,500 13,900 - - 72,400
Revisions of estimated development costs................ 32,196 (1,345) - - 30,851
Revisions of previous quantity estimates................ (26,118) 5,668 - - (20,450)
Accretion of discount................................... 128,461 15,348 - - 143,809
Net change in income taxes.............................. (76,755) (9,795) (24,899) - (111,449)
Purchases of reserves in place.......................... 9,462 2,707 - - 12,169
Sales of reserves in place.............................. (36,919) (1,140) - - (38,059)
Changes in timing and other............................. (55,724) (18,374) - - (74,098)
----------- -------- -------- -------- ----------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves at December 31,
1993.................................................... 1,262,368 159,771 49,579 - 1,471,718
Additional disclosures:
Amounts attributable to volumetric production payment... 105,323 - - - 105,323
----------- -------- -------- -------- ----------
Total discounted future net revenues relating to proved
oil and gas reserves, including amounts attributable
to volumetric production payment, at December 31,
1993.................................................. $ 1,367,691 $159,771 $ 49,579 $ - $1,577,041
=========== ======== ======== ======== ==========
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves at December 31,
1993.................................................... $ 1,262,368 $159,771 $ 49,579 $ - $1,471,718
Sales and transfers of oil and gas produced, net of
production costs...................................... (339,809) (37,693) (30,825) (483) (408,810)
Net changes in prices and production costs.............. (506,273) (65,287) 11,002 - (560,558)
Extensions, discoveries, additions and improved recovery
net of related costs.................................. 225,366 51,006 96,515 - 372,887
Development costs incurred.............................. 69,900 6,700 7,582 - 84,182
Revisions of estimated development costs................ 6,792 5,931 - - 12,723
Revisions of previous quantity estimates................ (2,909) (3,407) 14,077 - 7,761
Accretion of discount................................... 145,119 19,762 7,448 - 172,329
Net change in income taxes.............................. 167,983 19,966 (45,789) (7,752) 134,408
Purchases of reserves in place.......................... 16,651 3,404 - 29,053 49,108
Sales of reserves in place.............................. (27,980) (461) - - (28,441)
Changes in timing and other............................. (54,403) (2,751) (6,159) - (63,313)
----------- -------- -------- -------- ----------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves at December 31,
1994.................................................... 962,805 156,941 103,430 20,818 1,243,994
Additional disclosures:
Amounts attributable to volumetric production
payments.............................................. 60,269 - - - 60,269
----------- -------- -------- -------- ----------
Total discounted future net revenues relating to proved
oil and gas reserves, including amounts attributable
to volumetric production payment, at December 31,
1994.................................................. $ 1,023,074 $156,941 $103,430 $ 20,818 $1,304,263
=========== ======== ======== ======== ==========
</TABLE>
(Table continued on following page)
F-31
<PAGE> 64
<TABLE>
<CAPTION>
UNITED
STATES CANADA TRINIDAD INDIA TOTAL
---------- -------- -------- ----- ----------
<S> <C> <C> <C> <C> <C>
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves at December 31,
1994.................................................... $ 962,805 $156,941 $103,430 $ 20,818 $1,243,994
Sales and transfers of oil and gas produced, net of
production costs...................................... (268,463) (29,883) (63,510) (4,858) (366,714)
Net changes in prices and production costs.............. 12,079 (5,698) (37,035) 7,857 (22,797)
Extensions, discoveries, additions and improved recovery
net of related costs.................................. 376,474(1) 38,028 53,674 46,180 514,356
Development costs incurred.............................. 29,100 2,600 1,800 - 33,500
Revisions of estimated development costs................ 920 139 28,771 4,500 34,330
Revisions of previous quantity estimates................ 5,694 (5,217) 10,142 (29) 10,590
Accretion of discount................................... 97,248 17,483 17,412 2,857 135,000
Net change in income taxes.............................. (132,614) 10,592 (8,048) (28,127) (158,197)
Purchases of reserves in place.......................... 193,711 - - - 193,711
Sales of reserves in place.............................. (54,441) (569) - - (55,010)
Changes in timing and other............................. 17,627 (7,843) 8,390 4,203 22,377
----------- -------- -------- -------- ----------
Standardized measure of discounted future net cash flows
relating to proved oil and gas reserves at December 31,
1995.................................................... 1,240,140 176,573 115,026 53,401 1,585,140
Additional disclosures:
Amounts attributable to volumetric production payment... 35,957 - - - 35,957
----------- -------- -------- -------- ----------
Total discounted future net revenues relating to proved
oil and gas reserves, including amounts attributable
to volumetric production payment, at December 31,
1995.................................................. $ 1,276,097 $176,573 $115,026 $ 53,401 $1,621,097
=========== ======== ======== ======== ==========
</TABLE>
- ---------------
(1) Includes approximately $77 million related to the reserves in the Big Piney
deep Paleozoic formations.
F-32
<PAGE> 65
UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1995
Net Operating Revenues................... $155,362 $183,974 $153,006 $156,360
======== ======== ======== ========
Operating Income......................... $ 42,829 $ 73,374 $ 37,925 $ 41,181
======== ======== ======== ========
Income before Income Taxes............... $ 39,500 $ 71,331 $ 33,344 $ 39,879
Income Tax Provision..................... 9,875 23,193 376 8,492
-------- -------- -------- --------
Net Income............................... $ 29,625 $ 48,138 $ 32,968 $ 31,387
======== ======== ======== ========
Earnings per Share of Common Stock....... $ .19 $ .30 $ .21 $ .20
======== ======== ======== ========
Average Number of Common Shares.......... 159,972 159,965 159,916 159,817
======== ======== ======== ========
1994
Net Operating Revenues................... $158,208 $155,449 $160,683 $151,483
======== ======== ======== ========
Operating Income......................... $ 38,938 $ 39,081 $ 52,020 $ 29,602
======== ======== ======== ========
Income before Income Taxes............... $ 39,088 $ 36,581 $ 50,497 $ 27,769
Income Tax Provision (Benefit)........... 8,830 2,369 9,529 (14,791)
-------- -------- -------- --------
Net Income............................... $ 30,258 $ 34,212 $ 40,968 $ 42,560
======== ======== ======== ========
Earnings per Share of Common Stock....... $ .19 $ .21 $ .26 $ .27
======== ======== ======== ========
Average Number of Common Shares.......... 159,840 159,859 159,777 159,902
======== ======== ======== ========
1993
Net Operating Revenues................... $136,834 $140,486 $152,647 $151,053
======== ======== ======== ========
Operating Income......................... $ 29,633 $ 31,517 $ 38,451 $ 15,958
======== ======== ======== ========
Income before Income Taxes............... $ 28,955 $ 29,598 $ 37,168 $ 16,552
Income Tax Provision (Benefit)........... (1,253) (3,923) 1,412 (21,988)
-------- -------- -------- --------
Net Income............................... $ 30,208 $ 33,521 $ 35,756 $ 38,540
======== ======== ======== ========
Earnings per Share of Common Stock....... $ .19 $ .21 $ .22 $ .24
======== ======== ======== ========
Average Number of Common Shares.......... 160,000 160,000 160,000 159,865
======== ======== ======== ========
</TABLE>
F-33
<PAGE> 66
SCHEDULE II
ENRON OIL & GAS COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
==========================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------------------------------------------------
ADDITIONS DEDUCTIONS FOR
BALANCE AT CHARGED TO PURPOSE FOR BALANCE AT
BEGINNING OF COSTS AND WHICH RESERVES END OF
DESCRIPTION YEAR EXPENSES WERE CREATED YEAR
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
1995
Reserves deducted from assets to which
they apply -
Revaluation of Accounts Receivable....... $1,022 $1,549 $ - $2,571
====== ====== ====== ======
Litigation Reserve(a)...................... $2,000 $ (379)(b) $1,621 $ -
====== ====== ====== ======
1994
Reserves deducted from assets to which
they apply -
Revaluation of Accounts Receivable....... $1,020 $ 2 $ - $1,022
====== ====== ====== ======
Litigation Reserve(a)...................... $2,000 $3,143 $3,143 $2,000
====== ====== ====== ======
1993
Reserves deducted from assets to which
they apply -
Revaluation of Accounts Receivable....... $ - $1,020 $ - $1,020
====== ====== ====== ======
Litigation Reserve(a)...................... $2,030 $2,520 $2,550 $2,000
====== ====== ====== ======
</TABLE>
- ---------------
(a) Included in Other Liabilities in the consolidated balance sheets.
(b) Includes reversal of prior year provision in excess of requirement.
S-1
<PAGE> 67
EXHIBITS
Exhibits not incorporated herein by reference to a prior filing are
designated by an asterisk (*) and are filed herewith; all exhibits not so
designated are incorporated herein by reference to the Company's Form S-1
Registration Statement, Registration No. 33-30678, filed on August 24, 1989
("Form S-1"), or as otherwise indicated.
<TABLE>
<S> <C>
3.1(a) - Restated Certificate of Incorporation of Enron Oil & Gas Company
(Exhibit 3.1 to Form S-1).
3.1(b) - Certificate of Amendment of Restated Certificate of Incorporation of
Enron Oil & Gas Company (Exhibit 4.1(b) to Form S-8 Registration
Statement, Registration No. 33-52201, filed on February 8, 1994).
3.1(c) - Certificate of Amendment of Restated Certificate of Incorporation of
Enron Oil & Gas Company (Exhibit 4.1(c) to Form S-8 Registration
Statement, Registration No. 33-58103, filed on March 15, 1995).
3.2* - By-laws of Enron Oil & Gas Company dated August 23, 1989, as amended
December 12, 1990, February 8, 1994 and January 19, 1996.
3.3 - Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to
Form S-1).
4.1 - Promissory Note due May 1, 1996, dated May 1, 1991 (Exhibit 4.1 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1991).
4.3 - Amended and Restated Enron Oil & Gas Company 1994 Stock Plan (Exhibit
4.3 to Form S-8 Registration Statement, Registration No. 33-58103,
filed on March 15, 1995).
4.3(a)* - Amendment to Amended and Restated Enron Oil & Gas Company 1994 Stock
Plan, dated effective as of December 12, 1995.
10.1 - Services Agreement, dated as of January 1, 1994, between Enron Oil &
Gas Company and Enron Corp. (Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.2 - Stock Restriction and Registration Agreement dated as of August 23,
1989 (Exhibit 10.2 to Form S-1).
10.3* - 1995 Tax Allocation Agreement, entered into effective as of December
14, 1995, between Enron Corp., Enron Oil & Gas Company, and the
subsidiaries of Enron Oil & Gas Company listed therein as additional
parties.
10.4 - Enron Corp. Deferral Plan dated December 10, 1985 (Exhibit 10.12 to
Form S-1).
10.5 - Enron Corp. 1988 Stock Plan (Exhibit 10.13 to Form S-1).
10.7 - Enron Corp. 1984 Stock Option Plan (Exhibit 10.15 to Form S-1).
10.8 - Enron Corp. 1986 Stock Option Plan (Exhibit 10.16 to Form S-1).
10.9(a) - Employment Agreement between Enron Oil & Gas Company and Forrest
Hoglund, dated as of September 1, 1987, as amended (Exhibit 10.19 to
Form S-1), and Second and Third Amendments to Employment Agreement
dated June 30, 1989 and February 14, 1992, respectively (Exhibit 10.10
to Form S-1 Registration Statement, Registration No. 33-50462, filed on
August 5, 1992).
10.9(b) - 4th Amendment to Employment Agreement dated December 14, 1994, among
Enron Corp., Enron Oil & Gas Company and Forrest Hoglund (Exhibit
10.9(b) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.10 - Fuel Supply Contract, dated as of June 30, 1986, by and between Enron
Oil & Gas Company, HNG Oil Company, BelNorth Petroleum Corporation and
Enron Cogeneration One Company, as amended (Exhibit 10.23 to Form S-1).
</TABLE>
E-1
<PAGE> 68
<TABLE>
<S> <C>
10.11 - Gas Sales Contract dated September 2, 1987 between Enron Oil & Gas
Company and Cogenron Inc., as amended (Exhibit 10.24 to Form S-1).
10.12 - Letter Agreement dated August 20, 1987 between Enron Oil & Gas Company
and Panhandle Gas Company (Exhibit 10.25 to Form S-1).
10.13 - Pension Program for Enron Corp. Deferral Plan Participants, effective
January 1, 1985, as amended (Exhibit 10.29 to Form S-1).
10.14 - Enron Oil & Gas Company 1993 Non-employee Director Stock Option Plan
(Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.15(a) - Credit Agreement, dated as of March 11, 1994, among Enron Oil & Gas
Company, the Banks named therein and Texas Commerce Bank, National
Association, as Administrative Agent and Promissory Note due January
15, 1998, dated March 11, 1994 to the order of Texas Commerce Bank
National Association, Promissory Note due January 15, 1998, dated March
11, 1994 to the order of The Bank of New York, Promissory Note due
January 15, 1998, dated March 11, 1994 to the order of The Bank of Nova
Scotia, Promissory Note due January 15, 1998, dated March 11, 1994 to
the order of Credit Lyonnais Cayman Islands Branch, Promissory Note due
January 15, 1998, dated March 11, 1994 to the order of Credit Suisse,
Promissory Note due January 15, 1998, dated March 11, 1994 to the order
of The First National Bank of Chicago, and Promissory Note due January
15, 1998, dated March 11, 1994 to the order of Bank of America National
Trust and Savings Association (Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.15(b) - Assignment and Acceptance dated April 14, 1994, between Texas Commerce
Bank National Association and Royal Bank of Canada and Promissory Note
due January 15, 1998, dated April 14, 1994, to the order of Texas
Commerce Bank National Association and Promissory Note due January 15,
1998, dated April 14, 1994, to the order of Royal Bank of Canada
(Exhibit 10.15(b) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994).
10.16 - Interest Rate and Currency Exchange Agreement, dated as of June 1,
1991, between Enron Risk Management Services Corp. and Enron Oil & Gas
Marketing, Inc. (Exhibit 10.17 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991), Confirmation dated June 14,
1992 (Exhibit 10.17 to Form S-1 Registration Statement, Registration
No. 33-50462, filed on August 5, 1992) and Confirmations dated March
25, 1991, April 25, 1991, and September 23, 1992 (assigned to Enron
Risk Management Services Corp. by Enron Finance Corp. pursuant to an
Assignment and Assumption Agreement, dated as of November 1, 1993, by
and between Enron Finance Corp., Enron Risk Management Services Corp.
and Enron Oil & Gas Marketing, Inc.). (Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993).
10.17 - Assignment and Assumption Agreement, dated as of November 1, 1993, by
and between Enron Oil & Gas Marketing, Inc., Enron Oil & Gas Company
and Enron Risk Management Services Corp. (Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1993).
10.18 - ISDA Master Agreement, dated as of November 1, 1993, between Enron Oil
& Gas Company and Enron Risk Management Services Corp., and
Confirmation Nos. 1268.0, 1286.0, 1291.0, 1292.0, 1304.0, 1305.0,
1321.0, 1335.0, 1338.0, 1370.0, 1471.0, 1485.0, 1486.0, 1494.0, 1495.0,
1509.0, 1514.0, 1533.01, 1569.0, 1986.0, 2217.0, 2227.0, 2278.0,
2299.0, 2372.0, 2647.0 (Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993).
</TABLE>
E-2
<PAGE> 69
<TABLE>
<S> <C>
10.19 - Letter Agreement between Colorado Interstate Gas Company and Enron Oil
& Gas Marketing, Inc. dated November 1, 1990 (Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1990).
10.22 - Gas Sales Agreement between Enron Gas Marketing, Inc. and Enron Oil &
Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.38 to Form S-1).
10.23 - Gas Purchase Agreement between Enron Oil & Gas Company and Enron Oil &
Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.41 to Form S-1).
10.24 - Gas Purchase Agreement between Enron Oil & Gas Company and Enron Oil &
Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.42 to Form S-1).
10.25 - Enron Corp. 1991 Stock Plan (Exhibit 10.08 to Enron Corp. Annual
Report on Form 10-K for the year ended December 31, 1991).
10.26 - Enron Corp. 1988 Deferral Plan (Exhibit 10.49 to Form S-1).
10.27 - Form of Enron Corp. Long-Term Incentive Plan Effective as of January
1, 1987 (Exhibit 10.50 to Form S-1).
10.28 - Enron Executive Supplemental Survivor Benefits Plan Effective January
1, 1987 (Exhibit 10.51 to Form S-1).
10.29 - 1988 FlexPerq Program Summary (Exhibit 10.52 to Form S-1).
10.30* - Credit Agreement between Enron Corp. and Enron Oil & Gas Company dated
September 29, 1995.
10.31* - Credit Agreement between Enron Oil & Gas Company and Enron Corp. dated
September 29, 1995.
10.33 - Swap Agreement between Banque Paribas and Enron Oil & Gas Company,
dated as of December 5, 1990 (Exhibit 10.37 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1990), and
Confirmations dated March 25, 1991 and April 25, 1991 (Exhibit 10.37 to
Form S-1 Registration Statement, Registration No. 33-50462, filed on
August 5, 1992).
10.34 - Enron Oil & Gas Company 1992 Stock Plan (As Amended and Restated
effective December 14, 1994) (incorporated by reference to Exhibit A to
the Company's Proxy Statement, dated March 27, 1995, with respect to
the Company's 1995 Annual Meeting of Shareholders).
10.35 - Enron Corp. 1992 Deferral Plan (Exhibit 10.41 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1991).
10.36(a) - Conveyance of Production Payment, dated September 25, 1992, between
Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited
Partnership (Exhibit 10.34 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992).
10.36(b) - First Amendment to Conveyance of Production Payment, dated effective
April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.36(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.36(c) - Second Amendment to Conveyance of Production Payment, dated effective
July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.36(c) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.36(d) - Third Amendment to Conveyance of Production Payment, dated effective
October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.36(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
</TABLE>
E-3
<PAGE> 70
<TABLE>
<S> <C>
10.37(a) - Hydrocarbon Exchange Agreement dated September 25, 1992, between Enron
Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership
(Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.37(b) - Amendment to Hydrocarbon Exchange Agreement dated effective as of
January 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.37(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.37(c) - First Amendment to Hydrocarbon Exchange Agreement dated effective as
of April 1, 1993, between Enron Oil & Gas Company and Cactus
Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(c) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.37(d) - Second Amendment to Hydrocarbon Exchange Agreement dated effective as
of July 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.37(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.37(e) - Amendment to Hydrocarbon Exchange Agreement dated effective as of
August 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.37(e) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.37(f) - Fourth Amendment to Hydrocarbon Exchange Agreement, dated effective
October 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.37 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.38 - Purchase and Sale Agreement, dated September 25, 1992, between Enron
Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership
(Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.39(a) - Production and Delivery Agreement, dated September 25, 1992, between
Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited
Partnership (Exhibit 10.37 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992).
10.39(b) - First Amendment to Production and Delivery Agreement, dated effective
April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.39(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.39(c) - Second Amendment to Production and Delivery Agreement, dated effective
July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.39(c) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.39(d) - Third Amendment to Production and Delivery Agreement, dated effective
October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.39(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.40 - Credit Agreement, dated as of March 8, 1994 between Enron Gas & Oil
Trinidad Limited and Caribbean Regional Development Investment Trust,
and Request for Advance No. 1, dated March 4, 1993, and Request for
Advance No. 2, dated March 4, 1993 (Exhibit 10.40 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993).
</TABLE>
E-4
<PAGE> 71
<TABLE>
<S> <C>
10.41 - Promissory Note due May 1, 1998, dated as of March 8, 1994, to the
order of Caribbean Regional Development Investment Trust (Exhibit 10.41
to the Company's Annual Report on Form 10-K for the year ended December
31, 1993).
10.42 - Promissory Note due May 1, 1998, dated as of March 8, 1994 to the
order of Caribbean Regional Development Investment Trust (Exhibit 10.42
to the Company's Annual Report on Form 10-K for the year ended December
31, 1993).
10.43 - Letter of Credit and Reimbursement Agreement, dated March 8, 1994,
between Enron Gas & Oil Trinidad Limited and Credit Suisse (Exhibit
10.43 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).
10.44 - Parent Guaranty, dated March 8, 1994 between Enron Oil & Gas Company
and Credit Suisse (Exhibit 10.44 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993).
10.45(a) - Letter Loan Agreement dated as of May 27, 1994, between Enron Gas &
Oil Trinidad Limited and The Bank of Nova Scotia (Exhibit 10.45(a) to
the Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10.45(b) - Promissory Note due May 27, 1999, dated as of May 31, 1994, to the
order of The Bank of Nova Scotia (Exhibit 10.45(b) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994).
10.45(c) - Promissory Note due May 27, 1999, dated as of January 10, 1995, to the
order of The Bank of Nova Scotia (Exhibit 10.45(c) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994).
10.46 - Guaranty dated as of May 27, 1994, between Enron Oil & Gas Company and
The Bank of Nova Scotia (Exhibit 10.46 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
10.47 - Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated
December 18, 1994 (Panna and Mukta Fields) (Exhibit 10.47 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.48 - Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994
(Panna and Mukta Fields) (Exhibit 10.48 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
10.49 - Financial and Performance Guarantee of Enron Oil & Gas International,
Inc. dated December 22, 1994 (Panna and Mukta Fields) (Exhibit 10.49 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10.50 - Joint Operating Agreement effective as of December 22, 1994, among Oil
& Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and
Reliance Industries Limited for contract area identified as Panna and
Mukta Fields (Appendices B-1 and B-2 have been intentionally omitted.
The Company hereby agrees to furnish a copy of either appendix to the
Commission upon request) (Exhibit 10.50 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
10.51 - Production Sharing Contract dated as of December 22, 1994, among The
Government of India, Oil & Natural Gas Corporation Limited, Reliance
Industries Limited and Enron Oil & Gas India Ltd., for contract area
identified as Panna and Mukta Fields [Appendices B-1 and B-2 and
Appendix G (Figures G-1, VIIA-1 to 10, VIIB-1 to 20 and VIII-3) have
all been intentionally omitted. The Company hereby agrees to furnish a
copy of any such appendix and/or figure to the Commission upon request]
(Exhibit 10.51 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
</TABLE>
E-5
<PAGE> 72
<TABLE>
<S> <C>
10.52 - Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated
December 18, 1994 (Tapti Fields) (Exhibit 10.52 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.53 - Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994
(Tapti Fields) (Exhibit 10.53 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
10.54 - Financial and Performance Guarantee of Enron Oil & Gas International,
Inc. dated December 22, 1994 (Tapti Fields) (Exhibit 10.54 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.55 - Joint Operating Agreement effective as of December 22, 1994, among Oil
& Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and
Reliance Industries Limited, for contract area identified as Mid-Tapti
and South-Tapti Gas Fields [Appendix B (Figure B-1) has been
intentionally omitted. The Company hereby agrees to furnish a copy of
such appendix to the Commission upon request] (Exhibit 10.55 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.56 - Production Sharing Contract dated as of December 22, 1994, among The
Government of India, Oil & Natural Gas Corporation Limited, Reliance
Industries Limited and Enron Oil & Gas India Ltd., for contract area
identified as Mid and South Tapti Field [Appendix B, Appendix G
(Figures G-1, VII-1 to 11, VIII-2 to 4 and Appendix 3) have all been
intentionally omitted. The Company hereby agrees to furnish a copy of
any such appendix, to the Commission upon request] (Exhibit 10.56 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10.57(a)* - Letter Agreement relating to Natural Gas Swap Transactions, dated
March 31, 1995, among Enron Oil & Gas Company, Enron Corp. and Enron
Capital & Trade Resources Corp.
10.57(b)* - Amendment to Natural Gas Swap Transactions Letter Agreement, dated
March 31, 1995, among Enron Oil & Gas Company, Enron Corp. and Enron
Capital & Trade Resources Corp.
10.58* - Confirmation Letter (revised due to adjustments to the attached
Payment Schedule), dated March 31, 1995, between Enron Oil & Gas
Company and Enron Capital & Trade Resources Corp. (ECT Transaction
Reference No. 15198.00).
10.59* - Confirmation Letter (revised due to Price Change for 1998 and
adjustment to the attached Payment Schedule), dated March 31, 1995,
between Enron Oil & Gas Company and Enron Capital & Trade Resources
Corp. (ECT Transaction Reference No. 15198.01).
10.60* - Letter Agreement relating to swap transaction payments, dated February
1995, between Enron Oil & Gas Company and Enron Capital & Trade
Resources Corp.
10.64* - Credit Agreement, dated as of January 16, 1996, among EOG Company of
Canada, as the Borrower, and the Banks named therein and Texas Commerce
Bank National Association, as Administrative Agent, and Promissory Note
due January 17, 2001, dated January 16, 1996, to the order of Texas
Commerce Bank National Association, Promissory Note due January 17,
2001, dated January 16, 1996, to the order of Commerzbank
Aktiengesellschaft, Promissory Note due January 17, 2001, dated January
16, 1996, to the order of Royal Bank of Canada, Promissory Note due
January 17, 2001, dated January 16, 1996, to the order of The Bank of
New York, and Promissory Note due January 17, 2001, dated January 16,
1996, to the order of The Bank of Nova Scotia.
</TABLE>
E-6
<PAGE> 73
<TABLE>
<S> <C>
10.65* - Guaranty, dated as of January 16, 1996, by Enron Oil & Gas Company, as
Guarantor, in favor of the Banks named therein and Texas Commerce Bank
National Association, as Administrative Agent.
10.66* - ISDA Master Agreement, dated as of January 16, 1996, between Royal
Bank of Canada and EOG Company of Canada.
10.67* - ISDA Master Agreement, dated as of January 16, 1996, between Royal
Bank of Canada and Enron Oil & Gas Company.
10.68* - Guaranty, dated effective as of January 16, 1996, by Enron Oil & Gas
Company in favor of Royal Bank of Canada.
21* - List of subsidiaries.
23.1* - Consent of DeGolyer and MacNaughton.
23.2* - Opinion of DeGolyer and MacNaughton dated January 22, 1996.
23.3* - Consent of Arthur Andersen LLP.
24* - Powers of Attorney.
27* - Financial Data Schedule.
</TABLE>
E-7
<PAGE> 74
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 5th day of
March, 1996.
ENRON OIL & GAS COMPANY
(Registrant)
By /s/ WALTER C. WILSON
---------------------------------
(Walter C. Wilson)
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of registrant and in
the capacities with Enron Oil & Gas Company indicated and on the 5th day of
March, 1996.
SIGNATURE TITLE
--------- -----
/s/ FORREST E. HOGLUND Chairman of the Board, President and Chief
- ------------------------------- Executive Officer and Director (Principal
(Forrest E. Hoglund) Executive Officer)
/s/ WALTER C. WILSON Senior Vice President and Chief Financial
- ------------------------------- Officer (Principal Financial Officer)
(Walter C. Wilson)
/s/ BEN B. BOYD Vice President and Controller (Principal
- ------------------------------- Accounting Officer)
(Ben B. Boyd)
FRED C. ACKMAN* Director
- -------------------------------
(Fred C. Ackman)
RICHARD D. KINDER* Director
- -------------------------------
(Richard D. Kinder)
KENNETH L. LAY* Director
- -------------------------------
(Kenneth L. Lay)
EDWARD RANDALL, III* Director
- -------------------------------
(Edward Randall, III)
*By /s/ ANGUS H. DAVIS
----------------------------
(Angus H. Davis)
(Attorney-in-fact
for persons indicated)
<PAGE> 75
INDEX TO EXHIBITS
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3.1(a) - Restated Certificate of Incorporation of Enron Oil & Gas Company
(Exhibit 3.1 to Form S-1).
3.1(b) - Certificate of Amendment of Restated Certificate of Incorporation of
Enron Oil & Gas Company (Exhibit 4.1(b) to Form S-8 Registration
Statement, Registration No. 3352201, filed on February 8, 1994).
3.1(c) - Certificate of Amendment of Restated Certificate of Incorporation of
Enron Oil & Gas Company (Exhibit 4.1(c) to Form S-8 Registration
Statement, Registration No. 3358103, filed on March 15, 1995).
3.2* - By-laws of Enron Oil & Gas Company dated August 23, 1989, as amended
December 12, 1990, February 8, 1994 and January 19, 1996.
3.3 - Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to
Form S-1).
4.1 - Promissory Note due May 1, 1996, dated May 1, 1991 (Exhibit 4.1 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1991).
4.3 - Amended and Restated Enron Oil & Gas Company 1994 Stock Plan (Exhibit
4.3 to Form S-8 Registration Statement, Registration No. 3358103, filed
on March 15, 1995).
4.3(a)* - Amendment to Amended and Restated Enron Oil & Gas Company 1994 Stock
Plan, dated effective as of December 12, 1995.
10.1 - Services Agreement, dated as of January 1, 1994, between Enron Oil &
Gas Company and Enron Corp. (Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.2 - Stock Restriction and Registration Agreement dated as of August 23,
1989 (Exhibit 10.2 to Form S-1).
10.3* - 1995 Tax Allocation Agreement, entered into effective as of December
14, 1995, between Enron Corp., Enron Oil & Gas Company, and the
subsidiaries of Enron Oil & Gas Company listed therein as additional
parties.
10.4 - Enron Corp. Deferral Plan dated December 10, 1985 (Exhibit 10.12 to
Form S-1).
10.5 - Enron Corp. 1988 Stock Plan (Exhibit 10.13 to Form S-1).
10.7 - Enron Corp. 1984 Stock Option Plan (Exhibit 10.15 to Form S-1).
10.8 - Enron Corp. 1986 Stock Option Plan (Exhibit 10.16 to Form S-1).
10.9(a) - Employment Agreement between Enron Oil & Gas Company and Forrest
Hoglund, dated as of September 1, 1987, as amended (Exhibit 10.19 to
Form S-1), and Second and Third Amendments to Employment Agreement
dated June 30, 1989 and February 14, 1992, respectively (Exhibit 10.10
to Form S-1 Registration Statement, Registration No. 3350462, filed on
August 5, 1992).
10.9(b) - 4th Amendment to Employment Agreement dated December 14, 1994, among
Enron Corp., Enron Oil & Gas Company and Forrest Hoglund (Exhibit
10.9(b) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.10 - Fuel Supply Contract, dated as of June 30, 1986, by and between Enron
Oil & Gas Company, HNG Oil Company, BelNorth Petroleum Corporation and
Enron Cogeneration One Company, as amended (Exhibit 10.23 to Form S-1).
</TABLE>
<PAGE> 76
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10.11 - Gas Sales Contract dated September 2, 1987 between Enron Oil & Gas
Company and Cogenron Inc., as amended (Exhibit 10.24 to Form S-1).
10.12 - Letter Agreement dated August 20, 1987 between Enron Oil & Gas Company
and Panhandle Gas Company (Exhibit 10.25 to Form S-1).
10.13 - Pension Program for Enron Corp. Deferral Plan Participants, effective
January 1, 1985, as amended (Exhibit 10.29 to Form S-1).
10.14 - Enron Oil & Gas Company 1993 Non-employee Director Stock Option Plan
(Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.15(a) - Credit Agreement, dated as of March 11, 1994, among Enron Oil & Gas
Company, the Banks named therein and Texas Commerce Bank, National
Association, as Administrative Agent and Promissory Note due January
15, 1998, dated March 11, 1994 to the order of Texas Commerce Bank
National Association, Promissory Note due January 15, 1998, dated March
11, 1994 to the order of The Bank of New York, Promissory Note due
January 15, 1998, dated March 11, 1994 to the order of The Bank of Nova
Scotia, Promissory Note due January 15, 1998, dated March 11, 1994 to
the order of Credit Lyonnais Cayman Islands Branch, Promissory Note due
January 15, 1998, dated March 11, 1994 to the order of Credit Suisse,
Promissory Note due January 15, 1998, dated March 11, 1994 to the order
of The First National Bank of Chicago, and Promissory Note due January
15, 1998, dated March 11, 1994 to the order of Bank of America National
Trust and Savings Association (Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.15(b) - Assignment and Acceptance dated April 14, 1994, between Texas Commerce
Bank National Association and Royal Bank of Canada and Promissory Note
due January 15, 1998, dated April 14, 1994, to the order of Texas
Commerce Bank National Association and Promissory Note due January 15,
1998, dated April 14, 1994, to the order of Royal Bank of Canada
(Exhibit 10.15(b) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994).
10.16 - Interest Rate and Currency Exchange Agreement, dated as of June 1,
1991, between Enron Risk Management Services Corp. and Enron Oil & Gas
Marketing, Inc. (Exhibit 10.17 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991), Confirmation dated June 14,
1992 (Exhibit 10.17 to Form S-1 Registration Statement, Registration
No. 3350462, filed on August 5, 1992) and Confirmations dated March 25,
1991, April 25, 1991, and September 23, 1992 (assigned to Enron Risk
Management Services Corp. by Enron Finance Corp. pursuant to an
Assignment and Assumption Agreement, dated as of November 1, 1993, by
and between Enron Finance Corp., Enron Risk Management Services Corp.
and Enron Oil & Gas Marketing, Inc.). (Exhibit 10.16 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993).
10.17 - Assignment and Assumption Agreement, dated as of November 1, 1993, by
and between Enron Oil & Gas Marketing, Inc., Enron Oil & Gas Company
and Enron Risk Management Services Corp. (Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1993).
10.18 - ISDA Master Agreement, dated as of November 1, 1993, between Enron Oil
& Gas Company and Enron Risk Management Services Corp., and
Confirmation Nos. 1268.0, 1286.0, 1291.0, 1292.0, 1304.0, 1305.0,
1321.0, 1335.0, 1338.0, 1370.0, 1471.0, 1485.0, 1486.0, 1494.0, 1495.0,
1509.0, 1514.0, 1533.01, 1569.0, 1986.0, 2217.0, 2227.0, 2278.0,
2299.0, 2372.0, 2647.0 (Exhibit 10.18 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993).
</TABLE>
<PAGE> 77
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10.19 - Letter Agreement between Colorado Interstate Gas Company and Enron Oil
& Gas Marketing, Inc. dated November 1, 1990 (Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1990).
10.22 - Gas Sales Agreement between Enron Gas Marketing, Inc. and Enron Oil &
Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.38 to Form S-1).
10.23 - Gas Purchase Agreement between Enron Oil & Gas Company and Enron Oil &
Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.41 to Form S-1).
10.24 - Gas Purchase Agreement between Enron Oil & Gas Company and Enron Oil &
Gas Marketing, Inc. dated August 22, 1989 (Exhibit 10.42 to Form S-1).
10.25 - Enron Corp. 1991 Stock Plan (Exhibit 10.08 to Enron Corp. Annual
Report on Form 10-K for the year ended December 31, 1991).
10.26 - Enron Corp. 1988 Deferral Plan (Exhibit 10.49 to Form S-1).
10.27 - Form of Enron Corp. Long-Term Incentive Plan Effective as of January
1, 1987 (Exhibit 10.50 to Form S-1).
10.28 - Enron Executive Supplemental Survivor Benefits Plan Effective January
1, 1987 (Exhibit 10.51 to Form S-1).
10.29 - 1988 FlexPerq Program Summary (Exhibit 10.52 to Form S-1).
10.30* - Credit Agreement between Enron Corp. and Enron Oil & Gas Company dated
September 29, 1995.
10.31* - Credit Agreement between Enron Oil & Gas Company and Enron Corp. dated
September 29, 1995.
10.33 - Swap Agreement between Banque Paribas and Enron Oil & Gas Company,
dated as of December 5, 1990 (Exhibit 10.37 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1990), and
Confirmations dated March 25, 1991 and April 25, 1991 (Exhibit 10.37 to
Form S-1 Registration Statement, Registration No. 3350462, filed on
August 5, 1992).
10.34 - Enron Oil & Gas Company 1992 Stock Plan (As Amended and Restated
effective December 14, 1994) (incorporated by reference to Exhibit A to
the Company's Proxy Statement, dated March 27, 1995, with respect to
the Company's 1995 Annual Meeting of Shareholders).
10.35 - Enron Corp. 1992 Deferral Plan (Exhibit 10.41 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1991).
10.36(a) - Conveyance of Production Payment, dated September 25, 1992, between
Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited
Partnership (Exhibit 10.34 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992).
10.36(b) - First Amendment to Conveyance of Production Payment, dated effective
April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.36(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.36(c) - Second Amendment to Conveyance of Production Payment, dated effective
July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.36(c) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.36(d) - Third Amendment to Conveyance of Production Payment, dated effective
October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.36(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
</TABLE>
<PAGE> 78
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10.37(a) - Hydrocarbon Exchange Agreement dated September 25, 1992, between Enron
Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership
(Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.37(b) - Amendment to Hydrocarbon Exchange Agreement dated effective as of
January 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.37(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.37(c) - First Amendment to Hydrocarbon Exchange Agreement dated effective as
of April 1, 1993, between Enron Oil & Gas Company and Cactus
Hydrocarbon 1992-A Limited Partnership (Exhibit 10.37(c) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.37(d) - Second Amendment to Hydrocarbon Exchange Agreement dated effective as
of July 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.37(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.37(e) - Amendment to Hydrocarbon Exchange Agreement dated effective as of
August 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.37(e) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.37(f) - Fourth Amendment to Hydrocarbon Exchange Agreement, dated effective
October 1, 1993, between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.37 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.38 - Purchase and Sale Agreement, dated September 25, 1992, between Enron
Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited Partnership
(Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.39(a) - Production and Delivery Agreement, dated September 25, 1992, between
Enron Oil & Gas Company and Cactus Hydrocarbon 1992-A Limited
Partnership (Exhibit 10.37 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992).
10.39(b) - First Amendment to Production and Delivery Agreement, dated effective
April 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.39(b) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.39(c) - Second Amendment to Production and Delivery Agreement, dated effective
July 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.39(c) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.39(d) - Third Amendment to Production and Delivery Agreement, dated effective
October 1, 1993 between Enron Oil & Gas Company and Cactus Hydrocarbon
1992-A Limited Partnership (Exhibit 10.39(d) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993).
10.40 - Credit Agreement, dated as of March 8, 1994 between Enron Gas & Oil
Trinidad Limited and Caribbean Regional Development Investment Trust,
and Request for Advance No. 1, dated March 4, 1993, and Request for
Advance No. 2, dated March 4, 1993 (Exhibit 10.40 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993).
</TABLE>
<PAGE> 79
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10.41 - Promissory Note due May 1, 1998, dated as of March 8, 1994, to the
order of Caribbean Regional Development Investment Trust (Exhibit 10.41
to the Company's Annual Report on Form 10-K for the year ended December
31, 1993).
10.42 - Promissory Note due May 1, 1998, dated as of March 8, 1994 to the
order of Caribbean Regional Development Investment Trust (Exhibit 10.42
to the Company's Annual Report on Form 10-K for the year ended December
31, 1993).
10.43 - Letter of Credit and Reimbursement Agreement, dated March 8, 1994,
between Enron Gas & Oil Trinidad Limited and Credit Suisse (Exhibit
10.43 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1993).
10.44 - Parent Guaranty, dated March 8, 1994 between Enron Oil & Gas Company
and Credit Suisse (Exhibit 10.44 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993).
10.45(a) - Letter Loan Agreement dated as of May 27, 1994, between Enron Gas &
Oil Trinidad Limited and The Bank of Nova Scotia (Exhibit 10.45(a) to
the Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10.45(b) - Promissory Note due May 27, 1999, dated as of May 31, 1994, to the
order of The Bank of Nova Scotia (Exhibit 10.45(b) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994).
10.45(c) - Promissory Note due May 27, 1999, dated as of January 10, 1995, to the
order of The Bank of Nova Scotia (Exhibit 10.45(c) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994).
10.46 - Guaranty dated as of May 27, 1994, between Enron Oil & Gas Company and
The Bank of Nova Scotia (Exhibit 10.46 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
10.47 - Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated
December 18, 1994 (Panna and Mukta Fields) (Exhibit 10.47 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.48 - Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994
(Panna and Mukta Fields) (Exhibit 10.48 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
10.49 - Financial and Performance Guarantee of Enron Oil & Gas International,
Inc. dated December 22, 1994 (Panna and Mukta Fields) (Exhibit 10.49 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10.50 - Joint Operating Agreement effective as of December 22, 1994, among Oil
& Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and
Reliance Industries Limited for contract area identified as Panna and
Mukta Fields (Appendices B-1 and B-2 have been intentionally omitted.
The Company hereby agrees to furnish a copy of either appendix to the
Commission upon request) (Exhibit 10.50 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
10.51 - Production Sharing Contract dated as of December 22, 1994, among The
Government of India, Oil & Natural Gas Corporation Limited, Reliance
Industries Limited and Enron Oil & Gas India Ltd., for contract area
identified as Panna and Mukta Fields [Appendices B-1 and B-2 and
Appendix G (Figures G-1, VIIA-1 to 10, VIIB-1 to 20 and VIII-3) have
all been intentionally omitted. The Company hereby agrees to furnish a
copy of any such appendix and/or figure to the Commission upon request]
(Exhibit 10.51 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994).
</TABLE>
<PAGE> 80
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10.52 - Attorney Opinion Letter of Enron Oil & Gas International, Inc. dated
December 18, 1994 (Tapti Fields) (Exhibit 10.52 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.53 - Certificate of Enron Oil & Gas India Ltd. dated December 22, 1994
(Tapti Fields) (Exhibit 10.53 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994).
10.54 - Financial and Performance Guarantee of Enron Oil & Gas International,
Inc. dated December 22, 1994 (Tapti Fields) (Exhibit 10.54 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.55 - Joint Operating Agreement effective as of December 22, 1994, among Oil
& Natural Gas Corporation Limited, Enron Oil & Gas India Ltd. and
Reliance Industries Limited, for contract area identified as Mid-Tapti
and South-Tapti Gas Fields [Appendix B (Figure B-1) has been
intentionally omitted. The Company hereby agrees to furnish a copy of
such appendix to the Commission upon request] (Exhibit 10.55 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994).
10.56 - Production Sharing Contract dated as of December 22, 1994, among The
Government of India, Oil & Natural Gas Corporation Limited, Reliance
Industries Limited and Enron Oil & Gas India Ltd., for contract area
identified as Mid and South Tapti Field [Appendix B, Appendix G
(Figures G-1, VII-1 to 11, VIII-2 to 4 and Appendix 3) have all been
intentionally omitted. The Company hereby agrees to furnish a copy of
any such appendix, to the Commission upon request] (Exhibit 10.56 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1994).
10.57(a)* - Letter Agreement relating to Natural Gas Swap Transactions, dated
March 31, 1995, among Enron Oil & Gas Company, Enron Corp. and Enron
Capital & Trade Resources Corp.
10.57(b)* - Amendment to Natural Gas Swap Transactions Letter Agreement, dated
March 31, 1995, among Enron Oil & Gas Company, Enron Corp. and Enron
Capital & Trade Resources Corp.
10.58* - Confirmation Letter (revised due to adjustments to the attached
Payment Schedule), dated March 31, 1995, between Enron Oil & Gas
Company and Enron Capital & Trade Resources Corp. (ECT Transaction
Reference No. 15198.00).
10.59* - Confirmation Letter (revised due to Price Change for 1998 and
adjustment to the attached Payment Schedule), dated March 31, 1995,
between Enron Oil & Gas Company and Enron Capital & Trade Resources
Corp. (ECT Transaction Reference No. 15198.01).
10.60* - Letter Agreement relating to swap transaction payments, dated February
1995, between Enron Oil & Gas Company and Enron Capital & Trade
Resources Corp.
10.64* - Credit Agreement, dated as of January 16, 1996, among EOG Company of
Canada, as the Borrower, and the Banks named therein and Texas Commerce
Bank National Association, as Administrative Agent, and Promissory Note
due January 17, 2001, dated January 16, 1996, to the order of Texas
Commerce Bank National Association, Promissory Note due January 17,
2001, dated January 16, 1996, to the order of Commerzbank
Aktiengesellschaft, Promissory Note due January 17, 2001, dated January
16, 1996, to the order of Royal Bank of Canada, Promissory Note due
January 17, 2001, dated January 16, 1996, to the order of The Bank of
New York, and Promissory Note due January 17, 2001, dated January 16,
1996, to the order of The Bank of Nova Scotia.
</TABLE>
<PAGE> 81
<TABLE>
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10.65* - Guaranty, dated as of January 16, 1996, by Enron Oil & Gas Company, as
Guarantor, in favor of the Banks named therein and Texas Commerce Bank
National Association, as Administrative Agent.
10.66* - ISDA Master Agreement, dated as of January 16, 1996, between Royal
Bank of Canada and EOG Company of Canada.
10.67* - ISDA Master Agreement, dated as of January 16, 1996, between Royal
Bank of Canada and Enron Oil & Gas Company.
10.68* - Guaranty, dated effective as of January 16, 1996, by Enron Oil & Gas
Company in favor of Royal Bank of Canada.
21* - List of subsidiaries.
23.1* - Consent of DeGolyer and MacNaughton.
23.2* - Opinion of DeGolyer and MacNaughton dated January 22, 1996.
23.3* - Consent of Arthur Andersen LLP.
24* - Powers of Attorney.
27* - Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
ENRON OIL & GAS COMPANY
A Delaware Corporation
Date of Adoption: August 23, 1989
As Amended:
December 12, 1990,
February 8, 1994, and
January 19, 1996
<PAGE> 2
BYLAWS
Table of Contents
<TABLE>
<CAPTION>
Page
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Article I. Offices
-------
Section 1. Registered Office 1
Section 2. Other Offices 1
Article II. Stockholders
------------
Section 1. Place of Meetings 1
Section 2. Quorum; Adjournment of Meetings 1
Section 3. Annual Meetings 2
Section 4. Special Meetings 2
Section 5. Record Date 2
Section 6. Notice of Meeting 3
Section 7. Stockholder List 3
Section 8. Proxies 3
Section 9. Voting; Elections; Inspectors 4
Section 10. Conduct of Meetings 5
Section 11. Treasury Stock 5
Section 12. Business to Be Brought Before
the Annual Meeting 5
Article III. Board of Directors
------------------
Section 1. Power; Number; Term of Office 6
Section 2. Quorum; Voting 7
Section 3. Place of Meetings; Order of Business 7
Section 4. First Meeting 7
Section 5. Regular Meetings 7
Section 6. Special Meetings 7
Section 7. Nomination of Directors 8
Section 8. Removal 9
Section 9. Vacancies; Increases in the Number
of Directors 9
Section 10. Compensation 9
Section 11. Action Without a Meeting; Telephone
Conference Meeting 9
Section 12. Approval or Ratification of Acts or
Contracts by Stockholders 10
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
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Article IV. Committees
----------
Section 1. Executive Committee 10
Section 2. Audit Committee 11
Section 3. Other Committees 11
Section 4. Procedure; Meetings; Quorum 11
Section 5. Substitution and Removal of Members;
Vacancies 11
Article V. Officers
--------
Section 1. Number, Titles and Term of Office 12
Section 2. Powers and Duties of the Chairman
of the Board 12
Section 3. Powers and Duties of the President,
President-North American Operations,
and President-International Operations 12
Section 4. Powers and Duties of Vice Chairman
of the Board 13
Section 5. Vice Presidents 13
Section 6. General Counsel 13
Section 7. Secretary 14
Section 8. Deputy Corporate Secretary and
Assistant Secretaries 14
Section 9. Treasurer 14
Section 10. Assistant Treasurers 14
Section 11. Action with Respect to Securities
of Other Corporations 15
Section 12. Delegation 15
Article VI. Capital Stock
-------------
Section 1. Certificates of Stock 15
Section 2. Transfer of Shares 16
Section 3. Ownership of Shares 16
Section 4. Regulations Regarding Certificates 16
Section 5. Lost or Destroyed Certificates 16
</TABLE>
-3-
<PAGE> 4
<TABLE>
<CAPTION>
Page
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Article VII. Miscellaneous Provisions
------------------------
Section 1. Fiscal year 16
Section 2. Corporate Seal 17
Section 3. Notice and Waiver of Notice 17
Section 4. Facsimile Signatures 17
Section 5. Reliance upon Books, Reports and
Records 17
Section 6. Application of Bylaws 18
Article VIII. Amendments 18
----------
</TABLE>
-4-
<PAGE> 5
BYLAWS
OF
ENRON OIL & GAS COMPANY
Article I
Offices
Section 1. Registered Office. The registered office of the
Corporation required by the General Corporation Law of the State of Delaware to
be maintained in the State of Delaware shall be the registered office named in
the original Certificate of Incorporation of the Corporation, or such other
office as may be designated from time to time by the Board of Directors in the
manner provided by law.
Section 2. The Corporation may also have offices at such other places
both within and without the state of incorporation of the Corporation as the
Board of Directors may from time to time determine or the business of the
Corporation may require.
Article II
Stockholders
Section 1. Place of Meetings. All meetings of the stockholders shall
be held at the principal office of the Corporation, or at such other place
within or without the state of incorporation of the Corporation as shall be
specified or fixed in the notices or waivers of notice thereof.
Section 2. Quorum; Adjournment of Meetings. Unless otherwise required
by law or provided in the Certificate of Incorporation or these Bylaws, (i) the
holders of a majority of the stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum at
any meeting of stockholders for the transaction of business, (ii) in all matters
other than election of directors, the affirmative vote of the holders of a
majority of such stock so present or represented at any meeting of stockholders
at which a quorum is present shall constitute the act of the stockholders, and
(iii) where a separate vote by a class or classes is required, a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter and the affirmative vote of the majority of the shares of
such class or classes present in person or
<PAGE> 6
represented by proxy at the meeting shall be the act of such class. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, subject to the provisions of clauses
(ii) and (iii) above.
Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote
on the election of directors.
Notwithstanding the other provisions of the Certificate of Incorporation
or these Bylaws, the chairman of the meeting or the holders of a majority of the
issued and outstanding stock, present in person or represented by proxy and
entitled to vote thereat, at any meeting of stockholders, whether or not a
quorum is present, shall have the power to adjourn such meeting from time to
time, without any notice other than announcement at the meeting of the time and
place of the holding of the adjourned meeting. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at such meeting. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally called.
Section 3. Annual Meetings. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place (within or without the state of incorporation of the
Corporation), on such date, and at such time as the Board of Directors shall fix
and set forth in the notice of the meeting, which date shall be within thirteen
(13) months subsequent to the last annual meeting of stockholders.
Section 4. Special Meetings. Unless otherwise provided in the
Certificate of Incorporation, special meetings of the stockholders for any
purpose or purposes may be called at any time by the Chairman of the Board, by
the President, by the Vice Chairman of the Board, by a majority of the Board of
Directors, or by a majority of the executive committee (if any), at such time
and at such place as may be stated in the notice of the meeting. A special
meeting of stockholders shall be called by the Chairman of the Board, the
President or the Secretary upon written request therefor, stating the purpose(s)
of the meeting, delivered to such officer and signed by the holder(s) of at
least ten percent (10%) of the issued and outstanding stock entitled to vote at
such meeting. Business transacted at a special meeting shall be confined to the
purpose(s) stated in the notice of such meeting.
Section 5. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or
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entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors of the Corporation may fix a date as the
record date for any such determination of stockholders, which record date shall
not precede the date on which the resolutions fixing the record date are
adopted and which record date shall not be more than sixty (60) days nor less
than ten (10) days before the date of such meeting of stockholders, nor more
than sixty (60) days prior to any other action.
If the Board of Directors does not fix a record date for any meeting of
the stockholders, the record date for determining stockholders entitled to
notice of or to vote at such meeting shall be at the close of business on the
day next preceding the day on which notice is given, or, if in accordance with
Article VII, Section 3 of these Bylaws notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. The
record date for determining stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 6. Notice of Meetings. Written notice of the place, date and
hour of all meetings, and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by or at the direction of the
Chairman of the Board, the President, the Vice Chairman of the Board, the
Secretary or the other person(s) calling the meeting to each stockholder
entitled to vote thereat not less than ten (10) nor more than sixty (60) days
before the date of the meeting. Such notice may be delivered either personally
or by mail. If mailed, notice is given when deposited in the United States
mail, postage prepaid, directed to the stockholder at such stockholder's address
as it appears on the records of the Corporation.
Section 7. Stockholder List. A complete list of stockholders entitled
to vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in the name of such stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The stockholder list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
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Section 8. Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by proxy.
Proxies for use at any meeting of stockholders shall be filed with the
Secretary, or such other officer as the Board of Directors may from time to time
determine by resolution, before or at the time of the meeting. All proxies
shall be received and taken charge of and all ballots shall be received and
canvassed by the secretary of the meeting, who shall decide all questions
touching upon the qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes, unless an inspector or inspectors shall have
been appointed by the chairman of the meeting, in which event such inspector or
inspectors shall decide all such questions.
No proxy shall be valid after three (3) years from its date, unless the
proxy provides for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all the powers of voting or giving consents thereby conferred,
or if only one be present, then such powers may be exercised by that one; or, if
an even number attend and a majority do not agree on any particular issue, each
proxy so attending shall be entitled to exercise such powers in respect of such
portion of the shares as is equal to the reciprocal of the fraction equal to the
number of proxies representing such shares divided by the total number of shares
represented by such proxies.
Section 9. Voting; Elections; Inspectors. Unless otherwise required by
law or provided in the Certificate of Incorporation, each stockholder shall on
each matter submitted to a vote at a meeting of stockholders have one vote for
each share of stock entitled to vote which is registered in his name on the
record date for the meeting. For the purposes hereof, each election to fill a
directorship shall constitute a separate matter. Shares registered in the name
of another corporation, domestic or foreign, may be voted by such officer, agent
or proxy as the bylaws (or comparable instrument) of such corporation may
prescribe, or in the absence of such provision, as the Board of Directors (or
comparable body) of such corporation may determine. Shares registered in the
name of a deceased person may be voted by the executor or administrator of such
person's estate, either in person or by proxy.
All voting, except as required by the Certificate of Incorporation or
where otherwise required by law, may be by a voice vote; provided, however,
upon request of the chairman of the meeting or upon demand therefor by
stockholders holding a majority of the issued and outstanding stock present in
person or by proxy at any meeting a stock
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vote shall be taken. Every stock vote shall be taken by written ballots, each
of which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
All elections of directors shall be by written ballots, unless otherwise
provided in the Certificate of Incorporation.
At any meeting at which a vote is taken by written ballots, the chairman
of the meeting may appoint one or more inspectors, each of whom shall subscribe
an oath or affirmation to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of such inspector's
ability. Such inspector shall receive the written ballots, count the votes and
make and sign a certificate of the result thereof. The chairman of the meeting
may appoint any person to serve as inspector, except no candidate for the office
of director shall be appointed as an inspector.
Unless otherwise provided in the Certificate of Incorporation,
cumulative voting for the election of directors shall be prohibited.
Section 10. Conduct of Meetings. The meetings of the stockholders
shall be presided over by the Chairman of the Board, or if the Chairman of the
Board is not present, by the President, or if the President is not present, by
the Vice Chairman of the Board, or if neither the Chairman of the Board, the
President nor the Vice Chairman of the Board is present, by a chairman elected
at the meeting. The Secretary of the Corporation, if present, shall act as
secretary of such meetings, or if the Secretary is not present, the Deputy
Corporate Secretary or an Assistant Secretary shall so act; if neither the
Secretary or the Deputy Corporate Secretary or an Assistant Secretary is
present, then a secretary shall be appointed by the chairman of the meeting.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to the chairman in
order.
Section 11. Treasury Stock. The Corporation shall not vote, directly
or indirectly, shares of its own stock owned by it and such shares shall not be
counted for quorum purposes. Nothing in this Section 11 shall be construed as
limiting the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
Section 12. Business to Be Brought Before the Annual Meeting. To be
properly brought before the annual meeting of stockholders, business must be
either (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (b) otherwise brought before
the meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 12 of Article II, who shall be entitled to vote at such meeting and who
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complies with the notice procedures set forth in this Section 12 of Article II.
In addition to any other applicable requirements, for business to be brought
before an annual meeting by a stockholder of the Corporation, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 90 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders of the Corporation. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (iii) the
acquisition date, the class and the number of shares of voting stock of the
Corporation which are owned beneficially by the stockholder, (iv) any material
interest of the stockholder in such business, and (v) a representation that the
stockholder intends to appear in person or by proxy at the meeting to bring the
proposed business before the meeting.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 12.
The chairman of the annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 12 of
Article II, and if the chairman should so determine, the chairman shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
Notwithstanding the foregoing provisions of this Section 12 of Article
II, a stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section 12.
Article III
Board of Directors
Section 1. Power; Number; Term of Office. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors, and subject to the restrictions imposed by law or the Certificate of
Incorporation, the Board of Directors may exercise all the powers of the
Corporation.
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The number of directors which shall constitute the whole Board of
Directors shall be determined from time to time by the Board of Directors
(provided that no decrease in the number of directors which would have the
effect of shortening the term of an incumbent director may be made by the Board
of Directors). If the Board of Directors makes no such determination, the
number of directors shall be three. Each director shall hold office for the
term for which such director is elected, and until such Director's successor
shall have been elected and qualified or until such Director's earlier death,
resignation or removal.
Unless otherwise provided in the Certificate of Incorporation, directors
need not be stockholders nor residents of the state of incorporation of the
Corporation.
Section 2. Quorum; Voting. Unless otherwise provided in the
Certificate of Incorporation, a majority of the total number of directors shall
constitute a quorum for the transaction of business of the Board of Directors
and the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 3. Place of Meetings; Order of Business. The directors may
hold their meetings and may have an office and keep the books of the
Corporation, except as otherwise provided by law, in such place or places,
within or without the state of incorporation of the Corporation, as the Board of
Directors may from time to time determine. At all meetings of the Board of
Directors business shall be transacted in such order as shall from time to time
be determined by the Chairman of the Board, or in the Chairman of the Board's
absence by the President (should the President be a director), or in the
President's absence by the Vice Chairman of the Board, or by the Board of
Directors.
Section 4. First Meeting. Each newly elected Board of Directors may
hold its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as the
annual meeting of the stockholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each year at which
a quorum shall be present, held next after the annual meeting of stockholders,
the Board of Directors shall elect the officers of the Corporation.
Section 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by the Chairman of the Board or, in the absence of the Chairman of
the Board, by the President (should the President be a director), or in the
President's absence, by the Vice Chairman of the Board. Notice of such regular
meetings shall not be required.
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Section 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President (should the
President be a director) or the Vice Chairman of the Board or, on the written
request of any two directors, by the Secretary, in each case on at least
twenty-four (24) hours personal, written, telegraphic, cable or wireless notice
to each director. Such notice, or any waiver thereof pursuant to Article VII,
Section 3 hereof, need not state the purpose or purposes of such meeting, except
as may otherwise be required by law or provided for in the Certificate of
Incorporation or these Bylaws. Meetings may be held at any time without notice
if all the directors are present or if those not present waive notice of the
meeting in writing.
Section 7. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders (a) by or at the direction
of the Board of Directors or (b) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 7 of Article III, who shall be entitled to vote for the election of
directors at the meeting and who complies with the notice procedures set forth
in this Section 7 of Article III. Such nominations, other than those made by or
at the direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation (i) with respect to an election
to be held at the annual meeting of the stockholders of the Corporation, 90 days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders of the Corporation, and (ii) with respect to an election to be held
at a special meeting of stockholders of the Corporation for the election of
directors, not later than the close of business on the 10th day following the
day on which such notice of the date of the meeting was mailed or public
disclosure of the date of the meeting was made, whichever first occurs. Such
stockholder's notice to the Secretary shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or re-election as a director,
all information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors, or is otherwise required,
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including the written consent of such person to be named in the proxy statement
as a nominee and to serve as a director if elected); and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
Corporation's books, of such stockholder, and (ii) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
stockholder. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee.
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In the event that a person is validly designated as nominee to the Board
and shall thereafter become unable or unwilling to stand for election to the
Board of Directors, the Board of Directors or the stockholder who proposed such
nominee, as the case may be, may designate a substitute nominee.
No person shall be eligible to serve as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section 7
of Article III. The chairman of the meeting of stockholders shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by the Bylaws, and if the chairman
should so determine, the chairman shall so declare to the meeting and the
defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this Section 7 of Article
III, a stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section 7 of Article
III.
Section 8. Removal. Any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors.
Section 9. Vacancies; Increases in the Number of Directors. Unless
otherwise provided in the Certificate of Incorporation, vacancies existing on
the Board of Directors for any reason and newly created directorships resulting
from any increase in the authorized number of directors may be filled by the
affirmative vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director; and any director so chosen shall
hold office until the next annual election and until such Director's successor
shall have been elected and qualified, or until such Director's earlier death,
resignation or removal.
Section 10. Compensation. Directors and members of standing committees
may receive such compensation as the Board of Directors from time to time shall
determine to be appropriate, and shall be reimbursed for all reasonable expenses
incurred in attending and returning from meetings of the Board of Directors.
Section 11. Action Without a Meeting; Telephone Conference Meeting.
Unless otherwise restricted by the Certificate of Incorporation, any action
required or permitted to be taken at any meeting of the Board of Directors, or
any committee designated by the Board of Directors, may be taken without a
meeting if all members of the Board of Directors or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee. Such consent
shall have the same force and effect as a unanimous vote at a meeting, and
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may be stated as such in any document or instrument filed with the Secretary of
State of the state of incorporation of the Corporation.
Unless otherwise restricted by the Certificate of Incorporation, subject
to the requirement for notice of meetings, members of the Board of Directors, or
members of any committee designated by the Board of Directors, may participate
in a meeting of such Board of Directors or committee, as the case may be, by
means of a conference telephone connection or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in such a meeting shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
Section 12. Approval or Ratification of Acts or Contracts by
Stockholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the stockholders,
or at any special meeting of the stockholders called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by the vote of the stockholders holding a majority of
the issued and outstanding shares of stock of the Corporation entitled to vote
and present in person or by proxy at such meeting (provided that a quorum is
present) shall be as valid and as binding upon the Corporation and upon all the
stockholders as if it has been approved or ratified by every stockholder of the
Corporation.
Article IV
Committees
Section 1. Executive Committee. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, designate an
Executive Committee consisting of one or more of the directors of the
Corporation, one of whom shall be designated chairman of the Executive
Committee. During the intervals between the meetings of the Board of Directors,
the Executive Committee shall possess and may exercise all the powers of the
Board of Directors, including the power to authorize the seal of the Corporation
to be affixed to all papers which may require it; provided, however, that the
Executive Committee shall not have the power or authority of the Board of
Directors in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution of the Corporation, amending, altering or repealing
these Bylaws or adopting new bylaws for the Corporation or otherwise acting
where action by the Board of Directors is specified by the Delaware General
Corporation Law. The Executive
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Committee shall also have, and may exercise, all the powers of the Board of
Directors, except as aforesaid, whenever a quorum of the Board of Directors
shall fail to be present at any meeting of the Board.
Section 2. Audit Committee. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate an Audit
Committee consisting of one or more of the directors of the Corporation, one of
whom shall be designated chairman of the Audit Committee. The Audit Committee
shall have and may exercise such powers and authority as provided in the
resolution creating it and as determined from time to time by the Board of
Directors.
Section 3. Other Committees. The Board of Directors may, by resolution
passed from time to time by a majority of the whole Board of Directors,
designate such other committees as it shall see fit consisting of one or more of
the directors of the Corporation, one of whom shall be designated chairman of
each such committee. Any such committee shall have and may exercise such powers
and authority as provided in the resolution creating it and as determined from
time to time by the Board of Directors.
Section 4. Procedure; Meetings; Quorum. Any committee designated
pursuant to this Article IV shall keep regular minutes of its actions and
proceedings in a book provided for that purpose and report the same to the Board
of Directors at its meeting next succeeding such action, shall fix its own rules
or procedures, and shall meet at such times and at such place or places as may
be provided by such rules, or by such committee or the Board of Directors.
Should a committee fail to fix its own rules, the provisions of these Bylaws,
pertaining to the calling of meetings and conduct of business by the Board of
Directors, shall apply as nearly as may be. At every meeting of any such
committee, the presence of a majority of all the members thereof shall
constitute a quorum, except as provided in Section 5 of this Article IV, and the
affirmative vote of a majority of the members present shall be necessary for the
adoption by it of any resolution.
Section 5. Substitution and Removal of Members; Vacancies. The Board
of Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of the absent or
disqualified member. The Board of Directors shall have the power at any time to
remove any member(s) of a committee and to appoint other directors in lieu of
the person(s) so removed and shall also have the power to fill vacancies in a
committee.
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Article V
Officers
Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a Chairman of the Board, a President, a President-North
American Operations, one or more Presidents-International Operations, one or
more Vice Presidents (any one or more of whom may be designated Executive Vice
President or Senior Vice President), a General Counsel, a Treasurer, a Secretary
and such other officers as the Board of Directors may from time to time elect or
appoint (including, but not limited to, a Vice Chairman of the Board, a Deputy
Corporate Secretary, one or more Assistant Secretaries and one or more Assistant
Treasurers). Each officer shall hold office until such officer's successor
shall be duly elected and shall qualify or until such officer's death or until
such officer shall resign or shall have been removed. Any number of offices may
be held by the same person, unless the Certificate of Incorporation provides
otherwise. Except for the Chairman of the Board and the Vice Chairman of the
Board, no officer need be a director.
Section 2. Powers and Duties of the Chairman of the Board. The
Chairman of the Board shall be the chief executive officer of the Corporation.
Subject to the control of the Board of Directors and the Executive Committee (if
any), the Chairman of the Board shall have general executive charge, management
and control of the properties, business and operations of the Corporation with
all such powers as may be reasonably incident to such responsibilities; may
agree upon and execute all leases, contracts, evidences of indebtedness and
other obligations in the name of the Corporation and may sign all certificates
for shares of capital stock of the Corporation; and shall have such other powers
and duties as designated in accordance with these Bylaws and as from time to
time may be assigned to the Chairman of the Board by the Board of Directors. The
Chairman of the Board shall preside at all meetings of the stockholders and of
the Board of Directors.
Section 3. Powers and Duties of the President, President-North American
Operations, and President-International Operations.
(a) Unless the Board of Directors otherwise determines, the President
shall have the authority to agree upon and execute all leases, contracts,
evidences of indebtedness and other obligations in the name of the Corporation;
and, unless the Board of Directors otherwise determines, the President shall, in
the absence of the Chairman of the Board or if there be no Chairman of the
Board, preside at all meetings of the stockholders and (should the President be
a director) of the Board of Directors; and the President shall have such other
powers and duties as designated in accordance with these
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Bylaws and as from time to time may be assigned to the President by the Board of
Directors or the Chairman of the Board.
(b) Unless the Board of Directors otherwise determines, the
President-North American Operations shall have the authority to agree upon and
execute all leases, contracts, evidences of indebtedness and other obligations
in the name of the Corporation pertaining to the Corporation's North American
operations; and the President- North American Operations shall have such other
powers and duties as designated in accordance with these Bylaws and as from time
to time may be assigned to the President-North American Operations by the Board
of Directors or the Chairman of the Board.
(c) Unless the Board of Directors otherwise determines, each
President-International Operations shall have the authority to agree upon and
execute all leases, contracts, evidences of indebtedness and other obligations
in the name of the Corporation pertaining to the Corporation's international
operations; and each President- International Operations shall have such other
powers and duties as designated in accordance with these Bylaws and as from time
to time may be assigned to each President-International Operations by the Board
of Directors or the Chairman of the Board.
Section 4. Powers and Duties of the Vice Chairman of the Board. The
Board of Directors may assign areas of responsibility to the Vice Chairman of
the Board, and, in such event, and subject to the overall direction of the
Chairman of the Board and the Board of Directors, the Vice Chairman of the Board
shall be responsible for supervising the management of the affairs of the
Corporation and its subsidiaries within the area or areas assigned and shall
monitor and review on behalf of the Board of Directors all functions within the
corresponding area or areas of the Corporation and each such subsidiary of the
Corporation. In the absence of the President, or in the event of the
President's inability or refusal to act, the Vice Chairman of the Board shall
perform the duties of the President, and when so acting shall have all the
powers of and be subject to all the restrictions upon the President. Further,
the Vice Chairman of the Board shall have such other powers and duties as
designated in accordance with these Bylaws and as from time to time may be
assigned to the Vice Chairman of the Board by the Board of Directors or the
Chairman of the Board.
Section 5. Vice Presidents. Each Vice President shall at all times
possess power to sign all certificates, contracts and other instruments of the
Corporation, except as otherwise limited in writing by the Chairman of the
Board, the President or the Vice Chairman of the Board or of the Corporation.
Each Vice President shall have such other powers and duties as from time to time
may be assigned to such Vice President by the Board of Directors, the Chairman
of the Board, the President or the Vice Chairman of the Board.
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Section 6. General Counsel. The General Counsel shall act as chief
legal advisor to the Corporation. The General Counsel may have one or more
staff attorneys and assistants, and may retain other attorneys to conduct the
legal affairs and litigation of the Corporation under the General Counsel's
supervision.
Section 7. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of the Board of Directors and the
stockholders, in books provided for that purpose; shall attend to the giving and
serving of all notices; may in the name of the Corporation affix the seal of the
Corporation to all contracts of the Corporation and attest the affixation of the
seal of the Corporation thereto; may sign with the other appointed officers all
certificates for shares of capital stock of the Corporation; shall have charge
of the certificate books, transfer books and stock ledgers, and such other books
and papers as the Board of Directors may direct, all of which shall at all
reasonable times be open to inspection of any director upon application at the
office of the Corporation during business hours; shall have such other powers
and duties as designated in these Bylaws and as from time to time may be
assigned to the Secretary by the Board of Directors, the Chairman of the Board,
the President or the Vice Chairman of the Board; and shall in general perform
all acts incident to the office of Secretary, subject to the control of the
Board of Directors, the Chairman of the Board, the President or the Vice
Chairman of the Board.
Section 8. Deputy Corporate Secretary and Assistant Secretaries. The
Deputy Corporate Secretary and each Assistant Secretary shall have the usual
powers and duties pertaining to such offices, together with such other powers
and duties as designated in these Bylaws and as from time to time may be
assigned to the Deputy Corporate Secretary or an Assistant Secretary by the
Board of Directors, the Chairman of the Board, the President, the Vice Chairman
of the Board, or the Secretary. The Deputy Corporate Secretary shall exercise
the powers of the Secretary during that officer's absence or inability or
refusal to act.
Section 9. Treasurer. The Treasurer shall have responsibility for the
custody and control of all the funds and securities of the Corporation, and
shall have such other powers and duties as designated in these Bylaws and as
from time to time may be assigned to the Treasurer by the Board of Directors,
the Chairman of the Board, the President or the Vice Chairman of the Board. The
Treasurer shall perform all acts incident to the position of Treasurer, subject
to the control of the Board of Directors, the Chairman of the Board, the
President and the Vice Chairman of the Board; and the Treasurer shall, if
required by the Board of Directors, give such bond for the faithful discharge of
the Treasurer's duties in such form as the Board of Directors may require.
Section 10. Assistant Treasurers. Each Assistant Treasurer shall have
the usual powers and duties pertaining to such office, together with such other
powers and duties as
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<PAGE> 19
designated in these Bylaws and as from time to time may be assigned to each
Assistant Treasurer by the Board of Directors, the Chairman of the Board, the
President, the Vice Chairman of the Board, or the Treasurer. The Assistant
Treasurers shall exercise the powers of the Treasurer during that officer's
absence or inability or refusal to act.
Section 11. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the Chairman of the Board,
the President or the Vice Chairman of the Board, together with the Secretary,
the Deputy Corporate Secretary or any Assistant Secretary shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of security holders of or with respect to any action of security
holders of any other corporation in which this Corporation may hold securities
and otherwise to exercise any and all rights and powers which this Corporation
may possess by reason of its ownership of securities in such other corporation.
Section 12. Delegation. For any reason that the Board of Directors may
deem sufficient, the Board of Directors may, except where otherwise provided by
statute, delegate the powers or duties of any officer to any other person, and
may authorize any officer to delegate specified duties of such officer to any
other person. Any such delegation or authorization by the Board shall be
effected from time to time by resolution of the Board of Directors.
Article VI
Capital Stock
Section 1. Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
that required by law and the Certificate of Incorporation, as shall be approved
by the Board of Directors. Every holder of stock represented by certificates
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman of the Board, President, Vice Chairman of the Board
or a Vice President and the Secretary, Deputy Corporate Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation representing the number of shares (and, if the stock of the
Corporation shall be divided into classes or series, certifying the class and
series of such shares) owned by such stockholder which are registered in
certified form; provided, however, that any of or all the signatures on the
certificate may be facsimile. The stock record books and the blank stock
certificate books shall be kept by the Secretary, or at the office of such
transfer agent or transfer agents as the Board of Directors may from time to
time determine. In case any officer, transfer agent or registrar who shall have
signed or whose facsimile signature or signatures shall have been placed upon
any such certificate or certificates shall have ceased to be such officer,
transfer agent or registrar before such certificate is
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<PAGE> 20
issued by the Corporation, such certificate may nevertheless be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue. The stock certificates shall be
consecutively numbered and shall be entered in the books of the Corporation as
they are issued and shall exhibit the holder's name and number of shares.
Section 2. Transfer of Shares. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal representatives
upon surrender and cancellation of certificates for a like number of shares.
Upon surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 3. Ownership of Shares. The Corporation shall be entitled to
treat the holder of record of any share or shares of capital stock of the
Corporation as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the state of
incorporation of the Corporation.
Section 4. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Corporation.
Section 5. Lost or Destroyed Certificates. The Board of Directors may
determine the conditions upon which the Corporation may issue a new certificate
of stock in place of a certificate theretofore issued by it which is alleged to
have been lost, stolen or destroyed and may require the owner of such
certificate or such owner's legal representative to give bond, with surety
sufficient to indemnify the Corporation and each transfer agent and registrar
against any and all losses or claims which may arise by reason of the alleged
loss, theft or destruction of any such certificate or the issuance of such new
certificate in the place of the one so lost, stolen or destroyed.
Article VII
Miscellaneous Provisions
Section 1. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of January of each year.
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<PAGE> 21
Section 2. Corporate Seal. The corporate seal shall be circular in
form and shall have inscribed thereon the name of the Corporation and the state
of its incorporation, which seal shall be in the charge of the Secretary and
shall be affixed to certificates of stock, debentures, bonds, and other
documents, in accordance with the direction of the Board of Directors or a
committee thereof, and as may be required by law; however, the Secretary may, if
the Secretary deems it expedient, have a facsimile of the corporate seal
inscribed on any such certificates of stock, debentures, bonds, contracts or
other documents. Duplicates of the seal may be kept for use by the Deputy
Corporate Secretary or any Assistant Secretary.
Section 3. Notice and Waiver of Notice. Whenever any notice is
required to be given by law, the Certificate of Incorporation or under the
provisions of these Bylaws, said notice shall be deemed to be sufficient if
given (i) by telegraphic, cable or wireless transmission (including by telecopy
or facsimile transmission) or (ii) by deposit of the same in a post office box
or by delivery to an overnight courier service company in a sealed prepaid
wrapper addressed to the person entitled thereto at such person's post office
address, as it appears on the records of the Corporation, and such notice shall
be deemed to have been given on the day of such transmission or mailing or
delivery to courier, as the case may be.
Whenever notice is required to be given by law, the Certificate of
Incorporation or under any of the provisions of these Bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person, including without limitation a director, at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation or these Bylaws.
Section 4. Facsimile Signatures. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors.
Section 5. Reliance upon Books, Reports and Records. A member of the
Board of Directors, or a member of any committee designated by the Board of
Directors, shall, in the performance of such person's duties, be fully protected
in relying in good faith upon the records of the Corporation and upon such
information, opinion, reports or statements
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<PAGE> 22
presented to the Corporation by any of the Corporation's officers or employees,
or committees of the Board of Directors, or by any other person as to matters
the member reasonably believes are within such other person's professional or
expert competence and who has been selected with reasonable care by or on behalf
of the Corporation.
Section 6. Application of Bylaws. In the event that any provisions of
these Bylaws is or may be in conflict with any law of the United States, of the
state of incorporation of the Corporation or of any other governmental body or
power having jurisdiction over this Corporation, or over the subject matter to
which such provision of these Bylaws applies, or may apply, such provision of
these Bylaws shall be inoperative to the extent only that the operation thereof
unavoidably conflicts with such law, and shall in all other respects be in full
force and effect.
Article VIII
Amendments
The Board of Directors shall have the power to adopt, amend and repeal
from time to time Bylaws of the Corporation, subject to the right of the
stockholders entitled to vote with respect thereto to amend or repeal such
Bylaws as adopted or amended by the Board of Directors.
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<PAGE> 1
Exhibit 4.3(a)
AMENDMENT TO
AMENDED AND RESTATED ENRON OIL & GAS COMPANY
1994 STOCK PLAN
WHEREAS, ENRON OIL & GAS COMPANY (the "Company") has heretofore
adopted and maintains the Amended and Restated Enron Oil & Gas Company 1994
Stock Plan (the "Plan"); and
WHEREAS, the Company desires to amend the Plan (a) to provide for the
increase in the number of shares available for grant, and (b) to revise the
definition of "retirement";
NOW, THEREFORE the plan is amended as follows:
A. Section 3.1 (i) is hereby rescinded and amended in its
entirety to read as follows:
"(i) Calculation of Number of Shares Available. The number
of shares available for granting Awards under the Plan shall
be six million (6,000,000) Shares, subject to adjustment as
provided in Section 3.2"
B. Section 10 (q) is hereby rescinded and amended in its entirety
to read as follows:
"(q) "Retirement" shall mean with respect to an Employee of
the Company or one of its subsidiaries, after attainment of
age 55 with at least 5 years of service, the Employee's
termination of employment and eligibility to receive benefits
under the Enron Corp. Retirement Plan."
AS AMENDED HEREBY, the Plan is specifically ratified and reaffirmed.
Date effective as of December 12, 1995.
ATTEST: ENRON OIL & GAS COMPANY
/s/ ANGUS H. DAVIS /s/ J. CHRIS BRYAN
________________________ ________________________
Angus H. Davis J. Chris Bryan
Vice President, Communications Vice President, Administration &
and Corporate Secretary Human Resources
<PAGE> 1
Exhibit 10.3
1995 TAX ALLOCATION AGREEMENT
THIS 1995 TAX ALLOCATION AGREEMENT ("Agreement") is entered into
effective as of the Deconsolidation Date between Enron Corp., a Delaware
corporation with its principal place of business being Houston, Texas
("Enron"), Enron Oil & Gas Company, also a Delaware corporation with its
principal place of business being Houston, Texas ("EOG"), and those
subsidiaries of EOG listed below as additional parties. (Enron, EOG, and those
EOG subsidiaries listed below are hereinafter collectively referred to as the
"Parties" and singularly as a "Party", while EOG and such subsidiaries are
collectively referred to as "EOG").
RECITALS
WHEREAS, Enron and EOG previously entered into that certain First
Amended and Restated Tax Allocation Agreement (hereinafter the "Base
Agreement") executed in August 1991 generally providing for the apportionment
and allocation of federal income and other tax liabilities between the Parties;
and
WHEREAS, the Parties subsequently modified the terms of the Base
Agreement, as reflected in Modification "A" to the First Amended and Restated
Tax Allocation Agreement executed in 1992 (the Base Agreement and Modification
"A" are hereinafter collectively referred to as the "Earlier Agreements") so as
to further specify their agreement as to the apportionment and allocation of
federal income and other tax liabilities; and
WHEREAS, Enron is considering selling a certain number of shares of
common stock that it owns in EOG, thus reducing its ownership interest in EOG
below 80 percent and thereby precluding Enron from continuing to include EOG in
the consolidated federal income tax returns prepared by Enron as common parent
for the taxable periods following the Deconsolidation Date;
WHEREAS, EOG has represented in various public statements that the
Deconsolidation, when coupled with the effectiveness of the Earlier Agreements
and this Agreement, will not have a material adverse effect on its financial
condition or results of operations; and
WHEREAS, the Earlier Agreements do not fully address the obligations
of the Parties vis-a-vis one another upon a Deconsolidation; and
WHEREAS, the Parties have agreed to change many of the provisions of
the Earlier Agreements and thus would like to memorialize such agreement
regarding their respective rights, obligations, and intentions as to any tax
payments to be made by EOG to Enron or by Enron to EOG for the
Post-Deconsolidation Date Period and, in particular, the Parties' rights,
obligations, and intentions with respect to (i) paragraph 7 of Modification "A"
and (ii) any refund of Taxes to be received by the Consolidated Group
attributable to the four years from 1988 through and including 1991, and have
such terms generally supersede those of the Earlier Agreements.
<PAGE> 2
NOW, THEREFORE, the Parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions: As used in this Agreement, the following terms
have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended, or
corresponding provisions of any subsequent federal tax laws.
"Consolidated Group" means the "affiliated group" of corporations of
which Enron is the "common parent corporation", as such terms are defined in
Code Section 1504(a)(1).
"Consolidated Minimum Tax Credit(s)" means the consolidated minimum
tax credit(s) computed in accordance with Code Sections 53, 1502, and 1503,
and shown on a Consolidated Return with respect to those tax periods up to and
including the Deconsolidation Date.
"Consolidated Return" means the consolidated federal income tax return
of the Consolidated Group for each taxable year as filed or to be filed by
Enron on behalf of the Consolidated Group.
"Consolidated Tax Liability" means, generally, the consolidated
federal income tax liability computed in accordance with Treasury Regulation
Section 1.1502-2 and shown on a Consolidated Return, taking into account all
credits to which the Consolidated Group is entitled under the Code, but not
taking into account any "consolidated alternative minimum tax liability" (as
provided under Code Sections 55, 1502, and 1503) or any Consolidated Minimum
Tax Credit.
"Deconsolidation" means that event which causes Enron to no longer
have the requisite ownership interest in EOG so as to allow the Parties to file
as a Consolidated Group.
"Deconsolidation Date" means that date when Enron and EOG no longer
constitute a Consolidated Group.
"Earlier Agreements" has that meaning ascribed to it in the Recitals.
"Party" and "Parties" have that meaning ascribed to them in the
Recitals.
"Pre-Deconsolidation Date Period" means, chronologically, those tax
years prior to the 1995 tax year plus that period in time beginning January 1,
1995 and ending on and including the Deconsolidation Date.
"Post-Deconsolidation Date Period" means, chronologically, that period
following the Deconsolidation Date.
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<PAGE> 3
"Taxes" or "Tax" means federal income taxes as provided in Code
Section 11, alternative minimum tax as provided in Code Section 55, and any
state taxes measured by net income (including state taxes measured by net income
reflected in any Unitary Tax Returns filed by Enron) and any interest or
penalties thereon. The term Taxes or Tax, however, specifically excludes any
tax imposed by any foreign government.
"Unitary Tax Return" means a state income tax return which reflects
the combined and/or consolidated reporting (either on a domestic or worldwide
basis) of Enron and its affiliates for a state which either (i) imposes its
income tax on its apportioned and/or allocable share of the net income and its
United States affiliates that are engaged in a "unitary business", part of
which is conducted in the state or (ii) imposes its income tax on its
apportioned and/or allocable share of the net income of a taxpayer and its
affiliates--both domestic and foreign--that are engaged in a unitary business.
Other terms defined herein have the meanings given them.
ARTICLE II
TAX INDEMNIFICATION
2.1 Enron's Tax Indemnification for the Pre-Deconsolidation Date
Period: Enron shall be liable for, indemnify, and hold EOG harmless for all
Taxes (i) imposed on or incurred by EOG for the Pre-Deconsolidation Date Period
and (ii) equitably apportioned to EOG by Enron for all tax periods beginning
before and ending after the Deconsolidation Date. Enron, in turn, shall be
entitled to receive all refunds of such Taxes, if any, from either the
applicable tax authorities or EOG (in the event such refund(s) have been made
directly to EOG), except with respect to the $10.5 million amount set forth in
Section 2.4(a) below.
2.2 EOG's 1995 Tax Liability and Payment
(a) EOG's sole liability for Taxes for the portion of the
Pre-Deconsolidation Date Period attributable to the 1995 tax year shall be
based on EOG's preparation of its portion of Enron's 1995 Consolidated Return
and Enron's review thereof. Any discrepancies between EOG's return position
and Enron's subsequent review shall be resolved by consultation by each Party's
respective tax officers and Enron's ultimate determination shall be controlling
as long as such determination does not have a material adverse effect on EOG's
financial condition or results of operations.
(b) The Parties agree that in determining EOG's allocable
share of the (i) Unitary and (ii) Consolidated Tax Liabilities for the 1995 tax
year that they shall follow the allocation and methodology set forth in the
Earlier Agreements.
(c) EOG shall pay Enron its allocable share of the
estimated Unitary and Consolidated Tax Liabilities for the 1995 tax year, net
of any 1995 Code Section 29 credits, within 45 days from the Deconsolidation
Date. A "true-up" payment shall be made by EOG to Enron or Enron to EOG, if
any, within 15 days after Enron's subsequent determination of EOG's liability
based on
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<PAGE> 4
taxable income and tax credits reported as part of Enron's 1995 Unitary and
Consolidated Returns and EOG's separate state Tax returns.
(d) Enron shall be liable for, indemnify, and hold EOG
harmless for all Taxes attributable to the event of Deconsolidation.
2.3 Government of India Taxes: Enron shall be liable for,
indemnify, and hold EOG harmless for additional taxes, interest, and penalties
assessed by India (including all third-party professional fees and
out-of-pocket costs incurred with respect to the conduct of any audit or the
defense against any assessment) due to (i) a disallowance of deduction for
pre-production sharing costs in fiscal years ended March 31, 1994 and March 31,
1995 and (ii) the failure to file an Association of Persons Return ("AOP") for
the year ended March 31, 1995. Enron shall also be liable for, indemnify, and
hold EOG harmless for any payment required to be made to Reliance Industries
Limited or its affiliates ("RIL") or Oil & Natural Gas Corporation Limited
("ONGC") and all third-party professional fees and out-of-pocket costs incurred
by EOG with respect to the defense against any action or claim made by RIL or
ONGC due to the failure to file AOP for the period ended March 31, 1995.
2.4 Other Payments to be Made Between the Parties
(a) Enron is obligated to pay to EOG $10.5 million
attributable to a federal income tax refund to be received by Enron for the
four tax years from 1988 through and including 1991.
(b) In consideration of Enron's tax indemnification as
set forth in Sections 2.1 and 2.3 to this Agreement, EOG shall be obligated to
pay to Enron $13 million no later than on the Deconsolidation Date.
(c) In the event Enron has not paid EOG the $10.5 million
refund amount by the Deconsolidation Date, EOG shall have the right to offset
its $13 million indemnification payment obligation to Enron by such $10.5
million sum thus resulting in a net payment by EOG to Enron of $2.5 million no
later than on the Deconsolidation Date.
ARTICLE III
MINIMUM TAX CREDIT
AND RELATED MATTERS ASSOCIATED WITH DECONSOLIDATION
3.1 Consolidated Minimum Tax Credit
(a) As currently calculated by Enron, no Consolidated
Minimum Tax Credits have been allocated to EOG by Enron based on Consolidated
Returns filed through tax year ended December 31, 1994 under the methodology
followed for the Pre-Deconsolidation Date Period and Enron has not made any
determination of EOG's allocable share of Consolidated Minimum Tax
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<PAGE> 5
Credits for the 1995 tax year. In the event Consolidated Minimum Tax Credits
are allocated to EOG, EOG shall be obligated to reimburse Enron for the amount
of such credits allocated to EOG. EOG shall make a good faith effort to
utilize such credits. Payments to be made by EOG to Enron shall be made upon
the occurrence of the earlier of the following two events:
(i) The date of EOG's filing of its federal
income tax return for the tax year in the Post-Deconsolidation Date
Period when EOG utilizes any reallocated Consolidated Minimum Tax
Credits; or
(ii) The date EOG's liability is reduced by such
credits if not on an original return and EOG receives a refund or
reduces a payment otherwise required to be made.
(b) For purposes of Section 3.1(a) any minimum tax
credits generated by EOG in the Post-Deconsolidation Date Period shall be
disregarded in making this determination.
(c) For purposes of Section 3.1(a), any payments to be
made between EOG and Enron may be made for more than one tax year of the
Post-Deconsolidation Date Period until the reallocated Consolidated Minimum Tax
Credit is used (or could have been used) in its entirety.
3.2 Consolidated Minimum Tax Credit Allocation Adjustments: In
the event the amount of the Consolidated Minimum Tax Credits allocated to EOG
are adjusted resulting in a reduction of Consolidated Minimum Tax Credits
previously utilized by EOG and a payment has been made by EOG to Enron pursuant
to the terms of Section 3.1, Enron shall be obligated to pay EOG for any
assessment of Taxes made against it by the Internal Revenue Service
attributable to such adjustment from the date of payment pursuant to Section
3.1. Payment shall be made by Enron to EOG on the day EOG pays the Internal
Revenue Service for such assessment.
ARTICLE IV
AUDITS AND OTHER TAX PROCEEDINGS
4.1 General Cooperation and Exchange of Information
(a) EOG shall provide, or cause to be provided, to Enron
copies of all correspondence received from any taxing authority by EOG in
connection with the liability of the Parties for Taxes for the
Pre-Deconsolidation Date Period. EOG shall also provide Enron with access to
or copies of any materials requested by Enron which would assist Enron in
resolving any tax matters for the Consolidated Group for the
Pre-Deconsolidation Date Period. Further, the Parties will provide each other
with such cooperation and information as they may reasonably request of each
other in preparing or filing any return, amended return, or claim for refund,
in determining liability or right of refund, or in conducting any audit or
other proceeding, in respect of Taxes imposed on the Parties or their
respective affiliates.
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<PAGE> 6
(b) Enron on one hand and EOG on the other hand and their
affiliates will preserve and retain all returns, schedules, workpapers, and all
material records or other documents relating to any such returns, claims,
audits, or other proceedings until the expiration of the statutory period of
limitations (including extensions) of the taxable periods to which such
documents relate and until the final determination of any payments which may be
required with respect to such periods under this Agreement and shall make such
documents available at the then-current corporate headquarters of such Party to
the other Party or any affiliate thereof, and their respective officers,
employees, and agents, upon reasonable notice and at reasonable times, it being
understood that such representative shall be entitled to make copies of any
such books and records relating to Enron or EOG as they shall deem necessary.
(c) Enron on one hand and EOG on the other hand further
agree to permit representatives of the other Party or any affiliate thereof to
meet with employees of such Party on a mutually convenient basis in order to
enable such representatives to obtain additional information and explanations
of any documents provided pursuant to this Section 4.1. Enron on one hand and
EOG on the other hand shall make available to the representatives of the other
Party or any affiliate thereof sufficient workspace and facilities to perform
the activities described in this Section. Any information obtained pursuant to
this Section 4.1 shall be kept confidential, except as may be otherwise
necessary in connection with the filing of returns or claims for refund or in
conducting any audit or other proceeding. Each Party shall provide the
cooperation and information required by this Section 4.1 at its own expense.
4.2 Audits: In the event of an audit by the Internal Revenue
Service, or by any state or local tax authority, of a return filed by Enron for
the Pre-Deconsolidation Date Period, Enron shall give EOG timely and reasonable
notice of audit proceedings and EOG will provide all necessary information and
other assistance reasonably requested by Enron with respect to issues
concerning the activities of EOG. All communications with the Internal Revenue
Service concerning such audit will be made by Enron unless otherwise agreed
between the Parties hereto.
4.3 Material Adverse Impact to EOG: Notwithstanding the
provisions of Section 4.2, the Parties agree that in no event shall Enron file
any amended tax return, claim for refund, or make any tax election affecting
the Pre-Deconsolidation Date Period that would have any material adverse
impact on EOG's financial condition or results of operations without first
obtaining the written permission of EOG.
ARTICLE V
UNITARY TAX RETURNS
FOR POST-DECONSOLIDATION DATE PERIOD FILINGS
Enron agrees to continue to file any Unitary Tax Returns and allocate
Unitary tax liability for the Post-Deconsolidation Date Period in which the
operations of EOG are reflected in a manner consistent with the methodology
followed for the Pre-Deconsolidation Date Period.
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<PAGE> 7
ARTICLE VI
OTHER PROVISIONS
6.1 Effect of the Agreement: The obligations of the Parties set
forth under this Agreement shall be unconditional and absolute, and shall
remain in effect without limitation as to time. Further, all prior tax sharing
and allocation agreements between Enron and EOG (including the Earlier
Agreements) shall terminate effective as of the Deconsolidation Date, except
that those provisions of the Earlier Agreement regarding the allocation of
Consolidated Tax Liability shall remain in effect for the 1995 tax year until
the provisions of Section 2.2 of this Agreement are fully implemented by the
Parties.
6.2 Conflict or Ambiguity: Because the terms of this Agreement
generally supersede the terms of the Earlier Agreements, the Parties agree that
if there is any conflict or ambiguity between the Earlier Agreements and this
Agreement the terms of this Agreement shall control.
6.3 Assignability: The rights and obligations of the Parties under
this Agreement may not be assigned by a Party without the prior written consent
of the other Party to this Agreement.
6.4 Governing Law: This Agreement shall be governed by the laws of
the state of Texas.
IN WITNESS WHEREOF, the Parties hereto have caused their names to be
subscribed and executed by the respective authorized officers on the dates
indicated, effective as of the date first written above.
ENRON CORP.
By: /s/ ROBERT J. HERMANN
___________________________________
Robert J. Hermann
Vice President, Tax
Date: December 11, 1995
__________________________________
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<PAGE> 8
ENRON OIL & GAS COMPANY
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
ENRON OIL & GAS INTERNATIONAL, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
EOGI-TRINIDAD, INC.
By: /s/ SUSAN M. MURRAY
___________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
_________________________________
EOGI-AUSTRALIA, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
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<PAGE> 9
EOGI-FRANCE, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
EOGI-RUSSIA, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
EOGI-QATAR, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
EOGI-UZBEKISTAN, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
-9-
<PAGE> 10
EOGI-KUWAIT, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
ENRON OIL & GAS-CARTHAGE, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
ERSO, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
ENRON OIL & GAS PROPERTY MANAGEMENT, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
___________________________________
-10-
<PAGE> 11
ENRON OIL & GAS MARKETING, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
I N HOLDINGS, INC.
By: /s/ SUSAN M. MURRAY
_____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
___________________________________
NILO OPERATING COMPANY
By: /s/ SUSAN M. MURRAY
_____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
EOGI-TRINIDAD U(a) BLOCK, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
-11-
<PAGE> 12
EOGI-ALGERIA, INC.
By: /s/ SUSAN M. MURRAY
____________________________________
Susan M. Murray
Vice President, Tax
Date: December 11, 1995
__________________________________
-12-
<PAGE> 13
EOGI-KAZAKHSTAN, INC.
By: /s/ DENNIS M. ULAK
____________________________________
Dennis M. Ulak
Assistant Secretary
Date: 12-11-95
__________________________________
EOGI-INDIA, INC.
By: /s/ DENNIS M. ULAK
____________________________________
Dennis M. Ulak
Assistant Secretary
Date: 12-11-95
__________________________________
EOGI-CHINA, INC.
By: /s/ DENNIS M. ULAK
____________________________________
Dennis M. Ulak
Assistant Secretary
Date: 12-11-95
__________________________________
ENRON OIL & GAS INDIA LTD.
By: /s/ DENNIS M. ULAK
____________________________________
Dennis M. Ulak
Assistant Secretary
Date: 12-11-95
__________________________________
-13-
<PAGE> 14
EOGI-UNITED KINGDOM, INC.
By: /s/ ANGUS H. DAVIS
____________________________________
Angus H. Davis
Assistant Secretary
Date: December 11, 1995
__________________________________
-14-
<PAGE> 15
IN WITNESS WHEREOF, the Parties hereto have caused their names to be
subscribed and executed by the respective authorized officers on the dates
indicated, effective as of the date first written above.
ENRON OIL & GAS INVESTMENTS, INC.
By: /s/ DOUGLAS WEAVER
____________________________________
Douglas Weaver
President
-15-
<PAGE> 1
EXHIBIT 10.30
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of September 29, 1995, between Enron Corp.,
a Delaware corporation ("Lender"), and Enron Oil & Gas Company, a Delaware
corporation ("Borrower"). The parties hereto hereby agree as follows:
1. Loans. Subject to the terms and conditions of this Agreement,
Lender may make loans (the "Loans") from its available funds to Borrower from
time to time during the period from the date of this Agreement up to but not
including the Termination Date, as defined in Section 10, in an aggregate
principal amount up to but not exceeding the sum of Two Hundred Million Dollars
($200,000,000) at any one time outstanding. Within the limits of this
Agreement, Borrower may borrow, prepay pursuant to Section 4, and reborrow
under this Section 1. While the Lender has, and shall have, no obligation to
make Loans to the Borrower pursuant to this Agreement, the parties hereto agree
that any Loans by the Lender will be made in reliance on the agreements of the
Lender and the Borrower contained herein and on the terms and conditions and in
the manner provided herein. Lender may make Loans to Borrower and Borrower may
borrow under this Agreement when one or both of the following shall occur and
be continuing:
a. Borrower does not have the capacity, under any
committed revolving credit facility or facilities carried as back-stop
sources (the total of such committed revolving credit facility or
facilities, as such facility or facilities may be modified, amended,
supplemented, or replaced from time to time, shall hereinafter be
collectively referred to as "Committed Revolving Credit Capacity") to
obtain debt financing from any of its commercial paper programs,
uncommitted bank lines or comparable sources (the debt financing
that Borrower may obtain from such programs, credit lines and
comparable sources, as such programs, credit lines and comparable
sources may be modified, amended, supplemented, or replaced from time,
is collectively referred to herein as "Commercial Revolving Debt
Capacity").
b. Lender has temporary surplus cash available.
2. Interest. Interest on the outstanding and unpaid principal
amount of Loans made pursuant to this Agreement shall be calculated as follows:
a. On and after September 29, 1995 but before January 1,
1996. Borrower shall pay interest to Lender on the outstanding and
unpaid principal amount of the Loans made on and after September 29,
1995 but before January 1, 1996 pursuant to this Agreement at a rate
per annum equal to:
(1) the one month LIBOR rate as indicated by the
British Bankers Association Interest Settlement Rate
(displayed on the LIBO page of Telerate 3750) as of 11:00
a.m., London time, or if not available,
(2) the arithmetic mean of the rates at which
deposits in dollars are offered at the principal London office
of Bankers Trust Company and Citibank N.A. rounded
<PAGE> 2
to the nearest 1/16 of 1% (or, if there is no such nearest 1/16
of 1%, the next higher 1/16 of 1%) at approximately 11:00 a.m.,
London time, and in an amount that is representative for a
single transaction in the London interbank market at such time.
b. On and after January 1, 1996. On and after January
1, 1996, if the sum of the outstanding and unpaid principal amount of
the (i) Borrower's Commercial Revolving Debt Capacity and (ii) Loans
outstanding under this Agreement:
(1) is equal to or less than Borrower's Committed
Revolving Credit Capacity, then Borrower shall pay interest to
Lender on the outstanding and unpaid principal amount of Loans
made pursuant to this Agreement at a rate per annum equal to
the sum of the following, divided by two: (i) the daily
market borrowing cost of Borrower, as determined daily by
Lender's Treasury Department and (ii) the daily average rate,
as determined daily by Lender's Treasury Department, at which
Lender is able in accordance with Lender's Investment Policy
to invest temporary surplus cash.
(2) exceeds Borrower's Committed Revolving Credit
Capacity, then Borrower shall pay interest to Lender on the
outstanding and unpaid principal amount of Loans made pursuant
to this Agreement at a rate per annum equal to:
(a) the sum of the following, divided by
two: (i) the daily market borrowing cost of
Borrower, as determined daily by Lender's Treasury
Department and (ii) the daily average rate, as
determined daily by Lender's Treasury Department, at
which Lender is able in accordance with Lender's
Investment Policy to invest temporary surplus cash
available to Lender to the extent such cash is
available to Lender for use in such Loan(s), and/or
to the extent such cash is not available to Lender,
(b) the daily market borrowing cost of
Borrower plus the cost incurred by the Lender to
maintain committed revolving credit facilities, as
determined daily by Lender's Treasury Department.
Interest shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed. Interest shall be paid at the offices of
Lender at 1400 Smith Street, Houston, Texas 77002 in funds immediately
available to Lender on the fifth Business Day of each month. As used herein,
Business Day means any day other than a Saturday, a Sunday or a state or
federal bank holiday in Houston, Texas or New York, New York.
3. Note. All Loans made by Lender under this Agreement shall be
evidenced by, and repaid with interest in accordance with, a single
promissory note of Borrower in substantially the form annexed hereto as Exhibit
A (the "Note"), with appropriate insertions therein. The Note shall be used to
evidence each borrowing, repayment and reborrowing hereunder. The Note shall
(i) be dated the date of the first Loan evidenced thereby and (ii) be stated to
mature as to principal on the Termination Date. Lender is hereby authorized by
Borrower to endorse on the schedule attached to the Note the
2
<PAGE> 3
amount of each Loan and of each payment of principal received by Lender on
account of the Loans, which endorsement shall, in the absence of manifest error,
be conclusive as to the outstanding balance of the Loans made by Lender,
provided, however, that the failure to make such notation with respect to any
Loan or payment shall not limit or otherwise affect the obligations of Borrower
under this Agreement or the Note.
4. Prepayments. Borrower may prepay the Note in whole or in
part.
5. Acceleration. Lender reserves the right to require prepayment
of the Note upon demand, whereupon this Agreement shall be immediately
terminated and the principal amount of the Note, together with accrued interest
thereon, shall become immediately due and payable.
6. Use of Proceeds. The proceeds of the Loans hereunder shall be
used by Borrower to supplement working capital and for other general corporate
purposes.
7. Notices, Etc. All notices and other communications provided
for under this Agreement shall be in writing (including telegraphic
communication) and mailed, telecopied, telegraphed, or delivered, if to Lender,
at its address at 1400 Smith Street, Houston, Texas 77002, Attention: Vice
President, Finance and Treasurer, telecopy number (713) 853-3920 and if to
Borrower, at its address at 1400 Smith Street, Houston, Texas 77002, Attention:
Senior Vice President and Chief Financial Officer, telecopy number (713)
646-2548; or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party complying as to delivery with
the terms of this Section 7.
8. No Waiver; Remedies. No failure on the part of Lender to
exercise, and no delay in exercising, any right, power, or remedy under this
Agreement or the Note shall operate as a waiver thereof; nor shall any single
or partial exercise of any right under this Agreement or the Note preclude any
other or further exercise thereof or the exercise of any other right. The
remedies provided in this Agreement or the Note are cumulative and not
exclusive of any remedies provided by law.
9. Governing Law. This instrument shall be construed under the
laws of the State of Texas, and the obligation of Borrower to make payments of
interest as provided for herein is expressly limited so that the aggregate
amount of all the interest paid by Borrower on the Note shall never exceed the
highest rate allowed by the laws of the State of Texas as construed by the
highest court or courts having jurisdiction thereof (the "Legal Interest Rate");
and if, at the time any such payment of interest is due, the payment of such sum
would make the total interest exceed the Legal Interest Rate, the amount so
payable by Borrower shall be reduced to an amount which does not exceed Legal
Interest Rate; and, similarly, if the maturity of the Note is accelerated for
any reason before the due date stated, earned interest may never include more
than the Legal Interest Rate, it being the intention of the parties to conform
strictly to the laws of the State of Texas now in force, and in the event it
should be held that the interest payable under the Note or otherwise is in
excess of the Legal Interest Rate, the interest chargeable hereunder (whether
included in the face amount or otherwise) shall be reduced to the Legal Interest
Rate, and any amount in excess of the Legal Interest Rate shall be cancelled
automatically and shall be either refunded (if theretofore paid) or credited to
the principal amount due on the Note.
3
<PAGE> 4
10. Termination Date. The "Termination Date" means December 31,
1998. Notwithstanding the above, this Credit Agreement may be terminated upon
at least thirty (30) days prior written notice given by one party to the other;
provided, however, that the provisions of this Agreement shall survive as to
any Loans maturing after the effective termination date. Upon cancellation of
the last such Loan, this Agreement shall be of no further force and effect.
11. Captions. The captions of the various sections of this
Agreement have been inserted only for the purposes of convenience, and shall
not be deemed in any manner to modify, explain, enlarge or restrict any
provisions of this Agreement.
12. Entire Agreement. THIS AGREEMENT AND THE NOTE TOGETHER
CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
ENRON OIL & GAS COMPANY
By:__________________________________
Walter C. Wilson
Senior Vice President and
Chief Financial Officer
ENRON CORP.
By:__________________________________
Kurt S. Huneke
Vice President, Finance and Treasurer
4
<PAGE> 5
EXHIBIT A
PROMISSORY NOTE
Houston, Texas
$200,000,000 September 29, 1995
FOR VALUE RECEIVED, the undersigned, Enron Oil & Gas Company, a
Delaware corporation ("Borrower"), DOES HEREBY PROMISE to pay to the order of
Enron Corp. ("Lender") at its office at 1400 Smith Street, Houston, Texas
77002, in lawful money of the United States and in funds immediately available
to Lender, the principal amount of Two Hundred Million and No/100 Dollars
($200,000,000) or the aggregate unpaid principal amount of all loans (the
"Loans") made to Borrower by Lender pursuant to Section 1 of the Credit
Agreement hereinafter referred to, whichever is less, on demand or on December
31, 1998. Borrower further promises to pay interest in like money, at said
office, from the date hereof on the unpaid principal amount hereof until such
principal amount shall become due and payable, at the rates per annum and on
the dates provided in Section 2 of the Credit Agreement.
Each Loan made by the Lender to the Borrower pursuant to the Credit
Agreement, and all payments made on account of principal thereof, shall be
recorded by the Lender and endorsed on the Schedule attached hereto which is
part of this Promissory Note or in such other records as the Lender may
designate.
This Promissory Note is the Note described in and issued pursuant to
the Credit Agreement dated as of September 29, 1995, between Borrower and
Lender (the "Credit Agreement"), and is entitled to the benefits thereof. The
Credit Agreement, among other things, (i) provides for the making of Loans by
the Lender to the Borrower from time to time in an aggregate amount not to
exceed the U.S. dollar amount first above mentioned, the indebtedness of the
Borrower resulting from each such Loan being evidenced by this Promissory Note,
and (ii) contains provisions for prepayments on account of the principal of
this Promissory Note upon the terms and conditions specified in the Credit
Agreement. Terms used herein which are defined in the Credit Agreement shall
have their defined meanings when used herein.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas. If this Note shall be collected by any legal
proceedings or shall be placed in the hands of an attorney for collection after
maturity, the undersigned promises to pay to the owner and holder hereof all
reasonable attorney's fees and costs of collection.
THIS AGREEMENT AND THE CREDIT AGREEMENT TOGETHER CONSTITUTE A WRITTEN
LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
<PAGE> 6
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
ENRON OIL & GAS COMPANY
By:__________________________________
Walter C. Wilson
Senior Vice President and
Chief Financial Officer
2
<PAGE> 7
SCHEDULE TO PROMISSORY NOTE
This Grid is attached to and made part of the Promissory Note dated
September 29, 1995, executed by Enron Oil & Gas Company to Enron Corp., and
records advances, payments and other information required therein.
UNPAID NAME OF
AMOUNT OF PRINCIPAL PERSON
AMOUNT OF PRINCIPAL BALANCE OF MAKING
DATE LOAN REPAID NOTE NOTATION
- -------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.31
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of September 29, 1995, between Enron Oil & Gas
Company, a Delaware corporation ("Lender"), and Enron Corp., a Delaware
corporation ("Borrower"). The parties hereto hereby agree as follows:
1. Loans. Subject to the terms and conditions of this Agreement,
Lender may make loans (the "Loans") from its available funds to Borrower from
time to time during the period from the date of this Agreement up to but not
including the Termination Date, as defined in Section 10, in an aggregate
principal amount up to but not exceeding the sum of Two Hundred Million Dollars
($200,000,000) at any one time outstanding. Within the limits of this
Agreement, Borrower may borrow, prepay pursuant to Section 4, and reborrow
under this Section 1. While the Lender has, and shall have, no obligation to
make Loans to the Borrower pursuant to this Agreement, the parties hereto agree
that any Loans by the Lender will be made in reliance on the agreements of the
Lender and the Borrower contained herein and on the terms and conditions and in
the manner provided herein. Lender may make Loans to Borrower and Borrower may
borrow under this Agreement to the extent Lender has temporary surplus cash
available and Borrower and Lender may mutually benefit from the Loans.
2. Interest. Interest on the outstanding and unpaid principal
amount of Loans made pursuant to this Agreement shall be calculated as follows:
a. On and after September 29, 1995 but before January 1,
1996. Borrower shall pay interest to Lender on the outstanding and
unpaid principal amount of the Loans made on and after September 29,
1995 but before January 1, 1996 pursuant to this Agreement at a rate
per annum equal to:
(1) the one month LIBOR rate as indicated by the
British Bankers Association Interest Settlement Rate
(displayed on the LIBO page of Telerate 3750) as of 11:00
a.m., London time, or if not available,
(2) the arithmetic mean of the rates at which
deposits in dollars are offered at the principal London office
of Bankers Trust Company and Citibank N.A. rounded to the
nearest 1/16 of 1% (or, if there is no such nearest 1/16 of
1%, the next higher 1/16 of 1%) at approximately 11:00 a.m.,
London time, and in an amount that is representative for a
single transaction in the London interbank market at such
time.
b. On and after January 1, 1996. Borrower shall pay
interest to Lender on the outstanding and unpaid principal amount of
the Loans made on and after January 1, 1996 pursuant to this Agreement
at a rate per annum equal to the sum of the following, divided by two:
(i) the daily market borrowing all-in cost of Borrower, as determined
daily by Borrower's Treasury Department and (ii) the daily average
rate, as determined daily by Borrower's Treasury Department, at which
Lender is able in accordance with Lender's Investment Policy to invest
temporary surplus cash available to Lender.
<PAGE> 2
c. Volumetric Production Payment Loans. Notwithstanding
the provisions of Section 2.a. or b., for any period during the term
of this Agreement during which the outstanding and unpaid principal
amount of loans made by Lender to Borrower is equal to or less than
the VPP Deferred Revenue Balance, such principal amount shall bear
interest as provided in the Promissory Note made on January 1, 1993 by
Borrower to Lender. Only principal balances in excess of any VPP
Deferred Revenue Balance shall bear interest as provided in Section
2.a or b. For purposes of this Agreement, "VPP Deferred Revenue
Balance" shall mean the amounts associated with the unamortized
deferred revenues under the terms of volumetric production payment and
exchange agreements effective October 1, 1992, as amended, that are
reported in the financial statements of Lender from time to time and
are comparable to amounts included in audited and publicly reported
financial statements.
Interest shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed. Interest shall be paid at the offices of
Lender at 1400 Smith Street, Houston, Texas 77002 in funds immediately
available to Lender on the fifth Business Day of each month. As used herein,
Business Day means any day other than a Saturday, a Sunday or a state or
federal bank holiday in Houston, Texas or New York, New York.
3. Note. All Loans made by Lender under this Agreement shall be
evidenced by, and repaid with interest in accordance with, a single promissory
note of Borrower in substantially the form annexed hereto as Exhibit A (the
"Note"), with appropriate insertions therein. The Note shall be used to
evidence each borrowing, repayment and reborrowing hereunder. The Note shall
(i) be dated the date of the first Loan evidenced thereby and (ii) be stated to
mature as to principal on the Termination Date. Lender is hereby authorized by
Borrower to endorse on the schedule attached to the Note the amount of each
Loan and of each payment of principal received by Lender on account of the
Loans, which endorsement shall, in the absence of manifest error, be conclusive
as to the outstanding balance of the Loans made by Lender, provided, however,
that the failure to make such notation with respect to any Loan or payment
shall not limit or otherwise affect the obligations of Borrower under this
Agreement or the Note.
4. Prepayments. Borrower may prepay the Note in whole or in
part.
5. Acceleration. Lender reserves the right to require prepayment
of the Note upon demand, whereupon this Agreement shall be immediately
terminated and the principal amount of the Note, together with accrued interest
thereon, shall become immediately due and payable.
6. Use of Proceeds. The proceeds of the Loans hereunder shall be
used by Borrower to supplement working capital and for other general corporate
purposes.
7. Notices, Etc. All notices and other communications provided
for under this Agreement shall be in writing (including telegraphic
communication) and mailed, telecopied, telegraphed, or delivered, if to Lender,
at its address at 1400 Smith Street, Houston, Texas 77002, Attention: Senior
Vice President and Chief Financial Officer, telecopy number (713) 646-2548, and
if to Borrower, at its address at 1400 Smith Street, Houston, Texas 77002,
Attention: Vice President, Finance and
2
<PAGE> 3
Treasurer, telecopy number (713) 853-3920; or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
party complying as to delivery with the terms of this Section 7.
8. No Waiver; Remedies. No failure on the part of Lender to
exercise, and no delay in exercising, any right, power, or remedy under this
Agreement or the Note shall operate as a waiver thereof; nor shall any single
or partial exercise of any right under this Agreement or the Note preclude any
other or further exercise thereof or the exercise of any other right. The
remedies provided in this Agreement or the Note are cumulative and not
exclusive of any remedies provided by law.
9. Governing Law. This instrument shall be construed under the
laws of the State of Texas, and the obligation of Borrower to make payments of
interest as provided for herein is expressly limited so that the aggregate
amount of all the interest paid by Borrower on the Note shall never exceed the
highest rate allowed by the laws of the State of Texas as construed by the
highest court or courts having jurisdiction thereof (the "Legal Interest
Rate"); and if, at the time any such payment of interest is due, the payment of
such sum would make the total interest exceed the Legal Interest Rate, the
amount so payable by Borrower shall be reduced to an amount which does not
exceed Legal Interest Rate; and, similarly, if the maturity of the Note is
accelerated for any reason before the due date stated, earned interest may
never include more than the Legal Interest Rate, it being the intention of the
parties to conform strictly to the laws of the State of Texas now in force, and
in the event it should be held that the interest payable under the Note or
otherwise is in excess of the Legal Interest Rate, the interest chargeable
hereunder (whether included in the face amount or otherwise) shall be reduced
to the Legal Interest Rate, and any amount in excess of the Legal Interest Rate
shall be cancelled automatically and shall be either refunded (if theretofore
paid) or credited to the principal amount due on the Note.
10. Termination Date. The "Termination Date" means December 31,
1998. Notwithstanding the above, this Credit Agreement may be terminated upon
at least thirty (30) days prior written notice given by one party to the other;
provided, however, that the provisions of this Agreement shall survive as to
any Loans maturing after the effective termination date. Upon cancellation of
the last such Loan, this Agreement shall be of no further force and effect.
11. Captions. The captions of the various sections of this
Agreement have been inserted only for the purposes of convenience, and shall
not be deemed in any manner to modify, explain, enlarge or restrict any
provisions of this Agreement.
12. Entire Agreement. THIS AGREEMENT AND THE NOTE TOGETHER
CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
3
<PAGE> 4
ENRON OIL & GAS COMPANY
By:__________________________________
Walter C. Wilson Senior Vice
President and Chief Financial
Officer
ENRON CORP.
By:__________________________________
kurt S. Huneke
Vice President, Finance and Treasurer
4
<PAGE> 5
EXHIBIT A
PROMISSORY NOTE
Houston, Texas
$200,000,000 September 29, 1995
FOR VALUE RECEIVED, the undersigned, Enron Corp., a Delaware corporation
("Borrower"), DOES HEREBY PROMISE to pay to the order of Enron Oil & Gas
Company ("Lender") at its office at 1400 Smith Street, Houston, Texas 77002, in
lawful money of the United States and in funds immediately available to Lender,
the principal amount of Two Hundred Million and No/100 Dollars ($200,000,000)
or the aggregate unpaid principal amount of all loans (the "Loans") made to
Borrower by Lender pursuant to Section 1 of the Credit Agreement hereinafter
referred to, whichever is less, on demand or on December 31, 1998. Borrower
further promises to pay interest in like money, at said office, from the date
hereof on the unpaid principal amount hereof until such principal amount shall
become due and payable, at the rates per annum and on the dates provided in
Section 2 of the Credit Agreement.
Each Loan made by the Lender to the Borrower pursuant to the Credit
Agreement, and all payments made on account of principal thereof, shall be
recorded by the Lender and endorsed on the Schedule attached hereto which is
part of this Promissory Note or in such other records as the Lender may
designate.
This Promissory Note is the Note described in and issued pursuant to
the Credit Agreement dated as of September 29, 1995, between Borrower and
Lender (the "Credit Agreement"), and is entitled to the benefits thereof. The
Credit Agreement, among other things, (i) provides for the making of Loans by
the Lender to the Borrower from time to time in an aggregate amount not to
exceed the U.S. dollar amount first above mentioned, the indebtedness of the
Borrower resulting from each such Loan being evidenced by this Promissory Note,
and (ii) contains provisions for prepayments on account of the principal of
this Promissory Note upon the terms and conditions specified in the Credit
Agreement. Terms used herein which are defined in the Credit Agreement shall
have their defined meanings when used herein.
This Note shall be governed by and construed in accordance with the
laws of the State of Texas. If this Note shall be collected by any legal
proceedings or shall be placed in the hands of an attorney for collection after
maturity, the undersigned promises to pay to the owner and holder hereof all
reasonable attorney's fees and costs of collection.
THIS AGREEMENT AND THE CREDIT AGREEMENT TOGETHER CONSTITUTE A WRITTEN
LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
<PAGE> 6
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
ENRON CORP.
By:__________________________________
Kurt S. Huneke Vice
President, Finance and
Treasurer
2
<PAGE> 7
SCHEDULE TO PROMISSORY NOTE
This Grid is attached to and made part of the Promissory Note dated
September 29, 1995, executed by Enron Oil & Gas Company to Enron Corp., and
records advances, payments and other information required therein.
UNPAID NAME OF
AMOUNT OF PRINCIPAL PERSON
AMOUNT OF PRINCIPAL BALANCE OF MAKING
DATE LOAN REPAID NOTE NOTATION
- -----------------------------------------------------------------------------
<PAGE> 1
Exhibit 10.57(a)
March 31, 1995
Enron Oil & Gas Company
1400 Smith Street
Houston, TX 77002
RE: Natural Gas Swap Transactions
Ladies and Gentlemen:
This letter serves to confirm our mutual understanding with respect to
the certain agreements by Enron Oil & Gas Company, a Delaware corporation
("EOG"), to make assignments to Enron Corp., a Delaware corporation ("Enron"),
and to Enron Capital & Trade Resources Corp., a Delaware corporation ("ECT");
and the obligations of Enron and ECT to enter into certain swap transactions in
consideration for such assignments. Unless otherwise defined herein, all
capitalized terms shall have the meaning assigned such terms in the Receivable
Sale and Service Agreement (the "Sale Agreement") of even date herewith among
ECT, State Street Bank and Trust Company, as Trustee of the Contract Funding
One Trust, the purchasers named therein, and Citibank, N.A., as agent for the
Purchasers.
In connection with the transactions contemplated by the Sale Agreement,
EOG is, of even date herewith, (a) assigning to Enron, who is immediately
thereafter assigning to ECT, the Fuel Supply Contract (and certain related fuel
purchase contracts), and (b) assigning to ECT the Paribas/Westpac Hedging
Agreements. As consideration for such assignments, ECT and EOG are entering
into the natural gas swap transactions (the "Swap Transactions") described in
Exhibit A attached hereto. As further consideration for such assignments,
Enron hereby guaranties to EOG that ECT will promptly pay and perform its
obligations to EOG pursuant to this letter and the Swap Transactions.
The parties recognize that (in connection with the transactions
contemplated by the Sale Agreement) ECT is establishing an Available Liquidity
Commitment (in the amount of $2,000,000) and is funding a Reserve Account (in
the amount of $2,000,000). As further consideration for such assignments and
the Swap Transactions, EOG and ECT have agreed to the following payment scheme
(with respect to the Available Liquidity Commitment and the Reserve Account):
(a) As soon as practicable after the end of calendar year 1995,
ECT will determine the amount (if any) by which the funds in the Reserve
Account and the Available Liquidity Commitment (existing as of the end of
1995) exceed $4,000,000
<PAGE> 2
(such excess, not to exceed $500,000, the "Reserve Excess"). Promptly
thereafter ECT will notify EOG in writing of the amount of the Reserve
Excess.
(b) Commencing January 1, 1996, through the Retirement Date, the
Reserve Excess will accrue a notional amount of interest at the per annum
rate (compounded monthly) equal to the discount rate used to calculate
the present value of the Receivable Asset. As referenced herein, the
"ECT Retained Amount" means the sum of (i) the Reserve Excess, plus (ii)
such notional interest accrual through the Retirement Date, plus (iii)
$4,000,000.
(c) If on the Retirement Date, the sum of the amounts in the
Reserve Account and the Available Liquidity Commitment is less than the
ECT Retained Amount, then EOG will pay to ECT (in immediately available
funds on the Retirement Date) the difference between such sum and the ECT
Retained Amount.
(d) If on the Retirement Date, the sum of the amounts in the
Reserve Account and the Available Liquidity Commitment is greater than
the ECT Retained Amount, then ECT will distribute to EOG (from the
Reserve Account in immediately available funds on the Retirement Date)
the difference between such sum and the ECT Retained Amount.
(e) In all instances, ECT will be entitled to receive on the
Retirement Date the first distribution of funds from the Reserve Account
until ECT has received an amount which (when combined with the amount of
the Available Liquidity Commitment as of the Retirement Date) equals the
ECT Retained Amount.
(f) Subject to compliance with any confidentiality covenants to
which ECT may be bound, ECT will provide EOG with access to such books
and records as is necessary for EOG to confirm the accuracy of the
payment and distribution of funds in compliance with clauses (a) through
(e) above.
This letter is essential to the understanding of the parties relating to
the subject matter hereof and is not superseded or cancelled by any
communications, understandings, and agreements dated on or after the date
hereof (including the assignments described above and notwithstanding the
provisions of such assignments to the contrary). This letter may not be
amended or modified except in writing and executed by the parties hereto.
This letter may be executed in counterparts which, when taken together,
shall constitute one document. This letter shall be governed by and construed
in accordance with the internal laws of the State of Texas without regard to
the conflicts of laws principles thereof. This letter shall be binding upon
the parties hereto and their respective successors and assigns.
- 2 -
<PAGE> 3
If the foregoing accurately reflects our mutual understandings, indicate
your acknowledgement by signing in the space provided below.
ENRON CORP.
By: /s/ Kurt S. Huneke
___________________________________________
Name: Kurt S. Huneke
Title: Vice President, Finance and Treasurer
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ Andrew S. Fastow
___________________________________________
Name: Andrew S. Fastow
Title: Vice President
Accepted and Agreed this
31st day of March, 1995
Enron Oil & Gas Company
By: /s/ Mark G. Papa
___________________________________________
Name: Mark G. Papa
Title: President, North American Operations
- 3 -
<PAGE> 4
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
EXHIBIT A: SCHEDULE FOR 200,000 MMBTUD ECT/EOG SWAP TRANSACTIONS
- -------------------------------------------------------------------------------------------
QUARTER QUARTER
UNDISCOUNTED DISCOUNTED UNDISCOUNTED DISCOUNTED
------------ ---------- ------------ ----------
YEAR MONTH $ DISC% $ $ $
- ---- ----- - ----- - - -
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
1995 3 $1,600,000 1,000000 $1,600,000 $1,600,000 $1,600,000
- -------------------------------------------------------------------------------------------
200,000 4 $3,166,666 0.993814 $3,147,078
- -------------------------------------------------------------------------------------------
MMBTUD 5 $3,166,667 0.987463 $3,126,966
- -------------------------------------------------------------------------------------------
6 $3,166,667 0.981355 $3,107,623 $9,500,000 $9,381,667
- -------------------------------------------------------------------------------------------
7 $3,166,666 0.975083 $3,087,761
- -------------------------------------------------------------------------------------------
8 $3,166,667 0.968851 $3,068,028
- -------------------------------------------------------------------------------------------
9 $3,166,667 0.962858 $3,049,050 $9,500,000 $9,204,839
- -------------------------------------------------------------------------------------------
10 $3,166,666 0.956704 $3,029,562
- -------------------------------------------------------------------------------------------
11 $3,166,667 0.950786 $3,010,823
- -------------------------------------------------------------------------------------------
12 $3,166,667 0.944710 $2,991,581 $9,500,000 $9,031,966
- -------------------------------------------------------------------------------------------
$30,100,000 $29,218,473
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
1996 1 $2,500,000 0.938672 $2,346,680
- -------------------------------------------------------------------------------------------
200,000 2 $2,500,000 0.933252 $2,333,129
- -------------------------------------------------------------------------------------------
MMBTUD 3 $2,500,000 0.927287 $2,318,217 $7,500,000 $6,998,026
- -------------------------------------------------------------------------------------------
4 $2,500,000 0.921551 $2,303,878
- -------------------------------------------------------------------------------------------
5 $2,500,000 0.915661 $2,289,153
- ------------------------------------------------------------------------------------------
6 $2,500,000 0.909997 $2,274,994 $7,500,000 $6,868,025
- -------------------------------------------------------------------------------------------
7 $2,500,000 0.904181 $2,260,454
- -------------------------------------------------------------------------------------------
8 $2,500,000 0.898403 $2,246,007
- -------------------------------------------------------------------------------------------
9 $2,500,000 0.892846 $2,232,114 $7,500,000 $6,738,574
- -------------------------------------------------------------------------------------------
10 $2,500,000 0.887139 $2,217,848
- -------------------------------------------------------------------------------------------
11 $2,500,000 0.881652 $2,204,129
- -------------------------------------------------------------------------------------------
12 $2,500,000 0.876017 $2,190,042 $7,500,000 $6,612,020
- -------------------------------------------------------------------------------------------
$30,000,000 $27,216,664
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
1997 1 $1,625,000 0.870418 $1,414,430
- -------------------------------------------------------------------------------------------
200,000 2 $1,625,000 0.865392 $1,406,262
- -------------------------------------------------------------------------------------------
MMBTUD 3 $1,625,000 0.859861 $1,397,274 $4,875,000 $4,217,960
- ------------------------------------------------------------------------------------------
4 $1,625,000 0.854542 $1,388,631
- -------------------------------------------------------------------------------------------
5 $1,625,000 0.849081 $1,379,756
- -------------------------------------------------------------------------------------------
6 $1,625,000 0.843829 $1,371,222 $4,875,000 $4,139,604
- -------------------------------------------------------------------------------------------
7 $1,625,000 0.838436 $1,362,458
- -------------------------------------------------------------------------------------------
8 $1,625,000 0.833077 $1,353,750
- -------------------------------------------------------------------------------------------
9 $1,625,000 0.827924 $1,345,377 $4,875,000 $4,061,585
- -------------------------------------------------------------------------------------------
10 $1,625,000 0.822633 $1,336,778
- -------------------------------------------------------------------------------------------
11 $1,625,000 0.817544 $1,328,509
- -------------------------------------------------------------------------------------------
12 $1,625,000 0.812319 $1,320,018 $4,875,000 $3,985,306
- -------------------------------------------------------------------------------------------
$19,500,000 $16,404,466
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
- -------------------------------------------------------------------------------------------
EXHIBIT A: SCHEDULE FOR 200,000 MMBTUD ECT/EOG SWAP TRANSACTIONS
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
1998 1 $683,333 0.807127 $551,537
- -------------------------------------------------------------------------------------------
200,000 2 $683,333 0.802467 $548,352
- -------------------------------------------------------------------------------------------
MMBTUD 3 $683,333 0.797338 $544,848 $2,050,000 $1,644,737
- -------------------------------------------------------------------------------------------
4 $683,333 0.792406 $541,477
- -------------------------------------------------------------------------------------------
5 $683,333 0.787342 $538,017
- -------------------------------------------------------------------------------------------
6 $683,333 0.782471 $534,689 $2,050,000 $1,614,183
- -------------------------------------------------------------------------------------------
7 $683,333 0.777470 $531,272
- -------------------------------------------------------------------------------------------
8 $683,333 0.772502 $527,876
- -------------------------------------------------------------------------------------------
9 $683,333 0.767723 $524,611 $2,050,000 $1,583,758
- -------------------------------------------------------------------------------------------
10 $683,333 0.762817 $521,258
- -------------------------------------------------------------------------------------------
11 $683,333 0.758098 $518,034
- -------------------------------------------------------------------------------------------
12 $683,333 0.753253 $514,723 $2,050,000 $1,544,014
- -------------------------------------------------------------------------------------------
$8,200,000 $6,396,693
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
1999 1 $350,000 0.748439 $261,954
- -------------------------------------------------------------------------------------------
200,000 2 $350,000 0.744117 $260,441
- -------------------------------------------------------------------------------------------
MMBTUD 3 $350,000 0.739361 $258,776 $1,050,000 $781,171
- -------------------------------------------------------------------------------------------
4 $350,000 0.734788 $257,176
- -------------------------------------------------------------------------------------------
5 $350,000 0.730092 $255,532
- -------------------------------------------------------------------------------------------
6 $350,000 0.725576 $253,951 $1,050,000 $766,659
- -------------------------------------------------------------------------------------------
7 $350,000 0.721059 $252,371
- -------------------------------------------------------------------------------------------
8 $350,000 0.716543 $250,790
- -------------------------------------------------------------------------------------------
9 $350,000 0.712027 $249,210 $1,050,000 $752,371
- -------------------------------------------------------------------------------------------
10 $350,000 0.707511 $247,629
- -------------------------------------------------------------------------------------------
11 $350,000 0.702995 $246,048
- -------------------------------------------------------------------------------------------
12 $350,000 0.698479 $244,468 $1,050,000 $738,145
- -------------------------------------------------------------------------------------------
$4,200,000 $3,038,346
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
$92,000,000 $82,274,621
----------- -----------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
INCLUDES "ESTIMATED" MARKET CONTRACT IMPACT -$900,000
- -------------------------------------------------------------------------------------------
INCLUDES "ESTIMATED" TRANSACTION COST =$700,000
- -------------------------------------------------------------------------------------------
SCHEDULE SUBJECT TO CHANGE BASED ON:
- -------------------------------------------------------------------------------------------
FINAL INTEREST RATE CALCULATIONS
- -------------------------------------------------------------------------------------------
FINAL TRANSACTION COSTS AND
- -------------------------------------------------------------------------------------------
FINAL MARKET CONTRACT CALCULATIONS
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.57(b)
AMENDMENT
TO
NATURAL GAS SWAP TRANSACTIONS
LETTER AGREEMENT
Reference for all purposes is hereby made to that certain Natural Gas Swap
Transactions Letter Agreement (the Letter Agreement), dated March 31, 1995
between and among ENRON CORP.,a Delaware corporation ("ENRON"), ENRON CAPITAL &
TRADE RESOURCES CORP.
WHEREAS, ENRON, ECT and EOG each desire to amend the Letter Agreement as
hereinafter set forth effective as of March 31, 1995 (the "Effective Date");
NOW, THEREFORE, for and in consideration of the premises and of the sum of Ten
Dollars ($10.00) and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged by each of the parties hereto, ENRON, ECT
and EOG do hereby amend the Letter Agreement as follows:
1 Capitalized terms used herein shall have the meanings given to
them in the Letter Agreement, unless otherwise defined herein.
2 Exhibit A of the Letter Agreement is hereby amended by deleting
same and substituting Amended Exhibit A attached hereto in lieu
thereof. Amended Exhibit A attached hereto is made a part of the
Letter Agreement and supercedes Exhibit A attached to the Letter
Agreement.
3 Except as expressly amended hereby, the Letter Agreement shall
remain in full force and effect as heretofore entered into.
ENRON, ECT and EOG each ratifies and confirms the Letter Agreement
as hereby amended.
EXECUTED this 19th day of December, 1995, but effective for all purposes as of
the Effective Date.
ENRON CORP. ENRON OIL & GAS COMPANY
By: /s/ E.P. Segner III By: /s/ Mark G. Papa
------------------------- ------------------------------------
Name: Edmond P. Segner III Name: Mark G. Papa
------------------------- ------------------------------------
Title: Executive Vice President Title: President, North American Operations
------------------------- ------------------------------------
ENRON CAPITAL & TRADE
RESOURCES CORP.
By: /s/ Richard A. Causey
-------------------------
Name: Richard A. Causey
-------------------------
Title: Vice President
-------------------------
Page 1
<PAGE> 2
AMENDED EXHIBIT A : SCHEDULE FOR 6,000,000 MMBTU
PER MONTH ECT/EOG SWAP TRANSACTIONS
<TABLE>
<CAPTION>
QUARTER QUARTER
UNDISCOUNTED DISCOUNTED UNDISCOUNTED DISCOUNTED MARGIN PURCHASE SALE
YEAR MONTH $ DISC % $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 3 $1,600,200 $1,582,476 $1,600,200 $1,582,476 $0.266700 $1.8500 $2.116700
6,000,000 4 $3,166,800 $3,113,093 $0.527800 $1.8500 $2.377800
MMBTU/MTH 5 $3,166,800 $3,093,958 $0.527800 $1.8500 $2.377800
6 $3,166,800 $3,075,552 $9,500,400 $9,282,603 $0.527800 $1.8500 $2.377800
7 $3,166,800 $3,056,648 $0.527800 $1.8500 $2.377800
8 $3,166,800 $3,037,860 $0.527800 $1.8500 $2.377800
9 $3,166,800 $3,019,787 $9,500,400 $9,114,295 $0.527800 $1.8500 $2.377800
10 $3,166,800 $3,001,226 $0.527800 $1.8500 $2.377800
11 $3,166,800 $2,983,371 $0.527800 $1.8500 $2.377800
12 $3,166,800 $2,965,033 $9,500,400 $8,949,630 $0.527800 $1.8500 $2.377800
$30,101,400 $28,929,004
1996 1 $2,500,200 $2,326,516 $0.416700 $1.9200 $2.336700
6,000,000 2 $2,500,200 $2,313,135 $0.416700 $1.9200 $2.336700
MMBTU/MTH 3 $2,500,200 $2,298,917 $7,500,600 $6,938,568 $0.416700 $1.9200 $2.336700
4 $2,500,200 $2,285,241 $0.416700 $1.9200 $2.336700
5 $2,500,200 $2,271,194 $0.416700 $1.9200 $2.336700
6 $2,500,200 $2,257,683 $7,500,600 $6,814,118 $0.416700 $1.9200 $2.336700
7 $2,500,200 $2,243,806 $0.416700 $1.9200 $2.336700
8 $2,500,200 $2,230,014 $0.416700 $1.9200 $2.336700
9 $2,500,200 $2,216,747 $7,500,600 $6,690,567 $0.416700 $1.9200 $2.336700
10 $2,500,200 $2,203,122 $0.416700 $1.9200 $2.336700
11 $2,500,200 $2,190,015 $0.416700 $1.9200 $2.336700
12 $2,500,200 $2,176,554 $7,500,600 $6,569,691 $0.416700 $1.9200 $2.336700
$30,002,400 $27,012,944
1997 1 $1,624,800 $1,405,778 $0.270800 $2.0300 $2.300800
6,000,000 2 $1,624,800 $1,397,971 $0.270800 $2.0300 $2.300800
MMBTU/MTH 3 $1,624,800 $1,389,379 $4,874,400 $4,193,128 $0.270800 $2.0300 $2.300800
4 $1,624,800 $1,381,113 $0.270800 $2.0300 $2.300800
5 $1,624,800 $1,372,624 $0.270800 $2.0300 $2.300800
6 $1,624,800 $1,364,458 $4,874,400 $4,118,195 $0.270800 $2.0300 $2.300800
7 $1,624,800 $1,356,071 $0.270800 $2.0300 $2.300800
8 $1,624,800 $1,347,736 $0.270800 $2.0300 $2.300800
9 $1,624,800 $1,339,718 $4,874,400 $4,043,525 $0.270800 $2.0300 $2.300800
10 $1,624,800 $1,331,483 $0.270800 $2.0300 $2.300800
11 $1,624,800 $1,323,562 $0.270800 $2.0300 $2.300800
12 $1,624,800 $1,315,427 $4,874,400 $3,970,472 $0.270800 $2.0300 $2.300800
$19,497,600 $16,325,320
</TABLE>
Page 2
<PAGE> 3
AMENDED EXHIBIT A : SCHEDULE FOR 6,000,000 MMBTU
PER MONTH ECT/EOG SWAP TRANSACTIONS
<TABLE>
<CAPTION>
MARGIN PURCHASE SALE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 1 $760,200 $611,670 $0.126700 $2.1400 $2.266700
6,000,000 2 $760,200 $608,273 $0.126700 $2.1400 $2.266700
MMBTU/MTH 3 $760,200 $604,534 $2,280,600 $1,824,477 $0.126700 $2.1400 $2.266700
4 $760,200 $600,937 $0.126700 $2.1400 $2.266700
5 $760,200 $597,244 $0.126700 $2.1400 $2.266700
6 $760,200 $593,691 $2,280,600 $1,791,872 $0.126700 $2.1400 $2.266700
7 $760,200 $590,041 $0.126700 $2.1400 $2.266700
8 $760,200 $586,415 $0.126700 $2.1400 $2.266700
9 $760,200 $582,926 $2,280,600 $1,759,382 $0.126700 $2.1400 $2.266700
10 $760,200 $579,343 $0.126700 $2.1400 $2.266700
11 $760,200 $575,896 $0.126700 $2.1400 $2.266700
12 $760,200 $572,357 $2,280,600 $1,727,596 $0.126700 $2.1400 $2.266700
$9,122,400 $7,103,327
1999 1 $349,800 $261,747 $0.058300 $2.2400 $2.298300
6,000,000 2 $349,800 $260,293 $0.058300 $2.2400 $2.298300
MMBTU/MTH 3 $349,800 $258,693 $1,049,400 $780,733 $0.058300 $2.2400 $2.298300
4 $349,800 $257,154 $0.058300 $2.2400 $2.298300
5 $349,800 $255,573 $0.058300 $2.2400 $2.298300
6 $349,800 $254,053 $1,049,400 $766,780 $0.058300 $2.2400 $2.298300
7 $349,800 $253,750 $0.058300 $2.2400 $2.298300
8 $349,800 $252,190 $0.058300 $2.2400 $2.298300
9 $349,800 $250,690 $1,049,400 $756,630 $0.058300 $2.2400 $2.298300
10 $349,800 $249,149 $0.058300 $2.2400 $2.298300
11 $349,800 $247,667 $0.058300 $2.2400 $2.298300
12 $349,800 $246,145 $1,049,400 $742,961 $0.058300 $2.2400 $2.298300
$4,197,600 $3,047,104
$92,921,400 $82,417,699
----------- -----------
</TABLE>
INCLUDES FINAL MARKET CONTRACT IMPACT =$901,000
INCLUDES FINAL TRANSACTION COST = $511,000
INCLUDES FINAL INTEREST RATE COST OF MONEY = 7.53% ANNUAL
Page 3
<PAGE> 1
Exhibit 10.58
Enron Capital & Trade Resources Corp.
1400 Smith Street
P. O. Box 4428
Houston, Texas 77210-4428
To: Enron Oil & Gas Company
1400 Smith Street
Houston, TX 77002
Attn: Mark Eschenburg
From: Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, TX 77002
Date: March 31, 1995
CONFIRMATION LETTER
(REVISED DUE TO ADJUSTMENTS TO THE ATTACHED PAYMENT SCHEDULE)
ECT TRANSACTION REFERENCE NOS.: 15198.00
The purpose of this communication is to set forth the terms and
conditions of the Swap Transaction entered into between us as of the Effective
Date specified below (the "Swap Transaction"). This communication constitutes
a "Confirmation" as referred to in the master swap agreement specified below.
The definitions and provisions contained in the 1987 Interest Rate and
Currency Exchange Definitions (as published by the International Swap Dealers
Association, Inc.) are incorporated into this Confirmation. In the event of
any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern.
Each party represents that it is entering into this transaction in
connection with its line of business and that the terms hereof have been
individually tailored and negotiated.
This Confirmation supplements, forms part of, and is subject to, the
following master swap agreement upon execution thereof:
Date As Of: November 1, 1993
Between: Enron Oil & Gas Company (EOG)
And: Enron Capital & Trade Resources Corp. (ECT)
Upon execution, all provisions contained in the master swap agreement
will govern this Confirmation except as expressly modified below.
All provisions contained in the master swap agreement will govern this
Confirmation except as expressly modified below.
<PAGE> 2
The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:
Commodity: Pipeline quality natural gas ("Natural Gas")
Quantity Per Period:
<TABLE>
<S> <C>
Quantity
Period Per Period
------ ----------
Each calendar month beginning with 6,000,000 MMBtu per
March 1, 1995 and ending on Month
December 31, 1999
</TABLE>
"MMBtu" means one million British Thermal Units.
Effective Date: March 1, 1995
Termination Date: December 31, 1999
The terms of this Swap Transaction relating to the Fixed Price Payor are
as follows:
Fixed Price Payor: Enron Oil & Gas Company
Payment Dates: 25th calendar day succeeding each
Period End Date.
Period End Date: The last calendar day for the
appropriate delivery month. The
first Period End Date being March
31, 1995.
Fixed Amount: $1.85/MMBtu x 6,000,000 MMBtu per
Month for each delivery month for
the Period March 1, 1995 through
December 31, 1995
$1.92/MMBtu x 6,000,000 MMBtu per
Month for each delivery month for
the Period January 1, 1996 through
December 31, 1996
$2.03/MMBtu x 6,000,000 MMBtu per
Month for each delivery month for
the Period January 1, 1997 through
December 31, 1997
$2.14/MMBtu x 6,000,000 MMBtu per
Month for each delivery month for
the Period January 1, 1998 through
December 31, 1998
$2.24/MMBtu x 6,000,000 MMBtu per
Month for each delivery month for
the Period January 1, 1999 through
December 31, 1999.
2
<PAGE> 3
The terms of this Swap Transaction relating to the Floating Price Payor
are as follows:
Floating Price Payor: ECT
Payment Dates: 25th calendar day succeeding each
Period End Date.
Period End Date: The last calendar day for the
appropriate delivery month. The
first Period End Date being March
31, 1995.
Floating Amount: The average of the last three NYMEX
Trading Days for the natural gas
contract for the appropriate
delivery month x 6,000,000 MMBtu
per month for each delivery month.
Period: Each calendar month beginning with
March 1, 1995 and ending on December
31, 1999.
Banking Day Convention: If any specified Payment Date is not
a New York Banking Day such Payment
Date will be the first following day
which is a New York Banking Day.
Payment Schedule: SEE ATTACHED PAYMENT SCHEDULE
RECONCILING TRANSACTION 15198.00 WITH 15198.01.
3
<PAGE> 4
Alternate Component Prices:
If NYMEX Natural Gas Settlement Prices are not published for any Period,
the Price for such Period shall be the amount determined by the mutual
agreement of the parties in good faith to most closely reflect the average spot
price in Dollars per MMBtu for that period for natural gas delivered to Henry
Hub, LA.
Subject to the netting of cross payments as provided in the master swap
agreement referred to herein, each party has agreed to make payments to the
other in accordance with this Confirmation. Please confirm that the foregoing
correctly sets forth the terms of our agreement by sending a return
acknowledgment to such effect to the attention of the Enron Capital & Trade
Resources Corp. Attn.: Director of Documentation (Fax No. 713/ 646-4816)
within three New York Banking Days following receipt of this Confirmation.
The parties agree that this Swap Transaction are governed by and subject
to the terms and conditions of the master swap agreement referenced above.
Please check this Confirmation carefully upon receipt so that errors and
discrepancies can promptly be identified and rectified.
Enron Capital & Trade Resources Corp. is very pleased to have concluded
this transaction with you.
Regards,
ENRON CAPITAL & TRADE
RESOURCES CORP.
/s/ Robert M. Hrytzik
______________________________________
Robert M. Hrytzik
Agent and Attorney-in-Fact
Enron Capital & Trade Resources Corp.
(formerly Enron Risk Management
Services Corp.)
Confirmed as of the 31st day of March,
1995
ENRON OIL & GAS COMPANY
/s/ Mark G. Papa
______________________________________
Mark G. Papa 05/09/95
President, North American Operations
______________________________________
(Title) (Date)
4
<PAGE> 5
REVISED PAYMENT SCHEDULE FOR RECONCILIATION OF CONTRACTS 15198.00 AND 15198.01
<TABLE>
<S> <C>
Determination Period Payment Amount
- -------------------- --------------
Mar-95 $1,600,200
Apr-95 $3,166,800
May-95 $3,166,800
Jun-95 $3,166,800
Jul-95 $3,166,800
Aug-95 $3,166,800
Sep-95 $3,166,800
Oct-95 $3,166,800
Nov-95 $3,166,800
Dec-95 $3,166,800
Jan-96 $2,500,200
Feb-96 $2,500,200
Mar-96 $2,500,200
Apr-96 $2,500,200
May-96 $2,500,200
Jun-96 $2,500,200
Jul-96 $2,500,200
Aug-96 $2,500,200
Sep-96 $2,500,200
Oct-96 $2,500,200
Nov-96 $2,500,200
Dec-96 $2,500,200
Jan-97 $1,624,800
Feb-97 $1,624,800
Mar-97 $1,624,800
Apr-97 $1,624,800
May-97 $1,624,800
Jun-97 $1,624,800
Jul-97 $1,624,800
Aug-97 $1,624,800
Sep-97 $1,624,800
Oct-97 $1,624,800
Nov-97 $1,624,800
Dec-97 $1,624,800
Jan-98 $760,200
Feb-98 $760,200
Mar-98 $760,200
Apr-98 $760,200
May-98 $760,200
Jun-98 $760,200
Jul-98 $760,200
Aug-98 $760,200
Sep-98 $760,200
Oct-98 $760,200
Nov-98 $760,200
Dec-98 $760,200
Jan-99 $349,800
Feb-99 $349,800
Mar-99 $349,800
Apr-99 $349,800
May-99 $349,800
Jun-99 $349,800
Jul-99 $349,800
Aug-99 $349,800
Sep-99 $349,800
Oct-99 $349,800
Nov-99 $349,800
Dec-99 $349,800
</TABLE>
<PAGE> 6
IDENTIFICATION OF HEDGING TRANSACTION
FOR FEDERAL INCOME TAX PURPOSES
Enron Oil & Gas Company hereby identifies the attached Swap Transaction as a
hedging transaction for federal income tax purposes:
Swap Transaction ref. # or effective date: 15198.00
_______________________________
between: Enron Oil & Gas Company
_______________________________
and: Enron Capital Trade & Resources
Corp.
_______________________________
Commodity or other item being hedged: Pipeline Quality Natural Gas
_______________________________
Date of identification: March 31, 1995
_______________________________
<PAGE> 1
Exhibit 10.59
Enron Capital & Trade Resources Corp.
1400 Smith Street
P. O. Box 4428
Houston, Texas 77210-4428
To: Enron Oil & Gas Company
1400 Smith Street
Houston, TX 77002
Attn: Mark Eschenburg
From: Enron Capital & Trade Resources Corp.
1400 Smith Street
Houston, TX 77002
Date: March 31, 1995
CONFIRMATION LETTER
(REVISED DUE TO PRICE CHANGE FOR 1998 AND ADJUSTMENT TO
THE ATTACHED PAYMENT SCHEDULE
ECT TRANSACTION REFERENCE NOS.: 15198.01
The purpose of this communication is to set forth the terms and
conditions of the Swap Transaction entered into between us as of the Effective
Date specified below (the "Swap Transaction"). This communication constitutes
a "Confirmation" as referred to in the master swap agreement specified below.
The definitions and provisions contained in the 1987 Interest Rate and
Currency Exchange Definitions (as published by the International Swap Dealers
Association, Inc.) are incorporated into this Confirmation. In the event of
any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern.
Each party represents that it is entering into this transaction in
connection with its line of business and that the terms hereof have been
individually tailored and negotiated.
This Confirmation supplements, forms part of, and is subject to, the
following master swap agreement upon execution thereof:
Date As Of: November 1, 1993
Between: Enron Oil & Gas Company (EOG)
And: Enron Capital & Trade Resources Corp. (ECT)
Upon execution, all provisions contained in the master swap agreement
will govern this Confirmation except as expressly modified below.
All provisions contained in the master swap agreement will govern this
Confirmation except as expressly modified below.
<PAGE> 2
The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:
Commodity: Pipeline quality natural gas ("Natural Gas")
<TABLE>
<CAPTION>
Quantity Per Period: Quantity
Period Per Period
------ ----------
<S> <C>
Each calendar month beginning with 6,000,000 MMBtu per
March 1, 1995 and ending on Month
December 31, 1999
"MMBtu" means one million British Thermal Units.
</TABLE>
Effective Date: March 1, 1995
Termination Date: December 31, 1999
The terms of this Swap Transaction relating to the Fixed Price Payor are
as follows:
Fixed Price Payor: ECT
Payment Dates: 25th calendar day succeeding each
Period End Date.
Period End Date: The last calendar day for the
appropriate delivery month. The
first Period End Date being March
31, 1995.
Fixed Amount: $2.1167/MMBtu x 6,000,000 MMBtu
per Month for each delivery month
for the Period March 1, 1995 through
March 31, 1995
$2.3778/MMBtu x 6,000,000 MMBtu per
Month for each delivery month for
the Period April 1, 1995 through
December 31, 1995
$2.3367/MMBtu x 6,000,000 MMBtu per
Month for each delivery month for
the Period January 1, 1996 through
December 31, 1996
$2.3008/MMBtu x 6,000,000 MMBtu per
Month for each delivery month for
the Period January 1, 1997 through
December 31, 1997
$2.2667/MMBtu x 6,000,000 MMBtu per
Month for each delivery month for
the Period January 1, 1998 through
December 31, 1998
$2.2983/MMBtu x 6,00,000 MMBtu per
Month for each delivery month for
the Period January 1, 1999 through
December 31, 1999.
The terms of this Swap Transaction relating to the Floating Price Payor
are as follows:
2
<PAGE> 3
Floating Price Payor: Enron Oil & Gas Company
Payment Dates: 25th calendar day succeeding each
Period End Date.
Period End Date: The last calendar day for the
appropriate delivery month. The
first Period End Date being March
31, 1995.
Floating Amount: The average of the last three NYMEX
Trading Days for the natural gas
contract for the appropriate
delivery month x 6,000,000 MMBtu
per month for each delivery month.
Period: Each calendar month beginning with
March 1, 1995 and ending on December
31, 1999.
Banking Day Convention: If any specified Payment Date is not
a New York Banking Day such Payment
Date will be the first following day
which is a New York Banking Day.
Payment Schedule: SEE ATTACHED PAYMENT SCHEDULE
RECONCILING TRANSACTION 15198.00
WITH 15198.01.
3
<PAGE> 4
Alternate Component Prices:
If NYMEX Natural Gas Settlement Prices are not published for any Period,
the Price for such Period shall be the amount determined by the mutual
agreement of the parties in good faith to most closely reflect the average spot
price in Dollars per MMBtu for that period for natural gas delivered to Henry
Hub, LA.
Subject to the netting of cross payments as provided in the master swap
agreement referred to herein, each party has agreed to make payments to the
other in accordance with this Confirmation. Please confirm that the foregoing
correctly sets forth the terms of our agreement by sending a return
acknowledgment to such effect to the attention of the Enron Capital & Trade
Resources Corp. Attn.: Director of Documentation (Fax No. 713/646-4816)
within three New York Banking Days following receipt of this Confirmation.
The parties agree that this Swap Transaction are governed by and subject
to the terms and conditions of the master swap agreement referenced above.
Please check this Confirmation carefully upon receipt so that errors and
discrepancies can promptly be identified and rectified.
Enron Capital & Trade Resources Corp. is very pleased to have concluded
this transaction with you.
Regards,
ENRON CAPITAL & TRADE RESOURCES CORP.
/s/ Robert M. Hrytzik
_____________________________________
Robert M. Hrytzik Agent and
Attorney-in-Fact
Enron Capital & Trade Resources Corp.
(formerly Enron Risk Management Services Corp.)
Confirmed as of the 31st day of March,
1995
ENRON OIL & GAS COMPANY
/s/ Mark G. Papa
_______________________________________
Mark G. Papa 05/09/95
President, North American Operations
_______________________________________
(Title) (Date)
4
<PAGE> 5
REVISED PAYMENT SCHEDULE FOR RECONCILIATION OF CONTRACTS 15198.00 AND 15198.01
<TABLE>
<CAPTION>
Determination Period Payment Amount
- -------------------- --------------
<S> <C>
Mar-95 $1,600,200
Apr-95 $3,166,800
May-95 $3,166,800
Jun-95 $3,166,800
Jul-95 $3,166,800
Aug-95 $3,166,800
Sep-95 $3,166,800
Oct-95 $3,166,800
Nov-95 $3,166,800
Dec-95 $3,166,800
Jan-96 $2,500,200
Feb-96 $2,500,200
Mar-96 $2,500,200
Apr-96 $2,500,200
May-96 $2,500,200
Jun-96 $2,500,200
Jul-96 $2,500,200
Aug-96 $2,500,200
Sep-96 $2,500,200
Oct-96 $2,500,200
Nov-96 $2,500,200
Dec-96 $2,500,200
Jan-97 $1,624,800
Feb-97 $1,624,800
Mar-97 $1,624,800
Apr-97 $1,624,800
May-97 $1,624,800
Jun-97 $1,624,800
Jul-97 $1,624,800
Aug-97 $1,624,800
Sep-97 $1,624,800
Oct-97 $1,624,800
Nov-97 $1,624,800
Dec-97 $1,624,800
Jan-98 $760,200
Feb-98 $760,200
Mar-98 $760,200
Apr-98 $760,200
May-98 $760,200
Jun-98 $760,200
Jul-98 $760,200
Aug-98 $760,200
Sep-98 $760,200
Oct-98 $760,200
Nov-98 $760,200
Dec-98 $760,200
Jan-99 $349,800
Feb-99 $349,800
Mar-99 $349,800
Apr-99 $349,800
May-99 $349,800
Jun-99 $349,800
Jul-99 $349,800
Aug-99 $349,800
Sep-99 $349,800
Oct-99 $349,800
Nov-99 $349,800
Dec-99 $349,800
</TABLE>
<PAGE> 6
IDENTIFICATION OF HEDGING TRANSACTION
FOR FEDERAL INCOME TAX PURPOSES
Enron Oil & Gas Company hereby identifies the attached Swap Transaction as a
hedging transaction for federal income tax purposes:
Swap Transaction ref. # or effective date: 15198.01
_____________________________
between: Enron Oil & Gas Company
_____________________________
and: Enron Capital Trade
_____________________________
Commodity or other item being hedged: Pipeline Quality Natural Gas
& Resources Corp.
_____________________________
Date of identification: March 31, 1995
_____________________________
<PAGE> 1
EXHIBIT 10.60
In consideration of the payment by Enron Capital & Trade Resources Corp.
("ECT") to Enron Oil & Gas Company ("EOG") of $11,254,706.48 and of the
covenants and agreements contained in the confirmations of the transactions
described on Exhibit A attached hereto (the "Transactions"), EOG and ECT hereby
agree to enter into the Transactions on the terms and conditions contained in
such confirmations and the Master Agreement referred to herein.
ENRON OIL & GAS COMPANY ENRON CAPITAL & TRADE
RESOURCES CORP.
By: /s/ Mark G. Papa By: /s/ Kevin P. Hannon
_________________________ __________________________
Name: Mark G. Papa Name: Kevin P. Hannon
Title: President, North American Title: Vice President
Operations
<PAGE> 2
EXHIBIT "A"
<TABLE>
<CAPTION>
EOG CONFIRMATION NUMBERS
------------------------
<S> <C>
4918.00 04918.01S
4919.00 04919.01S
4920.01 04920.01S
8465.00 08465.00S
9194.00 09194.00S
9422.00 09422.00S
9423.00 09423.00S
9424.00 09424.00S
10009.00 10009.00S
10009.01 10009.01S
10140.00 10140.00S
10328.00 10328.00S
10531.00 10531.00S
10621.00 10621.00S
10660.00 10660.00S
10681.00 10681.00S
11190.00 11190.00S
11220.00 11220.00S
11255.00 11255.00S
</TABLE>
<PAGE> 1
EXHIBIT 10.64
U.S. $105,000,000
CREDIT AGREEMENT
Dated as of January 16, 1996
Among
EOG COMPANY OF CANADA,
as the Borrower
and
THE BANKS NAMED HEREIN
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Administrative Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
1.3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
1.4. Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
ARTICLE II
AMOUNT AND TERMS OF THE ADVANCES
2.1. The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.2. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.4. Repayment; Extension of Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.5. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.6. Additional Interest on Eurodollar Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
2.7. Interest Rate Determination and Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
2.8. Voluntary Conversion of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
2.9. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
2.10. Increased Costs; Capital Adequacy, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
2.11. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
2.12. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
2.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
2.14. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
2.15. Increase of Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
2.16 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
2.17. Non-Ratable Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
2.18. Replacement of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
ARTICLE III
CONDITIONS TO EACH BORROWING
3.1. Initial Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
3.2. Additional Conditions Precedent to the Borrowings . . . . . . . . . . . . . . . . . . . . . . . . -25-
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
ARTICLE V
COVENANTS OF THE BORROWER
5.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
5.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
ARTICLE VI
EVENTS OF DEFAULT
6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
ARTICLE VII
THE ADMINISTRATIVE AGENT
7.1. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
7.2. Administrative Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
7.3. Administrative Agent and Its Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
7.4. Bank Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
7.5. Certain Rights of the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
7.6. Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
7.7. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
7.8. Resignation by the Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
ARTICLE VIII
MISCELLANEOUS
8.1. Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
8.2. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
8.3. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.4. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.5. Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.6. Binding Effect; Assignments; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.7. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
8.8. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
8.9. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
8.10. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
8.11. Survival; Term; Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
8.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
8.13. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
8.14 Location of Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
8.15. Currency Conversion and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Annex I Commitments
Schedule I - Applicable Margin
Schedule II - Applicable Lending Offices
Exhibit A Form of Note
Exhibit B Notice of Borrowing
Exhibit C-1 Opinion of Vinson & Elkins L.L.P., special U.S. counsel to Borrower and Guarantor
Exhibit C-2 Opinion of Bennett Jones Verchere, Canadian tax counsel to Borrower and Guarantor
Exhibit C-3 Opinion of Stewart McKelvey Stirling Scales, Nova Scotia counsel to Borrower and Guarantor
Exhibit D Opinion of Vice President and General Counsel of Guarantor
Exhibit E Notice of Conversion
Exhibit F Form of Assignment and Acceptance
</TABLE>
<PAGE> 6
CREDIT AGREEMENT
Dated as of January 16, 1996
EOG COMPANY OF CANADA, an unlimited liability company incorporated
under the laws of the province of Nova Scotia (the "Borrower"), the financial
institutions party hereto (the "Banks"), and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION (in its individual capacity, "TCB"), as administrative agent (in
such capacity, the "Administrative Agent") for the Banks hereunder, agree as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and the plural forms of the terms
defined):
"Adjusted CD Rate" means, for any Interest Period for each
Adjusted CD Rate Advance, an interest rate per annum equal to the sum of:
(a) the rate per annum obtained by dividing (1) the rate
of interest determined by the Administrative Agent to be the average
(rounded upward to the nearest whole multiple of 1/100 of 1% per
annum, if such average is not such a multiple) of the consensus bid
rate determined by each of the Reference Banks for the bid rates per
annum, at 9:00 A.M. (or as soon thereafter as practicable) on the
first day of such Interest Period, of New York certificate of deposit
dealers of recognized standing selected by such Reference Bank for the
purchase at face value of certificates of deposit of such Reference
Bank in an amount substantially equal to such Reference Bank's
Adjusted CD Rate Advance and with a maturity equal to such Interest
Period (provided that, if bid rate quotes from such dealers are not
available to any Reference Bank, such Reference Bank shall notify the
Administrative Agent of a reasonably equivalent rate determined by it
on the basis of another source or sources selected by it), by (2) a
percentage equal to 100% minus the Adjusted CD Rate Reserve Percentage
for such Interest Period, plus
(b) the Assessment Rate for such Interest Period.
The Adjusted CD Rate for the Interest Period for each Adjusted CD Rate Advance
shall be determined by the Administrative Agent on the basis of applicable
rates furnished to and received by the Administrative Agent from the Reference
Banks one Business Day before the first day of such Interest Period, subject
however, to the provisions of Section 2.7.
-1-
<PAGE> 7
"Adjusted CD Rate Advance" means an Advance which bears
interest as provided in Section 2.5(b).
"Adjusted CD Rate Reserve Percentage" for any Interest Period
for each Adjusted CD Rate Advance means the reserve percentage applicable one
Business Day before the first day of such Interest Period under regulations
issued from time to time by the Federal Reserve Board for determining the
maximum reserve requirement (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) for a member bank of the
Federal Reserve System in New York City with deposits exceeding one billion
dollars with respect to liabilities consisting of or including (among other
liabilities) U.S. dollar nonpersonal time deposits in the United States with a
maturity equal to such Interest Period.
"Administrative Agent" shall have the meaning specified in the
first paragraph of this Agreement, together with any successor thereto pursuant
to Section 7.8.
"Advance" means an advance by a Bank to the Borrower pursuant
to Article II (and where appropriate or the context requires, each portion of
such an advance of a specific "Type" as defined below), each portion thereof
transferred to a Bank (including a Person that becomes a Bank in connection
with such transfer) pursuant to Section 2.10(e), 2.18 or 8.6(b) and each
portion remaining after any such transfer, each Advance to consist of one or
more of the following types (each of which shall be a "Type" of Advance): an
Adjusted CD Rate Advance, a Base Rate Advance or a Eurodollar Advance.
"Agreement" means this Credit Agreement, as amended,
supplemented or modified from time to time in the future.
"Applicable Lending Office" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of a Base Rate Advance, such
Bank's CD Lending Office in the case of an Adjusted CD Rate Advance and such
Bank's Eurodollar Lending Office in the case of a Eurodollar Advance.
"Applicable Margin" means, for any Interest Period for each
Adjusted CD Rate Advance and for any Interest Period for each Eurodollar
Advance, the percentage per annum applicable to such Interest Period for such
Advance as shown in Schedule I and being based on (a) the Type of Advance to
which such Interest Period relates (i.e., Adjusted CD Rate Advance or
Eurodollar Advance), and (b) the Rating Level, which for the purposes of
determining the Applicable Margin shall be the Rating Level in effect on the
first day of such Interest Period.
"Assessment Rate" for any Interest Period for each Adjusted CD
Rate Advance means the annual assessment rate estimated by the Bank which is
the Administrative Agent one Business Day before the first day of such Interest
Period for determining the then current annual assessment payable by such Bank
to the FDIC for insuring dollar deposits of such Bank at its principal office
in the United States.
-2-
<PAGE> 8
"Bankruptcy Code" means Title 11 of the United States Code, as
now or hereafter in effect, or any successor thereto.
"Banks" has the meaning specified in the first paragraph of
this Agreement, and shall include any financial institution which becomes a
Bank pursuant to Section 2.15, Section 2.18 or Section 8.6(b).
"Base Rate" at any time shall mean the higher of (a) the Prime
Commercial Lending Rate as in effect from time to time and (b) the Federal
Funds Rate plus 1/2 of 1%. If for any reason the Administrative Agent shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Federal Funds Rate for any reason, including
the inability or failure of the Administrative Agent to obtain sufficient bids
or publications in accordance with the terms hereof, the Base Rate shall be the
Prime Commercial Lending Rate until the circumstances giving rise to such
inability no longer exist.
"Base Rate Advance" means an Advance which bears interest as
provided in Section 2.5(a).
"Borrower" means EOG Company of Canada, an unlimited liability
company incorporated under the laws of the province of Nova Scotia, and any
successor thereto pursuant to Section 5.2(b).
"Borrowing" means a borrowing hereunder consisting of (a) the
initial Advances on January 16, 1996, and (b) any subsequent Advances made (on
the same date) after January 16, 1996 pursuant to an increase in the facility
in accordance with Section 2.15.
"Business Day" means (a) any day of the year except Saturday,
Sunday and any day on which banks are required or authorized to close in
Halifax, Nova Scotia, Houston, Texas or New York, New York, and (b) if the
applicable Business Day relates to any Eurodollar Advances, any day which is a
"Business Day" described in clause (a) and which is also a day for trading by
and between banks in the applicable interbank Eurodollar market.
"CD Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "CD Lending Office" opposite its name on
Schedule II hereto or in the document pursuant to which it became a party
hereto as contemplated by Section 2.15, 2.18 or 8.6(b) (or, if no such office
is specified, its Domestic Lending Office) or such other office of such Bank as
such Bank may from time to time specify to the Borrower and the Administrative
Agent.
"Chapter One" shall mean Chapter One of the Texas Credit Code,
as in effect on the date the document using such term was executed.
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"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor Federal tax code, and any reference to any
statutory provision of the Code shall be deemed to be a reference to any
successor provision or provisions.
"Commitment" means the commitment of each Bank to lend money
in an amount not to exceed the amount set forth opposite such Bank's name on
Annex I hereto.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of another Type pursuant to
Section 2.7, Section 2.8 or Section 2.10(b).
"Domestic Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "Domestic Lending Office" opposite its
name on Schedule II or in the document pursuant to which it became a party
hereto as contemplated by Section 2.15, 2.18 or 8.6(b) or such other office of
such Bank as such Bank may from time to time specify to the Borrower and the
Administrative Agent.
"eurocurrency liabilities" has the meaning assigned to that
term in Regulation D of the Federal Reserve Board, as in effect from time to
time.
"Eurodollar Advance" means an Advance which bears interest as
provided in Section 2.5(c).
"Eurodollar Lending Office" means, with respect to any Bank,
the office of such Bank specified as its "Eurodollar Lending Office" opposite
its name on Schedule II or in the document pursuant to which it became a party
hereto as contemplated by Section 2.15, 2.18 or 8.6(b) (or, if no such office
is specified, its Domestic Lending Office) or such other office of such Bank as
such Bank may from time to time specify to the Borrower and the Administrative
Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Advance, the lesser of (a) (i) an interest rate per annum shown on
page 3750 of the Dow Jones & Company Telerate screen or any successor page as
the composite offered rate for London interbank deposits with a period equal to
the Interest Period for such Eurodollar Advance, as shown under the heading
"USD", as of 11:00 A.M. (London time) two Business Days prior to the first day
of such Interest Period, (ii) if the rate specified in clause (i) of this
definition does not appear, an interest rate per annum based on the rates at
which Dollar deposits with a period equal to such Interest Period are displayed
on page "LIBO" of the Reuters Monitor Money Rates Service or such other page as
may replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks as of 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period, it being
understood that if two or more rates appear on such page, the rate will be the
arithmetic average of such displayed rates and if fewer than two such rates are
displayed, this clause (ii) of this definition shall not be applicable, and
(iii) if the rate specified in clause (i) does not appear and if clause (ii) of
this definition is not applicable, an interest rate
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per annum equal to the average (rounded upward to the nearest whole multiple of
1/16 of 1% per annum, if such average is not such a multiple) of the rate per
annum at which dollar deposits in immediately available funds for delivery on
the first day of such Interest Period are offered by TCB to leading banks in
the interbank Eurodollar market selected by TCB at approximately 11:00 A.M.
(local time in the relevant Eurodollar market) two Business Days before the
first day of such Interest Period in an amount substantially equal to the
amount of the largest Eurodollar Advance to be outstanding during such Interest
Period and for a period equal to such Interest Period and (b) the Highest
Lawful Rate. The Eurodollar Rate for each Interest Period for each Eurodollar
Advance shall be determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the Administrative Agent from TCB
two Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 2.7.
"Events of Default" has the meaning specified in Section 6.1.
"Exchange Rate" means, in relation to the exchange of one
currency to another on a particular day for the purpose of Section 8.15 hereof,
the rate of exchange quoted by each Bank (with respect to amounts owed to such
Bank) as its noon spot rate of exchange for the conversion of one currency to
the other on such day.
"FDIC" means the Federal Deposit Insurance Corporation, or any
federal agency or authority of the United States from time to time succeeding
to its function.
"Federal Funds Rate" means, 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 Administrative Agent from
three Federal funds brokers of recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the
Federal Reserve System, or any federal agency or authority of the United States
from time to time succeeding to its function.
"Guarantor" means Enron Oil & Gas Company, a Delaware
corporation, or any successor permitted by Section 4.2(d) of the Guaranty.
"Guarantor Default" shall have the meaning assigned such term
in the Guaranty.
"Guaranty" means that certain Guaranty dated of even date
herewith issued by the Guarantor in favor of the Administrative Agent and the
Banks, as the same may be supplemented, amended or modified from time to time.
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"Highest Lawful Rate" shall mean, on any day, with respect to
any Bank, the maximum nonusurious rate of interest permitted for that day by
the laws applicable to such Bank, stated as a rate per annum. On each day, if
any, that Chapter One establishes the Highest Lawful Rate, the Highest Lawful
Rate shall be the "indicated rate ceiling" (as defined in Chapter One) for that
day.
"Interest Period" means, with respect to each Adjusted CD Rate
Advance or Eurodollar Advance, the period commencing on the date of such
Advance or the date of the Conversion of any Advance into such an Advance and
ending on the last day of the period selected by the Borrower pursuant to the
provisions below and, thereafter, each subsequent period commencing on the last
day of the immediately preceding Interest Period and ending on the last day of
the period selected by the Borrower pursuant to the provisions below except
that any Interest Period for Eurodollar Advances which commences on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month shall end on the last Business Day of the appropriate subsequent
calendar month. The duration of each such Interest Period shall be (a) in the
case of an Adjusted CD Rate Advance, 30, 60, 90 or 180 days and (b) in the case
of a Eurodollar Advance, one, two, three or six months, in each case as the
Borrower may, upon notice received by the Administrative Agent not later than
11:00 A.M. on the third Business Day (first Business Day in the case of an
Adjusted CD Rate Advance) on the first day of such Interest Period, select;
provided, however, that:
(1) Interest Periods commencing on the same date for
Adjusted CD Rate Advances or Eurodollar Advances, respectively, shall
be of the same duration;
(2) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided, in the case of any Interest Period for a
Eurodollar Advance, that if such extension would cause the last day of
such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next preceding
Business Day; and
(3) no Interest Period for any Advance under a Note which
is maturing may end after the Maturity Date for such Note.
"Loan Document" means this Agreement, each Note, the Notice of
Borrowing and each other document or instrument executed and delivered in
connection with this Agreement.
"Majority Banks" means at any time Banks holding at least 66
2/3% of the then aggregate unpaid principal amount of the Notes held by Banks,
or, if no such principal amount is then outstanding, Banks having at least 66
2/3% of the Commitments.
"Maturity Date" means, (a) with respect to any Note dated
January 16, 1996, the earlier of (i) January 17, 2001, or such later date to
which the maturity of such Note has been
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extended pursuant to Section 2.4(b), or (ii) the date, if any, that the Notes
become due and payable in accordance with Section 6.1; and (b) with respect to
any Note issued pursuant to Section 2.15, the earlier of (i) five (5) years and
one (1) day from the date of such Note, or such later date to which the
maturity of such Note has been extended pursuant to Section 2.4(b), or (ii) the
date, if any, that the Notes become due and payable in accordance with Section
6.1.
"Moody's" means Moody's Investors Service, Inc.
"Note" means a promissory note of the Borrower payable to the
order of any Bank, in substantially the form of Exhibit A, evidencing the
aggregate indebtedness of the Borrower to such Bank resulting from the Advance
owed to such Bank. The Notes evidencing the Advances made on January 16, 1996,
shall be dated January 16, 1996. The Notes evidencing Advances comprising a
Borrowing made pursuant to an increase in the facility pursuant to Section
2.15, shall be dated the date of such Advances.
"Notice of Borrowing" has the meaning specified in Section 2.2.
"Other Taxes" has the meaning specified in Section 2.13(c).
"Payment Office" means the office of the Administrative Agent
located at 712 Main Street, Houston, Texas or such other office as the
Administrative Agent may designate by written notice to the other parties
hereto.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, firm or other entity, or a
government or any political subdivision or agency, department or
instrumentality thereof.
"Prescribed Forms" means such duly executed form(s) or
statement(s), and in such number of copies, which may, from time to time, be
prescribed by law and which, pursuant to applicable provisions of (a) an income
tax treaty between the United States and the country of residence of the Bank
providing the form(s) or statement(s), (b) the Code, or (c) any applicable rule
or regulation under the Code, permit the Borrower to make payments hereunder
for the account of such Bank free of deduction or withholding of income or
similar taxes (except for any deduction or withholding of income or similar
taxes as a result of any change in or in the interpretation of any such treaty,
the Code or any such rule or regulation).
"Prime Commercial Lending Rate" means that rate of interest
from time to time announced by TCB at its principal office as its prime rate
(or comparable rate, if TCB does not so designate a "prime rate"), the Prime
Commercial Lending Rate to change when and as such prime rate or comparable
rate, as the case may be, changes. The Prime Commercial Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. TCB may make commercial loans or other loans
at rates of interest at, above or
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below the Prime Commercial Lending Rate. For purposes hereof, the principal
office of TCB, as of the date hereof, is its office located at 712 Main Street,
Houston, Texas.
"Rating Level" means the applicable category of rating level
contained in Schedule I which is based on the rating of the Guarantor's senior
unsecured long-term debt as classified by Moody's and/or Standard & Poor's and
which shall be the highest applicable Rating Level I, Rating Level II, Rating
Level III, Rating Level IV, Rating Level V or Rating Level VI, as the case may
be, as set forth in Schedule I.
"Reference Banks" means Texas Commerce Bank National
Association, Commerzbank Aktiengesellschaft, Atlanta Agency, and Royal Bank of
Canada.
"Standard & Poor's" and "S&P" each means Standard & Poor's
Ratings Group.
"Taxes" has the meaning specified in Section 2.13(a).
"Texas Credit Code" shall mean Title 79, Revised Civil
Statutes of Texas, 1925, as amended.
1.2. Computation of Time Periods. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding". Unless otherwise indicated, all references to a
particular time are references to Houston, Texas time.
1.3. Miscellaneous. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, Schedule and Exhibit references are to
Articles and Sections of and Schedules and Exhibits to this Agreement, unless
otherwise specified. The term "including" shall mean "including, without
limitation,".
1.4. Ratings. A rating, whether public or private, by
Standard & Poor's or Moody's shall be deemed to be in effect on the date of
announcement or publication by Standard & Poor's or Moody's, as the case may
be, of such rating or, in the absence of such announcement or publication, on
the effective date of such rating and will remain in effect until the date when
any change in such rating is deemed to be in effect. In the event any of the
rating categories used by Moody's or Standard & Poor's is revised or designated
differently (such as by changing letter designations to different letter
designations or to numerical designations), the references herein to such
rating shall be changed to the revised or redesignated rating for which the
standards are closest to, but not lower than, the standards at the date hereof
for the rating which has been revised or redesignated. Long-term debt
supported by a letter of credit, guaranty, insurance or other similar credit
enhancement mechanism shall not be considered as senior unsecured long-term
debt.
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ARTICLE II
AMOUNT AND TERMS OF THE ADVANCES
2.1. The Advances. Each Bank severally agrees, on the
terms and conditions hereinafter set forth, to make one advance to the Borrower
on January 16, 1996 in an amount not to exceed such Bank's Commitment. If a
Borrowing is made to increase the outstanding indebtedness under this Agreement
pursuant to Section 2.15, each Bank participating in such increase shall make
an advance to the Borrower to fund its portion of such Borrowing. The
Borrower, for interest rate purposes, may elect pursuant to the terms hereof to
divide the Advance made by each Bank into one or more Types specified herein;
provided that for all Eurodollar Advances, not more than four (4) different
Interest Periods shall not be outstanding at the same time, and for all CD Rate
Advances, not more than four (4) different Interest Periods shall not be
outstanding at the same time; and provided further that all Advances made on
January 16, 1996 of any Type shall be made by the Banks ratably according to
their respective Commitments. The Advances are not revolving and the Borrower
may not reborrow amounts repaid or prepaid. On the date of each Borrowing, any
portion of the Commitments not utilized shall be terminated.
2.2. Making the Advances.
(a) Each Borrowing shall be made on notice, given not
later than 11:00 A.M. (x) if the Borrowing is to be comprised, in whole or in
part, of Eurodollar Advances, at least three (3) Business Days prior to the
date of the Borrowing, (y) if the Borrowing is to be comprised of Adjusted CD
Rate Advances, at least one (1) Business Day prior to the date of the
Borrowing, and (z) if the Borrowing is to be comprised of Base Rate Advances,
on the day of the Borrowing, by the Borrower to the Administrative Agent, which
shall give to each Bank prompt notice thereof by telecopy. Such notice of the
Borrowing (the "Notice of Borrowing") shall be by telecopy, confirmed
immediately in writing, in substantially the form of Exhibit B, specifying
therein the requested (1) Type of Advances comprising the Borrowing, (2)
aggregate amount of the Borrowing, and (3) if the Borrowing will be comprised
of Adjusted CD Rate Advances or Eurodollar Advances, the initial Interest
Period for each such Advance. If the Borrowing is comprised, in whole or in
part, of Adjusted CD Rate Advances or Eurodollar Advances, the Administrative
Agent shall promptly notify each Bank of the applicable interest rate under
Section 2.5(b) or (c). Each Bank shall, before 11:00 A.M. (2:00 P.M. if the
Borrowing is comprised of Base Rate Advances) on the date of the Borrowing,
make available for the account of its Applicable Lending Office to the
Administrative Agent at its Payment Office, in same day funds, such Bank's
ratable portion of the Borrowing. After the Administrative Agent's receipt of
such funds and upon fulfillment of the applicable conditions set forth in
Article III, the Administrative Agent will make such funds available to the
Borrower in accordance with the Borrower's written instructions.
(b) The Notice of Borrowing shall be irrevocable and
binding on the Borrower. If the Notice of Borrowing specifies the Borrowing is
to be comprised, in whole or in part, of
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Adjusted CD Rate Advances or Eurodollar Advances, the Borrower shall, subject
to Section 8.8, indemnify each Bank against any loss, cost or expense incurred
by such Bank as a result of any failure to fulfill on or before the date
specified in such Notice of Borrowing for the Borrowing the applicable
conditions set forth in Article III, or to make the Borrowing specified in such
Notice of Borrowing on the date specified in such Notice of Borrowing
including, without limitation, any loss (excluding loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Bank to fund the Advance to be made
by such Bank as part of the Borrowing when such Advance, as a result of such
failure, is not made on such date.
(c) Unless the Administrative Agent shall have received
notice from a Bank prior to the date of a Borrowing that such Bank will not
make available to the Administrative Agent such Bank's ratable portion of the
Borrowing, the Administrative Agent may assume that such Bank has made such
portion available to the Administrative Agent on the date of the Borrowing in
accordance with subsection (a) of this Section 2.2 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Bank shall not
have so made such ratable portion available to the Administrative Agent, such
Bank and the Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Administrative Agent, at (1) in the case
of the Borrower, the weighted average of the respective interest rates which
would have been applicable to Advances not so made and (2) in the case of such
Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative
Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Advance as part of the Borrowing for purposes of this Agreement.
(d) The failure of any Bank to make the Advance to be
made by it as part of any Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its Advance on the date of the Borrowing,
but no Bank shall be responsible for the failure of any other Bank to make the
Advance to be made by such other Bank on the date of the Borrowing.
2.3. Fees. Subject to Section 8.8, the Borrower shall pay
to the Administrative Agent such fees as may be separately agreed to by it and
the Administrative Agent.
2.4. Repayment; Extension of Maturity Date.
(a) The Borrower shall repay the unpaid principal amount
of each Advance owed to each Bank in accordance with the Note or Notes
evidencing such Advance to the order of such Bank. The unpaid principal
balance of each Note, together with all accrued and unpaid interest on such
Note, shall be due and payable on the Maturity Date for such Note.
(b) Within the 90-day period ending on January 16, 1997
(or in the case of any Note issued pursuant to Section 2.15, within the 90-day
period ending on the first anniversary of
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the issuance of such Note), and, in either case, within the subsequent 90-day
period ending on each yearly anniversary thereafter, the Borrower may request
in writing that the Banks extend the Maturity Date for such Notes, as
appropriate, for one (1) additional year; provided, however, that any such
extension shall require the consent of all of the Banks, which consent may be
withheld in each Bank's sole discretion; and provided, further, that if any
Bank has not responded to such request in writing within 45 days after receipt
of the written request of the Borrower by the Administrative Agent, such
failure shall be deemed a denial of said request and such Bank shall be subject
to removal as provided in Section 2.18.
2.5. Interest. Subject to Section 8.8, the Borrower shall
pay interest on the unpaid principal amount of each Advance owed to each Bank
from the date of such Advance until such principal amount shall be paid in
full, at the following rates per annum:
(a) Base Rate Advances. During such periods as such
Advance is a Base Rate Advance, a rate per annum equal at all times to the Base
Rate in effect from time to time, due quarterly on the last Business Day of
each January, April, July and October (commencing on the last Business Day of
April, 1996) during such periods and on the date such Base Rate Advance shall
be Converted or paid in full; provided that any amount of principal (other than
principal of Adjusted CD Rate Advances bearing interest pursuant to the proviso
to Section 2.5(b) and principal of Eurodollar Advances bearing interest
pursuant to the proviso to Section 2.5(c)) which is not paid when due (whether
at stated maturity, by acceleration or otherwise) shall bear interest, from the
date on which such amount is due until such amount is paid in full, due on
demand, at a rate per annum equal at all times to 2% per annum above the Base
Rate in effect from time to time.
(b) Adjusted CD Rate Advances. During such periods as
such Advance is an Adjusted CD Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of the Adjusted
CD Rate for such Interest Period for such Advance plus the Applicable Margin
per annum for such Interest Period, due on the last day of such Interest Period
and, if such Interest Period has a duration of more than 90 days, on the day
which occurs during such Interest Period 90 days from the first day of such
Interest Period (each Adjusted CD Rate Advance to bear interest from and
including the first day of the Interest Period for such Advance to (but not
including) the last day of such Interest Period); provided that any amount of
principal of any Adjusted CD Rate Advance which is not paid when due (whether
at stated maturity, by acceleration or otherwise) shall bear interest, from the
date on which such amount is due until such amount is paid in full, due on
demand, at a rate per annum equal at all times to the greater of (x) 2% per
annum above the Base Rate in effect from time to time and (y) 2% per annum
above the rate per annum required to be paid on such Advance immediately prior
to the date on which such amount became due.
(c) Eurodollar Advances. During such periods as such
Advance is a Eurodollar Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of the Eurodollar Rate for
such Interest Period for such Advance plus the Applicable Margin
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<PAGE> 17
per annum for such Interest Period, due on the last day of such Interest Period
and, if such Interest Period has a duration of more than three months, on the
day which occurs during such Interest Period three months from the first day of
such Interest Period (each Eurodollar Rate Advance to bear interest from and
including the first day of the Interest Period for such Advance to (but not
including) the last day of such Interest Period); provided that any amount of
principal of any Eurodollar Advance which is not paid when due (whether at
stated maturity, by acceleration or otherwise) shall bear interest, from the
date on which such amount is due until such amount is paid in full, due on
demand, at a rate per annum equal at all times to the greater of (x) 2% per
annum above the Base Rate in effect from time to time and (y) 2% per annum
above the rate per annum required to be paid on such Advance immediately prior
to the date on which such amount became due.
2.6. Additional Interest on Eurodollar Advances. If any
Bank is required under regulations of the Federal Reserve Board to maintain
reserves with respect to liabilities or assets consisting of or including
eurocurrency liabilities, and if as a result thereof there is an increase in
the cost to such Bank of agreeing to make or making, funding or maintaining
Eurodollar Advances, the Borrower shall, subject to Section 8.8, from time to
time, upon demand by such Bank (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Bank additional amounts, as additional interest hereunder, sufficient to
compensate such Bank for such increased cost. A certificate in reasonable
detail as to the basis for and the amount of such increased cost, submitted to
the Borrower and the Administrative Agent by such Bank, shall be conclusive and
binding for all purposes, absent manifest error.
2.7. Interest Rate Determination and Protection.
(a) Each Reference Bank agrees to furnish to the
Administrative Agent timely information for the purpose of determining each
Adjusted CD Rate. If any one or more of the Reference Banks shall not furnish
such timely information to the Administrative Agent for the purpose of
determining any such Adjustable CD Rate, the Administrative Agent shall
determine such Adjustable CD Rate on the basis of timely information furnished
by the remaining Reference Banks.
(b) The Administrative Agent shall give prompt notice to
the Borrower and the Banks of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.5(a), (b) or (c), and the
applicable rate, if any, furnished by each Reference Bank for the purpose of
determining the applicable interest rate under Section 2.5(b).
(c) If fewer than two Reference Banks furnish timely
information to the Administrative Agent for determining the Adjusted CD Rate
for any Adjusted CD Rate Advances,
(1) the Administrative Agent shall forthwith notify the
Borrower and the Banks that the interest rate cannot be determined for
such Adjusted CD Rate Advances,
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(2) each such Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base
Rate Advance (or if such Advance is then a Base Rate Advance, will
continue as a Base Rate Advance), and
(3) the obligation of the Banks to make, or to Convert
Advances into, Adjusted CD Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist.
(d) If, with respect to any Adjusted CD Rate Advances or
Eurodollar Advances, the Majority Banks notify the Administrative Agent that
the applicable interest rate for any Interest Period for such Advances will not
adequately reflect the cost to such Majority Banks of making, funding or
maintaining their respective Adjusted CD Rate Advances or Eurodollar Advances,
as the case may be, for such Interest Period, the Administrative Agent shall
forthwith so notify the Borrower and the Banks, whereupon
(1) each such Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base
Rate Advance (or, if such Advance is then a Base Rate Advance, will
continue as a Base Rate Advance), and
(2) the obligation of the Banks to make, or to Convert
Advances into, Adjusted CD Rate Advances or Eurodollar Advances, as
the case may be, shall be suspended until the Administrative Agent
shall notify the Borrower and the Banks that the circumstances causing
such suspension no longer exist.
(e) If the Borrower shall fail to select the duration of
any Interest Period for any Adjusted CD Rate Advances or Eurodollar Advances in
accordance with the provisions contained in this Agreement, the Administrative
Agent will forthwith so notify the Borrower and the Banks and such Advances
will automatically, on the last day of the then existing Interest Period
therefor, Convert into Base Rate Advances.
(f) (1) On the date on which the aggregate unpaid
principal amount of all Eurodollar Advances having the same Interest
Period shall be reduced, by payment or prepayment or otherwise, to
less than $5,000,000, such Eurodollar Advances shall automatically
Convert into Base Rate Advances, and on and after such date, the right
of the Borrower to Convert Advances into Eurodollar Advances shall
terminate; provided, however, that (A) if other Eurodollar Advances
are outstanding, the Borrower shall have the right to aggregate such
Eurodollar Advances (and continue such Advances) if the aggregate
unpaid principal amount of all such Eurodollar Advances being
aggregated and continued shall equal or exceed $5,000,000, and (B) if
Adjusted CD Rate Advances are outstanding, the Borrower shall have the
right, in the case of Adjusted CD Rate Advances, on the last day of
the Interest Period for such Advance, to aggregate all or such portion
of such Adjusted CD Rate Advances with such Eurodollar Advance (and
Convert or
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continue such Advances) if the aggregate unpaid principal amount of
such resulting Eurodollar Advances having the same Interest Period
shall equal or exceed $5,000,000.
(2) On the date on which the aggregate unpaid principal
amount of all Adjusted CD Rate Advances having the same Interest
Period shall be reduced, by payment or prepayment or otherwise, to
less than $5,000,000, such Adjusted CD Rate Advances shall
automatically Convert into Base Rate Advances, and on and after such
date, the right of the Borrower to Convert Advances into Adjusted CD
Rate Advances shall terminate; provided, however, that (A) if other
Adjusted CD Rate Advances are outstanding, the Borrower shall have the
right to aggregate such Adjusted CD Rate Advances (and continue such
Advances) if the aggregate unpaid principal amount of all such
Adjusted CD Rate Advances being aggregated and continued shall equal
or exceed $5,000,000, and (B) if Eurodollar Advances are outstanding,
the Borrower shall have the right, in the case of Eurodollar Advances,
on the last day of the Interest Period for such Advance, to aggregate
all or such portion of such Eurodollar Advances with such Adjusted CD
Rate Advance (and Convert or continue such Advances) if the aggregate
unpaid principal amount of such resulting Adjusted CD Rate Advances
having the same Interest Period shall equal or exceed $5,000,000.
(g) Any Bank may, if it so elects, fulfill its Commitment
as to any Eurodollar Advance by causing a branch, foreign or otherwise, or
affiliate of such Bank to make such Advance and may transfer and carry such
Advance at, to or for the account of any branch office or affiliate of such
Bank; provided that in such event, for the purposes of this Agreement, such
Advance shall be deemed to have been made by such Bank and the obligation of
the Borrower to repay such Advance shall nevertheless be to such Bank and shall
be deemed to be held by such Bank, to the extent of such Advance, for the
account of such branch or affiliate.
2.8. Voluntary Conversion of Advances. The Borrower may
on any Business Day, upon notice given to the Administrative Agent not later
than 11:00 A.M. (x) in the case of a proposed Conversion into Eurodollar
Advances, on the third Business Day prior to the date of the proposed
Conversion, (y) in the case of a proposed Conversion into Adjusted CD Rate
Advances, on the first Business Day prior to the date of the proposed
Conversion, and (z) in the case of a proposed Conversion into Base Rate
Advances, on the date of the proposed Conversion and subject to the limitations
in Section 2.1 as to the number of permitted Interest Periods and subject to
the provisions of Sections 2.7 and 2.11, Convert Advances of one Type into
Advances of another Type; provided, however, that any Conversion of any
Eurodollar Advances shall be made on, and only on, the last day of an Interest
Period for such Eurodollar Advances and that any Conversion of any Adjusted CD
Rate Advances shall be made on, and only on, the last day of an Interest Period
for such Adjusted CD Rate Advances. Each such notice of a Conversion (a
"Notice of Conversion") shall be by telecopy, confirmed immediately in writing,
in substantially the form of Exhibit E, and shall, within the restrictions
specified above, specify (1) the date of such Conversion, (2) the Advances to
be Converted and the Type into which they are to be
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<PAGE> 20
Converted, and (3) if such Conversion is into Adjusted CD Rate Advances or
Eurodollar Advances, the duration of the Interest Period for each such Advance.
2.9. Prepayments. The Borrower may (x) in respect of
Adjusted CD Rate Advances, upon at least one Business Day's notice, (y) in
respect of Eurodollar Advances, upon at least three Business Days' notice, and,
(z) in respect of Base Rate Advances, upon notice by 11:00 A.M. on the day of
the proposed prepayment, to the Administrative Agent (which shall promptly
notify each Bank) stating the proposed date and aggregate principal amount of
the prepayment and the Types of Advances to be prepaid, and in the case of
Eurodollar Advances or Adjusted CD Rate Advances, the specific Advances being
prepaid, and if such notice is given the Borrower shall prepay the outstanding
principal amounts of the Advances, in whole or ratably in part, together with
accrued interest to the date of such prepayment on the principal amount prepaid
without premium or penalty; provided, however, that each partial prepayment
shall be in an aggregate principal amount not less than $5,000,000, and
provided further, that if the Borrower prepays any Adjusted CD Rate Advance or
any Eurodollar Advance on any day other than the last day of an Interest Period
therefor, the Borrower shall compensate the Banks pursuant to Section 8.4(b).
2.10. Increased Costs; Capital Adequacy, Etc.
(a) Subject to Section 8.8, if, due to either (1) the
introduction of or any change (other than any change by way of imposition or
increase of reserve requirements included in the Adjusted CD Rate Reserve
Percentage) in or in the interpretation of any law or regulation by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or (2) the compliance with any
guideline or request from any governmental authority, central bank or
comparable agency (whether or not having the force of law), there shall be any
increase in the cost to any Bank of agreeing to make or making, funding or
maintaining Adjusted CD Rate Advances or Eurodollar Advances (other than
increased costs described in Section 2.6 or in clause (c) below), the Borrower
shall from time to time, upon demand by such Bank (with a copy of such demand
to the Administrative Agent), pay to the Administrative Agent for the account
of such Bank additional amounts sufficient to compensate such Bank for such
increased cost. A certificate in reasonable detail as to the basis for and the
amount of such increased cost, submitted to the Borrower and the Administrative
Agent by such Bank, shall be conclusive and binding for all purposes, absent
manifest error. Promptly after any Bank becomes aware of any such
introduction, change or proposed compliance, such Bank shall notify the
Borrower thereof. No Bank shall be permitted to recover increased costs
incurred or accrued more than 90 days prior to such notice to the Borrower.
(b) If the Borrower so notifies the Administrative Agent
within five Business Days after any Bank notifies the Borrower of any increased
cost pursuant to the provisions of Section 2.10(a), the Borrower shall Convert
all Advances of the Type affected by such increased cost of all Banks then
outstanding into Advances of another Type in accordance with Section 2.8 and,
additionally, reimburse such Bank for such increased cost in accordance with
Section 2.10(a).
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<PAGE> 21
(c) If any Bank shall have determined that, after the
date hereof, the adoption of any applicable law, rule, regulation or treaty
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its lending office) with any request or
directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency (except to the extent
such request or directive arises as a result of the individual creditworthiness
of such Bank), has or would have the effect of increasing the amount of capital
required or expected to be maintained as a result of its Commitment hereunder,
such Bank shall have the right to give prompt written notice thereof to the
Borrower with a copy to the Administrative Agent, which notice shall show in
reasonable detail the calculation of such additional amounts as shall be
required to compensate such Bank for the increased cost to such Bank as a
result of such increase in capital and shall certify that such costs are
generally being charged by such Bank to other similarly situated borrowers
under similar credit facilities, which notice shall be conclusive and binding
for all purposes, absent manifest error, although the failure to give any such
notice shall not, unless such notice fails to set forth the information
required above or except as otherwise expressly provided in Section 2.10(d),
release or diminish any of the Borrower's obligations to pay additional amounts
pursuant to Section 2.10(d).
(d) Each Bank agrees that, upon giving notice specified
in Section 2.10(c), at the request of the Borrower, it will promptly enter into
good faith negotiations with the Borrower with respect to the method of
reimbursement for the additional costs specified in such notice. No later than
15 days after the date of the giving of any such notice, and assuming the Bank
giving same has made itself available for the aforesaid good faith
negotiations, the Borrower shall have the option, to be exercised in writing,
to (1) subject to Section 8.8, compensate such Bank for the specified
additional costs on the basis, if any, negotiated between such Bank and the
Borrower or (2) terminate such Bank as a Bank to the extent, and on the terms
and conditions, specified in Section 2.10(e); provided that if the Borrower
fails to so exercise such option, it shall be deemed to have agreed to
reimburse such Bank from time to time on demand the additional costs specified
in the Bank's notice delivered pursuant to Section 2.10(c). Notwithstanding
the foregoing, the Borrower shall not be obligated to reimburse any Bank
pursuant to this Section 2.10(d) or Section 2.10(e) or Section 2.18 for any
additional costs under Section 2.10(c) incurred or accruing more than 90 days
prior to the date on which such Bank gave the written notice specified in
Section 2.10(c).
(e) In the event that the Borrower has given notice to a
Bank pursuant to Section 2.10(d) that it elects to terminate such Bank as a
Bank (a copy of which notice shall be sent to the Administrative Agent), such
termination shall become effective 15 days thereafter unless such Bank
withdraws its request for additional compensation. On the date of the
termination of any Bank as a Bank pursuant to this Section 2.10(e), (x) the
Borrower shall deliver notice of the effectiveness of such termination to such
Bank and to the Administrative Agent, (y) the Borrower shall pay all amounts
owed by the Borrower to such Bank under this Agreement or under each Note
payable to such Bank (including principal of and interest on each Advance owed
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<PAGE> 22
to such Bank, and amounts specified in such Bank's notice delivered pursuant to
Section 2.10(c) with respect to the period prior to such termination) and (z)
upon the occurrence of the events set forth in clauses (x) and (y), such Bank
shall cease to be a "Bank" hereunder for all purposes except for rights under
Sections 2.6, 2.10, 2.13, 2.18 and 8.4 arising out of events and occurrences
before or concurrently with its ceasing to be a "Bank" hereunder. The Borrower
may elect to terminate a Bank as a Bank pursuant to Section 2.10(d) only if at
such time:
(1) no Event of Default is then in existence or would be
in existence but for requirement that notice be given or time elapse
or both; and
(2) the Borrower has elected, or is then electing, to
terminate all Banks as Banks which have made similar requests for
increased compensation under this Section 2.10, which requests have
not been withdrawn, provided, that requests may be determined by the
Borrower to be dissimilar based on the negotiation of materially
dissimilar rates of compensation under clause (1) of Section 2.10(d).
(f) Each Bank shall use its reasonable efforts
(consistent with its internal policies and legal and regulatory restrictions)
to select a jurisdiction for its Applicable Lending Office or change the
jurisdiction of its Applicable Lending Office, as the case may be, so as to
avoid the imposition of any increased costs under this Section 2.10 or to
eliminate the amount of any such increased cost which may thereafter accrue;
provided that no such selection or change of the jurisdiction for its
Applicable Lending Office shall be made if, in the reasonable judgment of such
Bank, such selection or change would be disadvantageous to such Bank.
(g) This Section 2.10 shall not apply to Taxes and Other
Taxes, which are governed by Section 2.13.
2.11. Illegality. Notwithstanding any other provision of
this Agreement, if the introduction of or any change in or in the
interpretation of or compliance with any law or regulation shall make it
unlawful, or any governmental authority, central bank or comparable agency
shall assert that it is unlawful, for any Bank or its Eurodollar Lending Office
to perform its obligations hereunder to make Eurodollar Advances or to continue
to fund or maintain Eurodollar Advances hereunder, then, on notice thereof and
demand therefor by such Bank to the Borrower through the Administrative Agent,
(a) the obligation of the Banks to make Eurodollar Advances and to Convert
Advances into Eurodollar Advances shall terminate and (b) the Borrower shall
forthwith Convert all Eurodollar Advances of all Banks then outstanding into
Advances of another Type in accordance with Section 2.8.
2.12. Payments and Computations.
(a) The Borrower shall make each payment under any Loan
Document not later than 11:00 A.M. on the day when due in dollars to the
Administrative Agent at its Payment Office in same day funds. The
Administrative Agent will promptly thereafter cause to be distributed like
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<PAGE> 23
funds relating to the payment of principal or interest ratably (other than
amounts payable pursuant to Section 2.6, 2.10, 2.13, 2.17, 2.18 or 8.4(b)) to
the Banks (decreased, as to any Bank, for any taxes withheld in respect of such
Bank as contemplated by Section 2.13(b)) for the account of their respective
Applicable Lending Offices, and like funds relating to the payment of any other
amount payable to any Bank to such Bank for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement.
(b) All computations of interest based on the Base Rate
(except during such times as the Base Rate is determined pursuant to clause (b)
of the definition thereof) shall be made by the Administrative Agent on the
basis of a year of 365 or 366 days, as the case may be, and, subject to Section
8.8, all computations of interest based on the Adjusted CD Rate, the Eurodollar
Rate, the Federal Funds Rate or, during such times as the Base Rate is
determined pursuant to clause (b) of the definition thereof, the Base Rate
shall be made by the Administrative Agent, and all computations of interest
pursuant to Section 2.6 shall be made by a Bank, on the basis of a year of 360
days, in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest is
payable. Each determination by the Administrative Agent (or, in the case of
Section 2.6, by a Bank) of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error. For the purposes of the
Interest Act (Canada) and disclosure thereunder, whenever any interest is made
payable under any Note at any rate or percentage for or based on a period of
three hundred sixty days (360), the yearly rate or percentage of interest to
which such rate or percentage of interest is equivalent is the rate or
percentage stipulated herein multiplied by the actual number of days in the
applicable year divided by three hundred sixty (360). The foregoing sentence
is for disclosure purposes only and shall not otherwise affect the terms of any
Note as set forth herein.
(c) Whenever any payment hereunder or under the Notes
shall be stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of payment of interest;
provided, however, if such extension would cause payment of interest on or
principal of Eurodollar Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have received
notice from the Borrower prior to the date on which any payment is due to the
Banks hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent
the Borrower shall not have so made such payment in full to the Administrative
Agent, each Bank shall, subject to Section 8.8, repay to the Administrative
Agent forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to such
Bank until the earlier of (a) the date such Bank repays such amount to the
Administrative Agent and (b) the date two Business Days after the date such
amount is so distributed, at the Federal Funds Rate,
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<PAGE> 24
and thereafter until the date such Bank repays such amount to the
Administrative Agent at the Federal Funds Rate plus 2%.
2.13. Taxes.
(a) Subject to Section 8.8, any and all payments by the
Borrower hereunder or under the Notes shall be made, in accordance with Section
2.12, free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges, fees, duties or withholdings, and
all liabilities with respect thereto, excluding, in the case of each Bank and
the Administrative Agent, (1) taxes imposed on its income, (2) franchise taxes
imposed on it by the jurisdiction under the laws of which (or under the laws of
a political subdivision of which) such Bank or Administrative Agent (as the
case may be) is organized or any political subdivision thereof and, in the case
of each Bank, franchise taxes imposed on it by the jurisdiction of such Bank's
Applicable Lending Office or any political subdivision thereof and (3) any
taxes imposed by the Government of Canada by means of withholding at the source
(other than such taxes imposed on payments to a Bank whose Applicable Lending
Office at the time such payment is made is located within the United States) if
and to the extent that such taxes shall be in effect and shall be applicable,
to payments to be made to such Bank or the Administrative Agent (all such
non-excluded taxes, levies, imposts, deductions, charges, fees, duties,
withholdings and liabilities being hereinafter referred to as "Taxes").
Subject to Section 8.8, if the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under any Note to any
Bank or the Administrative Agent, (x) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.13) such Bank or the
Administrative Agent (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (y) the Borrower shall
make such deductions and (z) the Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with
applicable law.
(b) Notwithstanding anything to the contrary contained in
this Agreement, each of the Borrower and the Administrative Agent shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
income or other similar taxes imposed by the United States of America from
interest, fees or other amounts payable hereunder for the account of any Bank
(without the payment by the Borrower of increased amounts to such Bank pursuant
to clause (a) above) other than a Bank (1) which is a domestic corporation (as
such term is defined in Section 7701 of the Code) for federal income tax
purposes or (2) which has the Prescribed Forms on file with the Borrower and
the Administrative Agent for the applicable year to the extent deduction or
withholding of such taxes is not required as a result of the filing of such
Prescribed Forms, provided that if the Borrower shall so deduct or withhold any
such taxes, it shall provide a statement to the Administrative Agent and such
Bank, setting forth the amount of such taxes so deducted or withheld, the
applicable rate and any other information or documentation which such Bank or
the Administrative Agent may reasonably request for assisting such Bank or the
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<PAGE> 25
Administrative Agent to obtain any allowable credits or deductions for the
taxes so deducted or withheld in the jurisdiction or jurisdictions in which
such Bank is subject to tax.
(c) In addition, subject to Section 8.8, the Borrower
agrees to pay any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which arise from any
payment made hereunder or under the Notes or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or the Notes
(hereinafter referred to as "Other Taxes").
(d) THE BORROWER, TO THE FULLEST EXTENT PERMITTED BY LAW,
WILL INDEMNIFY EACH BANK AND THE ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF
TAXES OR OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY TAXES OR OTHER TAXES
IMPOSED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 2.13) PAID BY
SUCH BANK OR THE ADMINISTRATIVE AGENT (AS THE CASE MAY BE) AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, (EXPRESSLY INCLUDING SUCH AMOUNTS PAID AS A RESULT OF THE ORDINARY,
SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH BANK OR THE ADMINISTRATIVE AGENT, BUT
EXCLUDING SUCH AMOUNTS PAID AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH BANK OR ADMINISTRATIVE AGENT), WHETHER OR NOT SUCH TAXES OR
OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED. This indemnification shall be
made within 30 days from the date such Bank or the Administrative Agent (as the
case may be) makes written demand therefor. No Bank nor the Administrative
Agent shall be indemnified for Taxes or Other Taxes incurred or accrued more
than 90 days prior to the date that such Bank or the Administrative Agent
notifies the Borrower thereof; provided that the foregoing 90-day limitation
shall not apply to the Borrower's obligations under the parenthetical contained
in clause (3) of Section 2.13(a), which shall be without limitation as to time.
(e) Within 30 days after the date of any payment of Taxes
by or at the direction of the Borrower, the Borrower will furnish to the
Administrative Agent, at its address referred to in Section 8.2, the original
or a certified copy of a receipt evidencing payment thereof. Should any Bank
or the Administrative Agent ever receive any refund, credit or deduction from
any taxing authority to which such Bank or the Administrative Agent would not
be entitled but for the payment by the Borrower of Taxes as required by this
Section 2.13 (it being understood that the decision as to whether or not to
claim, and if claimed, as to the amount of any such refund, credit or deduction
shall be made by such Bank or the Administrative Agent in its sole discretion),
such Bank or the Administrative Agent, as the case may be, thereupon shall
repay to the Borrower an amount with respect to such refund, credit or
deduction equal to any net reduction in taxes actually obtained by such Bank or
the Administrative Agent, as the case may be, and determined by such Bank or
the Administrative Agent, as the case may be, to be attributable to such
refund, credit or deduction.
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(f) Each Bank shall use its reasonable efforts
(consistent with its internal policies and legal and regulatory restrictions)
to select a jurisdiction for its Applicable Lending Office or change the
jurisdiction of its Applicable Lending Office, as the case may be, so as to
avoid the imposition of any Taxes or Other Taxes or to eliminate the amount of
any such additional amounts which may thereafter accrue; provided that no such
selection or change of the jurisdiction for its Applicable Lending Office shall
be made if, in the reasonable judgment of such Bank, such selection or change
would be disadvantageous to such Bank.
(g) Without prejudice to the survival of any other
agreement of the Borrower hereunder, but subject to the expiration of any
applicable statute of limitations, the agreements and obligations of the
Borrower contained in this Section 2.13 shall survive the payment in full of
principal and interest hereunder and under the Notes.
(h) The Administrative Agent agrees with the Borrower
that the Administrative Agent will use reasonable efforts to (i) solicit
relevant federal income tax documentation (including Form 4224 or Form 1001 as
appropriate) from each Bank necessary to allow the Administrative Agent to
properly withhold and report federal income taxes on payments made by the
Administrative Agent hereunder, (ii) report to the Internal Revenue Service all
reportable income paid hereunder by the Administrative Agent to any Bank that
is not a domestic corporation ( as such term is defined in Section 7701 of the
Code) for federal income tax purposes on Forms 1042 and 1042S or other
appropriate form, (iii) deliver to each Bank that is not a domestic corporation
(as such term is defined in Section 7701 of the Code) for federal income tax
purposes a Form 1042S or other appropriate form by March 15 following any year
in which payment is made hereunder by the Administrative Agent to such Bank,
and (iv) upon request of the Borrower, deliver copies of such forms to the
Borrower.
2.14. Sharing of Payments, Etc. If any Bank shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Advances made by it (other than
pursuant to Section 2.6, 2.10, 2.13, 2.17, 2.18 or 8.4(b)) in excess of its
ratable share of payments on account of the Advances obtained by all the Banks,
such Bank shall forthwith purchase from the other Banks such participations in
the Advances made by them as shall be necessary to cause such purchasing Bank
to share the excess payment ratably with each of them, provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Bank, such purchase from each Bank shall be rescinded and such Bank
shall repay to the purchasing Bank the purchase price to the extent of its
ratable share (according to the proportion of (a) the amount of the
participation purchased from such Bank as a result of such excess payment to
(b) the total amount of such excess payment) of such recovery together with an
amount equal to such Bank's ratable share (according to the proportion of (x)
the amount of such Bank's required repayment to (y) the total amount so
recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered.
The Borrower agrees that any Bank so purchasing a participation from another
Bank pursuant to this Section 2.14 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with
respect to such
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<PAGE> 27
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation.
2.15. Increase of Facility. The Borrower shall have the
right, with the consent of the Administrative Agent and all of the Banks (which
consents shall not be unreasonably withheld), to effectuate from time to time
an increase in the total amount of the indebtedness outstanding under this
Agreement by issuing additional Notes under this Agreement to one or more
commercial banks or other financial institutions (who shall, upon completion of
the requirements stated in this Section 2.15, constitute Banks hereunder), or
by issuing additional Notes to one or more Banks hereunder, so that such
additional Notes shall equal the amount of the indebtedness increased pursuant
to this Section 2.15; provided that (a) no increase pursuant to this Section
2.15 shall result in the total indebtedness outstanding under this Agreement
exceeding $150,000,000, and (b) no Bank shall be required to lend additional
funds or purchase an additional Note without the consent of such Bank, given in
its sole discretion. The Borrower shall give the Administrative Agent three
(3) Business Days' notice of the Borrower's intention to increase the
indebtedness under this Agreement pursuant to this Section 2.15. Such notice
shall specify each new commercial bank or other financial institution, if any,
the amount of the Note to be issued to such Person(s), the date of the
Borrowing evidenced by such Notes, and such other information as is reasonably
requested by the Administrative Agent. Each new commercial bank or other
financial institution, and each Bank agreeing to lend additional funds, shall
execute and deliver to the Administrative Agent a document satisfactory to the
Administrative Agent pursuant to which it becomes a party hereto or agrees to
lend additional funds, as the case may be, which document, in the case of a new
commercial bank or other financial institution, shall (among other matters)
specify the CD Lending Office, Domestic Lending Office and Eurodollar Lending
Office of such new commercial bank or other financial institution. In
addition, the Borrower shall execute and deliver a Note to each new commercial
bank or other financial institution participating in the increase in the
principal amount to be advanced by such new commercial bank or other financial
institution, and an additional Note to each existing Bank participating in such
increase in the principal amount to be advanced by such existing Bank. Such
Notes and other documents of the nature referred to in Section 3.1 shall be
furnished to the Administrative Agent in form and substance as may be
reasonably required by it. Upon execution and delivery of such documents, such
new commercial bank or other financial institution shall constitute a "Bank"
hereunder, or such Bank shall be obligated to lend the additional funds
specified therein, as the case may be.
2.16 Reserved.
2.17. Non-Ratable Repayment. In addition to the Borrower's
rights pursuant to Section 2.9, the Borrower may prepay in whole (but not in
part) all Advances owed to one or more Banks, non-ratably and without the
requirement to prepay Advances owed to any other Banks, (x) in the case of
Adjusted CD Rate Advances, upon at least one Business Days' notice, (y) in the
case of Eurodollar Advances, upon at least three Business Days' notice, and (z)
in the case of Base Rate Advances, upon notice by 11:00 A.M. on the day of the
proposed prepayment, to the Administrative Agent stating the proposed date of
prepayment, the Bank or Banks to which
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such prepayment is to be made, the aggregate principal amount of the prepayment
and the principal amount to be prepaid to each Bank; provided that the Borrower
shall not give any such notice if (i) any Event of Default then exists or any
event then exists which would constitute an Event of Default but for the
requirement that notice be given or time elapse or both, and (ii) the senior
unsecured long-term debt of the Guarantor is rated BBB- or lower by Standard &
Poor's or Baa3 or lower by Moody's. If the Borrower gives the notice
contemplated by this Section 2.17, the Borrower shall prepay the outstanding
principal amount of the Advances described in such notice, together with
accrued interest to the date of such prepayment on the principal amount
prepaid, without premium or penalty, and all other amounts, if any, owed to
each Bank to which such prepayment is to be made (including any amount owed
pursuant to Section 8.4(b)).
2.18. Replacement of Bank. In the event that any Bank
shall either (i) refuse to the extend the Maturity Date following a request
under Section 2.4(b), or (ii) claim payment of any increased costs pursuant to
Section 2.10 or any additional amounts pursuant to Section 2.13, the Borrower
shall have the right to replace such Bank with another commercial bank or other
financial institution; provided that such replacement commercial bank or other
financial institution, (a) if it is not a Bank, shall be reasonably acceptable
to the Administrative Agent, (b) shall unconditionally offer in writing (with a
copy to the Administrative Agent) to purchase all of such Bank's rights and
assume all of such Bank's obligations hereunder and interest in the Advances
owing to such Bank and the Note or Notes held by such Bank without recourse at
the principal amount of such Note plus interest accrued thereon to the date of
such purchase on a date therein specified, and (c) shall execute and deliver to
the Administrative Agent a document satisfactory to the Administrative Agent
pursuant to which such replacement commercial bank or other financial
institution becomes a party hereto, which document, if such replacement
commercial bank or other financial institution is not already a Bank, shall
(among other matters) specify the CD Lending Office, Domestic Lending Office and
Eurodollar Lending Office of such replacement commercial bank or other financial
institution. Upon satisfaction of the requirements set forth in the first
sentence of this Section 2.18, acceptance of such offer to purchase by the Bank
to be replaced, payment to such Bank of the purchase price in immediately
available funds, and, if required, the payment by the Borrower of all requested
costs accruing to the date of purchase which the Borrower is obligated to pay
under Section 8.4 and all other amounts owed by the Borrower to such Bank (other
than the principal of and interest on the Advances of such Bank purchased by the
replacement commercial bank or other financial institution), the replacement
commercial bank or other financial institution shall constitute a "Bank"
hereunder and the Bank being so replaced shall no longer constitute a "Bank"
hereunder (with Annex I being amended to reflect same), except that the rights
under Sections 2.6, 2.10, 2.13 and 8.4 of the Bank being so replaced shall
continue with respect to matters arising out of events or occurrences before or
concurrently with its ceasing to be a "Bank" hereunder. If, however, (x) a Bank
accepts such an offer and such commercial bank or other financial institution
fails to purchase such rights and interest on such specified date in accordance
with the terms of such offer, the Borrower shall continue to be obligated to pay
the increased costs to such Bank pursuant to Section 2.10 or the additional
amounts pursuant to Section 2.13, as the case may be, or (y) the Bank proposed
to be replaced fails to accept such purchase offer, the Borrower shall not be
obligated to pay to such
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Bank such increased costs or additional amounts incurred or accrued from and
after the date of such purchase offer.
ARTICLE III
CONDITIONS TO EACH BORROWING
3.1. Initial Conditions Precedent. The obligation of each
Bank to fund its portion of the Borrowing on January 16, 1996 (or to fund any
Borrowing pursuant to Section 2.15) pursuant to the terms and conditions of
this Agreement is subject to the conditions precedent that the Administrative
Agent shall have received the following, each dated on or before the date of
such Borrowing, in form and substance satisfactory to the Administrative Agent:
(a) Loan Documents. This Agreement, the Guaranty, and
the executed Notes payable to the order of the Banks, respectively, in the
amount of such Bank's Commitment as set forth on Annex I (in the case of the
Borrowing made on January 16, 1996) and in the amount to be advanced by such
Bank (in the case of a Borrowing pursuant to Section 2.15).
(b) Corporate Documents. Certified copies of the
resolutions of the Board of Directors of each of the Guarantor and the Borrower
approving the execution, delivery and performance of, in the case of the
Guarantor, the Guaranty, and in the case of the Borrower, the Loan Documents to
which it is a party and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to each such Loan
Document or the Guaranty and certified copies of the restated certificate of
incorporation and bylaws of the Guarantor and of the memorandum and articles of
association of the Borrower.
(c) Incumbency. A certificate of the Secretary or an
Assistant Secretary of each of the Guarantor and the Borrower certifying the
names and true signatures of the officers of each authorized to sign, in the
case of the Guarantor, the Guaranty, and in the case of the Borrower, each Loan
Document to which it is a party and the other documents to be delivered
hereunder.
(d) Legal Opinions. A favorable opinion from each of the
following:
(i) Vinson & Elkins L.L.P., special counsel for the
Guarantor and the Borrower, to be delivered to, and for the benefit
of, the Banks and the Administrative Agent, at the express instruction
of the Guarantor and the Borrower, substantially in the form of
Exhibit C-1 and as to such other matters as any Bank through the
Administrative Agent may reasonably request.
(ii) Bennett Jones Verchere, special Canadian tax counsel
for the Borrower, to be delivered to, and for the benefit of, the
Banks and the Administrative Agent, at the
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express instruction of the Borrower, substantially in the form of
Exhibit C-2 and as to such other matters as any Bank through the
Administrative Agent may reasonably request.
(iii) Stewart McKelvey Stirling Scales, special Nova Scotia
counsel for the Borrower, to be delivered to, and for the benefit of,
the Banks and the Administrative Agent, at the express instruction of
the Borrower, substantially in the form of Exhibit C-3 and as to such
other matters as any Bank through the Administrative Agent may
reasonably request.
(iv) A favorable opinion of Dennis M. Ulak, Vice President
and General Counsel of the Guarantor, to be delivered to, and for the
benefit of, the Banks and the Administrative Agent, at the express
instruction of the Guarantor, in substantially the form of Exhibit D
and as to such other matters as any Bank through the Administrative
Agent may reasonably request.
(e) Parol Certificate. A Notice of Entire Agreement,
executed by the Borrower.
3.2. Additional Conditions Precedent to the Borrowings.
The obligation of each Bank to fund its portion of the Borrowing on January 16,
1996 (or to fund any subsequent Borrowing pursuant to Section 2.15) shall be
subject to the additional conditions precedent that on the date of the
Borrowing:
(a) Absence of Default. The following statements shall
be true (and each of the giving of the applicable Notice of Borrowing and the
acceptance by the Borrower of the proceeds of the Borrowing shall constitute a
representation and warranty by the Borrower that on the date of the Borrowing
such statements are true):
(i) The representations and warranties contained in
Section 4.1 of this Agreement and the other Loan Documents are correct
on and as of the date of such Advance, before and after giving effect
to the Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date, and
(ii) No event has occurred and is continuing, or would
result from the Borrowing or from the application of the proceeds
therefrom, which constitutes an Event of Default or would constitute
an Event of Default but for the requirement that notice be given or
time elapse or both; and
(b) Notice of Borrowing. The Administrative Agent shall
have received the Notice of Borrowing required by Section 2.2 and such other
approvals, opinions or documents as any Bank through the Administrative Agent
may reasonably request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Borrower. The
Borrower represents and warrants to the Banks as follows:
(a) Formation; Existence. The Borrower is duly formed,
validly existing and in good standing under the laws of the jurisdiction of its
formation. The Borrower has all power and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
(b) Authority; Etc. The execution, delivery and
performance by the Borrower of each Loan Document to which it is or will be a
party are within the Borrower's powers, have been duly authorized by all
necessary action of the Borrower, require, in respect of the Borrower, no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
law or regulation (including Regulation X issued by the Federal Reserve Board)
applicable to the Borrower or Regulation U issued by the Federal Reserve Board
or the memorandum and articles of association of the Borrower or any judgment,
injunction, order, decree or material ("material" for the purposes of this
representation meaning creating a liability of $50,000,000 or more) agreement
binding upon the Borrower or result in the creation or imposition of any lien,
security interest or other charge or encumbrance on any asset of the Borrower.
(c) Validity. This Agreement and each Note are, and each
other Loan Document to which the Borrower is or will be a party, when executed
and delivered in accordance with this Agreement will be, the legal, valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, except as the enforceability thereof may be limited
by the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and by general
principles of equity.
(d) Investment Company Act. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(e) Public Utility Holding Company Act. The Borrower is
not a "holding company", a "subsidiary company" of a "holding company", an
"affiliate" of a "holding company", or an "affiliate" of a "subsidiary company"
of a "holding company", in each case as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended.
(f) Margin Stock. Following application of the proceeds
of each Advance, not more than 25 percent of the value of the assets (both of
the Borrower only and of the Borrower and its subsidiaries on a consolidated
basis), which are subject to any arrangement with the Administrative Agent or
any Bank (herein or otherwise) whereby the Borrower's right or ability
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to sell, pledge or otherwise dispose of assets is in any way restricted, will
be margin stock (within the meaning of Regulation U issued by the Federal
Reserve Board).
ARTICLE V
COVENANTS OF THE BORROWER
5.1. Affirmative Covenants. The Borrower covenants and
agrees that so long as any Note shall remain unpaid, the Borrower will, unless
the Majority Banks shall otherwise consent in writing:
(a) Reporting Requirements. Furnish to each Bank, as
soon as possible and in any event within five (5) days after an executive
officer of the Borrower having obtained knowledge thereof, notice of the
occurrence of any Event of Default or any event which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default,
continuing on the date of such notice, and a statement of the chief financial
officer of the Borrower setting forth details of such Event of Default or event
and the action which the Borrower (or the Guarantor) has taken and proposes to
take with respect thereto;
(b) Compliance with Laws, Etc. Comply with all
applicable laws, rules, regulations and orders to the extent noncompliance
therewith would have a material adverse effect on the Borrower, such compliance
to include, without limitation, the paying before the same become delinquent of
all taxes, assessments and governmental charges imposed upon it or upon its
property except to the extent contested in good faith by appropriate
proceedings.
(c) Use of Proceeds. Use the proceeds of each Borrowing
for general business purposes of the Borrower and its subsidiaries. However,
no part of the proceeds of any Borrowing shall be used for the purpose of
purchasing or carrying margin stock within the meaning of Regulation U issued
by the Federal Reserve Board.
5.2. Negative Covenants. So long as any Note shall remain
unpaid, the Borrower will not at any time, without the written consent of the
Majority Banks:
(a) Disposition of Assets. Lease, sell, transfer or
otherwise dispose of, voluntarily or involuntarily, all or substantially all of
its assets; provided that the foregoing shall not apply to (i) any conversions
of currency between U.S. Dollars and Canadian Dollars that the Borrower may
undertake from time to time, or (ii) any lease, sale, transfer or other
disposition of assets by the Borrower to any Person which is wholly-owned,
directly or indirectly, by the Guarantor.
(b) Mergers, Etc. Merge, amalgamate or consolidate with
or into, any Person, unless (i) the Borrower is the survivor or (ii) the
surviving Person, if not the Borrower, assumes,
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<PAGE> 33
pursuant to a written agreement in form and substance satisfactory to the
Administrative Agent, all obligations of the Borrower under this Agreement,
provided, in each case that both immediately before and after giving effect to
such proposed transaction, no Event of Default or event which, with the giving
of notice or the lapse of time, or both, would constitute an Event of Default
exists, or would exist or result.
ARTICLE VI
EVENTS OF DEFAULT
6.1. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) Payment Default. The Borrower shall fail to pay (1)
any principal on any Note when due and payable or (2) any interest on any Note
for more than five days after such interest becomes due and payable; or
(b) Failure of Representation. Any representation or
warranty made by the Borrower (or any of its officers) (including
representations and warranties deemed made pursuant to Section 3.2) under or in
connection with any Loan Document shall prove to have been incorrect in any
material respect when made or deemed made and such materiality is continuing;
or
(c) Failure to Comply with Covenants. The Borrower shall
fail to perform or observe any term, covenant or agreement contained in Section
5.2 or shall fail to perform or observe any other term, covenant or agreement
contained in any Loan Document on its part to be performed or observed if, in
the case of such other term, covenant or agreement, such failure shall remain
unremedied for 30 days after written notice thereof shall have been given to
the Borrower by the Administrative Agent at the request of any Bank; or
(d) Default on Other Indebtedness. The Borrower shall
fail to pay any principal of or premium or interest on any indebtedness for
borrowed money, which is outstanding in the principal amount of at least
$50,000,000 in the aggregate, when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise),
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such indebtedness; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate the maturity of such
indebtedness; or any such indebtedness shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment or as a result of the giving of notice of a voluntary prepayment),
prior to the stated maturity thereof; or
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<PAGE> 34
(e) Insolvency. The Borrower shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower
seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, including without limitation, the
Companies' Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency
Act (Canada) or the Winding-up Act (Canada), or seeking the entry of an order
for relief or the appointment of a receiver, trustee or other similar official
for it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), shall remain
undismissed or unstayed for a period of 60 days; or the Borrower shall take any
action to authorize any of the actions set forth above in this subsection (e);
or
(f) Guarantor Default. A Guarantor Default shall occur
and be continuing; then, and in any such event, the Administrative Agent shall
at the request, or may with the consent, of the Majority Banks, by notice to
the Borrower, declare the principal balance of the Notes, all interest accrued
thereon and all other accrued amounts payable under this Agreement to be
forthwith due and payable, whereupon the principal balance of the Notes, all
such accrued interest and all such accrued amounts shall become and be
forthwith due and payable, without presentment, demand, protest, notice of
intent to accelerate or further notice of any kind, all of which are, to the
extent permitted by law, hereby expressly WAIVED by the Borrower; provided,
however, that in the event of an actual or deemed entry of an order for relief
with respect to the Borrower under the Bankruptcy Code, the Companies'
Creditors Arrangement Act (Canada), the Bankruptcy and Insolvency Act (Canada)
or the Winding-up Act (Canada), the principal balance of the Notes, all accrued
interest and all accrued amounts shall automatically become and be due and
payable, without presentment, demand, protest, notice of intent to accelerate
or any notice of any kind, all of which are, to the extent permitted by law,
hereby expressly WAIVED by the Borrower.
ARTICLE VII
THE ADMINISTRATIVE AGENT
7.1. Authorization and Action. Each Bank hereby appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under the Loan Documents or the Guaranty as
are delegated to the Administrative Agent, by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto. As to any
matters not expressly provided for by the Loan Documents or the Guaranty
(including enforcement or collection of the Notes), the Administrative Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in
so acting or refraining from acting) upon the instructions of the Majority
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Banks, and such instructions shall be binding upon all Banks and all holders of
Notes; provided, however, that the Administrative Agent shall not be required
to take any action which exposes the Administrative Agent to personal liability
or which is contrary to any Loan Document, the Guaranty or applicable law and
shall not be required to initiate or conduct any litigation or other
proceedings. The Administrative Agent agrees to give to each Bank prompt
notice of each notice given to it by the Borrower pursuant to the terms of this
Agreement.
7.2. Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with any Loan Document or the Guaranty, except for its or
their own gross negligence or willful misconduct. The duties of the
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have, by reason of this Agreement, any other
Loan Document or the Guaranty, a fiduciary relationship in respect of any Bank
or the holder of any Note; and nothing in this Agreement, any other Loan
Document or the Guaranty, expressed or implied, is intended or shall be so
construed as to impose upon the Administrative Agent any obligations in respect
of this Agreement, any other Loan Document or the Guaranty, except as expressly
set forth herein. Without limitation of the generality of the foregoing, the
Administrative Agent: (a) may treat the payee of any Note as the holder thereof
until the Administrative Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the
Administrative Agent; (b) may consult with legal counsel (including counsel for
the Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Bank and shall not be
responsible to any Bank for any statements, warranties or representations made
in or in connection with any Loan Document or the Guaranty; (d) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of any Loan Document or the Guaranty on
the part of the Borrower or the Guarantor or to inspect the property (including
the books and records) of the Borrower or the Guarantor and shall not be deemed
to have knowledge of an Event of Default or of any event which with the giving
of notice or the lapse of time or both would be an Event of Default (other than
nonpayment of principal of or interest on the Notes) unless it has received
from a Bank or the Borrower a notice specifying such default and stating that
it is an "Notice of Default"; (e) shall not be responsible to any Bank for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document, the Guaranty or any other instrument or document
furnished pursuant hereto; and (f) shall incur no liability under or in respect
of any Loan Document or the Guaranty by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopier,
telegram, cable or telex) believed by it to be genuine and signed or sent by
the proper party or parties.
7.3. Administrative Agent and Its Affiliates. With
respect to its Commitment, the Advances made by it and the Note issued to it,
the Bank which is also the Administrative Agent shall have the same rights and
powers under the Loan Documents and the Guaranty as any
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<PAGE> 36
other Bank and may exercise the same as though it were not the Administrative
Agent; and the term "Bank" or "Banks" shall, unless otherwise expressly
indicated, include the Bank serving as the Administrative Agent in its
individual capacity. The Bank serving as the Administrative Agent and its
affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Borrower,
any of its subsidiaries and any Person who may do business with or own
securities of the Borrower or any of its subsidiaries, all as if such Bank were
not the Administrative Agent and without any duty to account therefor to the
Banks.
7.4. Bank Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Bank and based on the financial statements referred to in Section
4.1(a)(1) of the Guaranty and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Bank also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement, the other Loan Documents or the Guaranty. The Administrative
Agent shall not have any duty or responsibility, either initially or on a
continuing basis, to provide any Bank or the holder of any Note with any credit
or other information with respect thereto, whether coming into its possession
before a Borrowing or at any time or times thereafter. The Administrative
Agent shall not be responsible to any Bank or the holder of any Note for any
recitals, statements, information, representations or warranties herein, in the
Guaranty or in any document, certificate or other writing delivered in
connection herewith or therewith or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, priority or sufficiency
of this Agreement, any other Loan Document or the Guaranty or the financial
condition of either the Guarantor or the Borrower or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, any other Loan Document or the
Guaranty, or the financial condition of either the Guarantor or the Borrower or
the existence or possible existence of any Event of Default or event of which
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
7.5. Certain Rights of the Administrative Agent. If the
Administrative Agent shall request instructions from all of the Banks (in the
case of matters specified in the proviso of Section 8.1) or the Majority Banks
(in all other cases) with respect to any act or action (including failure to
act) in connection with this Agreement, any other Loan Document or the
Guaranty, the Administrative Agent shall be entitled to refrain from such act
or taking such action unless and until the Administrative Agent shall have
received instructions from all of the Banks or the Majority Banks, as the case
may be; and it shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Bank or the holder of any Note
shall have any right of action whatsoever against the Administrative Agent as a
result of its acting or refraining from acting hereunder, under any other Loan
Document or under the Guaranty in accordance with the instructions of the
Majority Banks or all of the Banks, as the case may be. Furthermore, except
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for action expressly required of the Administrative Agent hereunder, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be specifically indemnified to its
satisfaction by the Banks against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
7.6. Holders. Any request, authority or consent of any
Person who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of
such Note or of any Note or Notes issued in exchange therefor.
7.7. Indemnification. The Banks agree to indemnify the
Administrative Agent (to the extent not reimbursed by the Borrower), ratably
according to the respective principal amounts of the Notes then held by each of
them (or if no principal of the Notes is at the time outstanding or if any
principal of the Notes is held by Persons which are not Banks, ratably
according to the respective amounts of their Commitments then existing, or, if
no such principal amounts are then outstanding and no Commitments are then
existing, ratably according to the respective amounts of the Commitments
existing immediately prior to the termination thereof), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of any of the Loan
Documents or the Guaranty or any action taken or omitted by the Administrative
Agent under the Loan Documents or the Guaranty EXPRESSLY INCLUDING ANY SUCH
LIABILITY, OBLIGATION, LOSS, DAMAGE, PENALTY, ACTION, JUDGMENT, SUIT, COST,
EXPENSE OR DISBURSEMENT ATTRIBUTABLE TO THE ORDINARY, SOLE OR CONTRIBUTORY
NEGLIGENCE OF SUCH INDEMNIFIED PARTY; PROVIDED THAT NO BANK SHALL BE LIABLE FOR
ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE
ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IT IS THE
INTENT OF THE BANKS THAT THE ADMINISTRATIVE AGENT SHALL, TO THE EXTENT PROVIDED
IN THIS SECTION 7.7, BE INDEMNIFIED FOR ITS ORDINARY, SOLE OR CONTRIBUTORY
NEGLIGENCE. Without limitation of the foregoing, each Bank agrees to reimburse
the Administrative Agent promptly upon demand for such Bank's ratable share of
any reasonable out-of-pocket expenses (including reasonable counsel fees)
incurred by the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, the Loan Documents, or
any of them or the Guaranty, to the extent that the Administrative Agent is not
reimbursed for such expenses by the Borrower.
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7.8. Resignation by the Administrative Agent.
(a) The Administrative Agent may resign from the
performance of all its functions and duties hereunder, under the other Loan
Documents or the Guaranty at any time by giving 15 Business Days' prior written
notice to the Borrower and the Banks. Such resignation shall take effect upon
the appointment of a successor Administrative Agent pursuant to clauses (b) and
(c) below or as otherwise provided below.
(b) Upon any such notice of resignation, the Majority
Banks shall have the right to appoint a successor Administrative Agent which
shall be a commercial bank or trust company reasonably acceptable to the
Borrower.
(c) If a successor to a resigning Administrative Agent
shall not have been so appointed within such 15 Business Day period, the
resigning Administrative Agent, with the consent of the Borrower (which consent
will not be unreasonably withheld), shall have the right to then appoint a
successor Administrative Agent who shall serve as Administrative Agent until
such time, if any, as the Majority Banks appoint a successor Administrative
Agent as provided above.
(d) If no successor Administrative Agent has been
appointed pursuant to clause (b) or (c) above and shall have accepted such
appointment by the 20th Business Day after the date such notice of resignation
was given by the resigning Administrative Agent, the resigning Administrative
Agent's resignation shall become effective and the Banks shall thereafter
perform all the duties of the resigning Administrative Agent hereunder, under
any other Loan Document or the Guaranty until such time, if any, as the
Majority Banks appoint a successor Administrative Agent as provided above.
ARTICLE VIII
MISCELLANEOUS
8.1. Amendments, Etc. No amendment or waiver of any
provision of any Loan Document, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Banks, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Banks, do any of the following: (a) waive any of
the conditions specified in Article III, (b) increase the Commitments of the
Banks or subject the Banks to any additional obligations, except as provided in
Section 2.15, (c) forgive or reduce the principal of, or interest on, the Notes
or other amounts payable hereunder, (d) postpone any date fixed for any payment
of principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, (e) take any action which requires the consent of all the Banks
pursuant to the terms of any Loan
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Document, (f) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes which shall be required for the Banks or
any of them to take any action under any Loan Document or (g) amend this
Section 8.1; and provided, further, that no amendment, waiver or consent shall,
unless in writing and signed by the Administrative Agent in addition to the
Banks required above to take such action, affect the rights or duties of the
Administrative Agent under any Loan Document.
8.2. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier communication)
and mailed, telecopied or delivered, if to the Borrower, at its address or
telecopier number set forth below:
EOG Company of Canada
1400 Smith Street
Houston, Texas 77002
Attention: Senior Vice President,
Chief Financial Officer and Treasurer
Telecopier No.: 713-646-2113
if to any Bank, at its Domestic Lending Office; if to the Administrative Agent,
at its address or telecopier number set forth below:
Texas Commerce Bank National Association
712 Main Street
Houston, Texas 77002
Attention: Manager
Energy Group
Telecopier No.: 713-216-4117
or, as to the Borrower or the Administrative Agent, at such other address as
shall be designated by such party in a written notice to the other parties and,
as to each other party, at such other address as shall be designated by such
party in a written notice to the Borrower and the Administrative Agent. All
such notices and communications shall be effective, if delivered, upon such
delivery; if mailed, three (3) Business Days after deposit in the mails; if
sent by overnight courier, one Business Day after delivery to the courier
company; and if sent by telecopier, when received by the receiving telecopier
equipment, respectively; provided, however, that (a) notices and communications
to the Administrative Agent shall not be effective until received by the
Administrative Agent and (b) telecopied notices received by any party after its
normal business hours (or on a day other than a Business Day) shall be
effective on the next Business Day.
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<PAGE> 40
8.3. No Waiver; Remedies. No failure on the part of any
Bank or the Administrative Agent to exercise, and no delay in exercising, and
no course of dealing with respect to, any right under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies provided in the Loan Documents are cumulative
and not exclusive of any remedies provided by law or in equity.
8.4. Costs, Expenses and Taxes.
(a) Subject to Section 8.8, the Borrower agrees to pay on
demand (1) all reasonable costs and expenses in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents and the other documents to be delivered under the Loan
Documents, including the reasonable fees and out-of- pocket expenses of one law
firm as counsel for the Administrative Agent with respect to preparation,
execution and delivery of the Loan Documents and the satisfaction of the
matters referred to in Section 3.1, and (2) all legal and other costs and
expenses, if any, of the Administrative Agent and each Bank in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of the Loan Documents and the other documents to be delivered under the Loan
Documents or incurred in connection with any workout, restructuring or
bankruptcy.
(b) If any payment or purchase of principal of, or
Conversion of, any Adjusted CD Rate Advance or Eurodollar Advance is made other
than on the last day of an Interest Period relating to such Advance, as a
result of a payment, purchase or Conversion pursuant to Sections 2.7(f), 2.8,
2.9, 2.10, 2.11, 2.13 or 2.18 or acceleration of the maturity of the Notes
pursuant to Section 6.1 or for any other reason, the Borrower, subject to
Section 8.8, shall, upon demand by any Bank (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Bank any amounts required to compensate such Bank for any additional losses,
costs or expenses which it may reasonably incur as a result of such payment,
purchase or Conversion, including, without limitation, any loss (excluding loss
of anticipated profits), cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Bank to fund or
maintain such Advance. A certificate in reasonable detail as to the basis for
and the amount of such loss, costs or expense, submitted to the Borrower and
the Administrative Agent by such Bank, shall be conclusive and binding for all
purposes, absent manifest error.
(c) THE BORROWER AGREES, TO THE FULLEST EXTENT NOT
PROHIBITED BY LAW, TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT AND
EACH BANK AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
AND CLAIMS, DAMAGES, LIABILITIES AND EXPENSES RELATING TO ENVIRONMENTAL
MATTERS) FOR WHICH ANY OF THEM MAY BECOME LIABLE OR WHICH MAY BE INCURRED BY OR
ASSERTED AGAINST THE ADMINISTRATIVE AGENT OR SUCH BANK OR ANY SUCH DIRECTOR,
OFFICER, EMPLOYEE OR AGENT OTHER THAN BY THE ADMINISTRATIVE AGENT OR ANOTHER
BANK OR ANY OF THEIR
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<PAGE> 41
RESPECTIVE SUCCESSORS OR ASSIGNS), IN EACH CASE IN CONNECTION WITH OR ARISING
OUT OF OR BY REASON OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING, WHETHER OR
NOT THE ADMINISTRATIVE AGENT OR SUCH BANK OR ANY SUCH DIRECTOR, OFFICER,
EMPLOYEE OR AGENT IS A PARTY THERETO, ARISING OUT OF, RELATED TO OR IN
CONNECTION WITH THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY TRANSACTION IN
WHICH ANY PROCEEDS OF ALL OR ANY PART OF THE ADVANCES ARE APPLIED (EXPRESSLY
INCLUDING ANY SUCH CLAIM, DAMAGE, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE
ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH INDEMNIFIED PARTY, BUT
EXCLUDING ANY SUCH CLAIM, DAMAGE, LIABILITY OR EXPENSE ATTRIBUTABLE TO THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY). IT IS THE
INTENT OF THE PARTIES HERETO THAT THE ADMINISTRATIVE AGENT AND EACH BANK, AND
THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS, SHALL, TO THE
EXTENT PROVIDED IN THIS SECTION 8.4(C), BE INDEMNIFIED FOR THEIR OWN ORDINARY,
SOLE OR CONTRIBUTORY NEGLIGENCE.
8.5. Right of Set-Off. Upon (a) the occurrence and during
the continuance of any Event of Default and (b) the making of the request or
the granting of the consent specified by Section 6.1 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.1, each Bank is hereby authorized at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Bank to or for
the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Note held by such Bank, irrespective of whether or not the Administrative
Agent or such Bank shall have made any demand under this Agreement or such Note
and although such obligations may be unmatured. Each Bank agrees promptly to
notify the Borrower after any such set-off and application made by such Bank;
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this Section 8.5
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which such Bank may have.
8.6. Binding Effect; Assignments; Participations.
(a) This Agreement shall become effective when it shall
have been executed by the Borrower and the Administrative Agent and when the
Administrative Agent shall have, as to each Bank, either received a copy of a
signature page hereof executed by such Bank or been notified by such Bank that
such Bank has executed it and thereafter shall be binding upon and inure to the
benefit of and be enforceable by the Borrower, the Administrative Agent and
each Bank and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the express prior written consent of the Banks (other than an
assignment effectuated by a merger or consolidation permitted by Section 5.2(b)
to the surviving Person referred to therein). Each Bank may assign to one or
more banks or other entities all or any part of, or may grant participations to
one or more banks or other entities in accordance with applicable law in or to
all or any part of, the Advances owing to such
-36-
<PAGE> 42
Bank and the Note held by such Bank and any such Bank's continuing obligations
with respect thereto, and to the extent of any such assignment or participation
(unless otherwise stated therein) the assignee or purchaser of such assignment
or participation shall, to the fullest extent permitted by law, have the same
rights to payment hereunder and under such Note as it would have if it were
such Bank hereunder; provided that (x) such Bank's obligations under this
Agreement, including its Commitment, shall remain unchanged, such Bank shall
remain solely responsible for the performance thereof, such Bank shall remain
the holder of any such Note for all purposes under this Agreement, and the
Borrower, the other Banks and the Administrative Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement; (y) no such assignee or participant shall be
entitled to receive any greater payment pursuant to Sections 2.6, 2.10 and 2.13
than such Bank would have been entitled to receive with respect to the rights
assigned or participated except as a result of circumstances arising after the
date of such assignment or participation to the extent that such circumstances
affect other Banks and participants generally; and (z) no Bank shall assign or
grant a participation that conveys to the assignee or participant the right to
vote or consent under this Agreement, other than the right to vote upon or
consent to (1) any increase in the amount of such Bank's Commitment; (2) any
reduction of the principal amount of, or interest to be paid on, such Bank's
Advance or Advances or Note; or (3) any postponement of the due date in respect
of any amounts owed to such Bank under any Loan Document or the Guaranty.
(b) Notwithstanding anything to the contrary in Section
8.6(a), in accordance with applicable law (x) any Bank may assign a portion of
its Commitment and its rights and obligations to one or more Banks, and (y) any
Bank may assign a portion, in an amount of at least $5,000,000 of its
Commitment (provided such assignment does not result in the remaining
Commitment of the assigning Bank being less than $10,000,000), and its rights
and obligations hereunder to another commercial bank or financial institution,
in the case of assignments pursuant to clause (y) above with prior written
consents of the Administrative Agent and the Borrower, which consents shall not
be unreasonably withheld, each of which assignees pursuant to clause (y) to
become a party to this Agreement as a Bank by executing and delivering to the
Administrative Agent an Assignment and Acceptance, in substantially the form of
Exhibit F, with the assigning Bank; provided that, in the case of each such
assignment, (A) at such time Annex I shall be modified to reflect the
Commitments of such assignee Bank and of the existing Banks, (B) the Borrower
shall issue new Notes to such assignee Bank and to the assigning Bank to
reflect the revised Commitments and (C) the Administrative Agent shall receive
at the time of such assignment, from the assigning or assignee Bank, a
non-refundable assignment fee of $2,500. To the extent of any assignment
pursuant to this Section 8.6(b), the assigning Bank shall be relieved of its
obligations hereunder with respect to its assigned Commitment.
(c) In addition to the assignments and participations
permitted under subsections (a) and (b) of this Section 8.6, any Bank may
assign, as collateral or otherwise, any of its rights (including rights to
payments of principal of and/or interest on the Notes) under any Loan Document
to any Federal Reserve Bank without notice to or consent of the Borrower or the
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<PAGE> 43
Administrative Agent; provided, that no such assignment under this subsection
(c) shall release the assigning Bank from its obligations hereunder.
8.7. Governing Law; Entire Agreement. THIS AGREEMENT AND
THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS. This Agreement, the Notes, the other Loan Documents and
any fee letter to the Administrative Agent signed by the Borrower constitute
the entire understanding among the parties hereto with respect to the subject
matter hereof and supersede any prior agreements, written or oral, with respect
thereto.
8.8. Interest. The parties to this Agreement intend to
strictly comply with all applicable laws, including applicable usury laws.
Accordingly, the provisions of this Section 8.8 shall govern and control over
every other provision of any Loan Document which conflicts or is inconsistent
with this Section 8.8, even if such other provision declares that it controls.
As used in this Section 8.8, the term "interest" includes the aggregate of all
charges, fees, benefits or other compensation which constitute interest under
applicable law; provided that, to the maximum extent permitted by applicable
law, (a) any non-principal payment shall be characterized as an expense or as
compensation for something other than the use, forbearance or detention of
money, and not as interest and (b) all interest at any time contracted for,
taken, reserved, charged or received shall be amortized, prorated, allocated
and spread during the full term of the Advances and the Commitments. In no
event shall the Borrower or any other Person be obligated to pay, or the
Administrative Agent or any Bank have any right or privilege to reserve,
receive or retain, (x) any interest in excess of the maximum amount of
nonusurious interest permitted under the laws of the State of Texas or the
applicable laws (if any) of the United States, the Government of Canada or of
any other state or province thereof or (y) total interest in excess of the
amount which the Administrative Agent or such Bank could lawfully have
contracted for, taken, reserved, received, retained or charged had the interest
been calculated for the full term of the Advances at the Highest Lawful Rate.
On each day, if any, that the interest rate (the "Stated Rate") called for
under any Loan Document exceeds the Highest Lawful Rate, the rate at which
interest shall accrue shall automatically be fixed by operation of this
sentence at the Highest Lawful Rate for that day, and shall remain fixed at the
Highest Lawful Rate for each day thereafter until the total amount of interest
accrued equals the total amount of interest which would have accrued if there
were no such ceiling rate as is imposed by this sentence. Thereafter, interest
shall accrue at the Stated Rate unless and until the Stated Rate again exceeds
the Highest Lawful Rate when the provisions of the immediately preceding
sentence shall again automatically operate to limit the interest accrual rate.
The daily interest rates to be used in calculating interest at the Highest
Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate
per annum by the number of days in the calendar year for which such calculation
is being made. None of the terms and provisions contained in any Loan Document
which directly or indirectly relate to interest shall ever be construed without
reference to this Section 8.8, or be construed to create a contract to pay for
the use, forbearance or detention of money at an interest rate in excess of the
Highest Lawful Rate. If the term of any of the Notes is shortened by reason of
acceleration of maturity or by reason of any required or permitted prepayment,
and if for that (or any other) reason the
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<PAGE> 44
Administrative Agent or any Bank at any time, including the stated maturity, is
owed or receives (and/or has received) interest in excess of interest
calculated at the Highest Lawful Rate, then and in any such event all of any
such excess interest shall be cancelled automatically as of the date of such
acceleration, prepayment or other event which produces the excess, and, if such
excess interest has been paid to the Administrative Agent or such Bank, it
shall be credited pro tanto against the then outstanding principal balance of
the Borrower's obligations to the Administrative Agent or such Bank, effective
as of the date or dates when the event occurs which causes it to be excess
interest, until such excess is exhausted or all of such principal has been
fully paid and satisfied, whichever occurs first, and any remaining balance of
such excess shall be promptly refunded to its payor.
8.9. Captions. Captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
8.10. Confidentiality. Each Bank agrees that it will use
reasonable efforts not to disclose without the prior consent of the Borrower
(other than to its employees, auditors or counsel, to another Bank, or to such
Bank's own holding or parent company and its affiliates, in each case if the
disclosing Bank or its holding or parent company in its sole discretion
determines that any such party should have access to such information) any
information with respect to the Guarantor, the Borrower or its subsidiaries
which is furnished pursuant to this Agreement, any other Loan Document or the
Guaranty and which is designated by either the Guarantor or the Borrower to the
Banks in writing as confidential; provided that any Bank may disclose any such
information (a) as has become generally available to the public, (b) as may be
required or appropriate in any report, statement or testimony submitted to any
municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Bank or to the Federal Reserve Board or the FDIC or
similar organizations (whether in the United States or elsewhere), (c) as may
be required or appropriate in response to any summons or subpoena or in
connection with any litigation, (d) in order to comply with any law, order,
regulation or ruling applicable to such Bank, and (e) to the prospective
transferee in connection with any contemplated transfer of any of the Notes or
any interest therein by such Bank; provided, further, that such prospective
transferee executes an agreement with the Borrower containing provisions
substantially identical to those contained in this Section 8.10.
8.11. Survival; Term; Reinstatement. In addition to the
other provisions of this Agreement expressly stated to survive the termination
of this Agreement, the obligations of the Borrower under Sections 2.6, 2,10,
2.13, 2.18 and 8.4 and the last sentence of this Section 8.11 and the
obligations of the Banks under Section 8.10 shall survive the termination of
this Agreement. The Borrower agrees that if at any time all or any part of any
payment previously applied by any Bank to any Advance or other sum hereunder is
or must be returned by or recovered from such Bank for any reason (including
the order of any bankruptcy court), the Loan Documents shall automatically be
reinstated to the same effect as if the prior application had not been made,
and the Borrower hereby agrees to indemnify such Bank against, and to save and
hold
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<PAGE> 45
such Bank harmless from, any required return by or recovery from such Bank of
any such payment.
8.12. Severability. Whenever possible, each provision of
the Loan Documents shall be interpreted in such manner as to be effective and
valid under applicable law. If any provision of any Loan Document shall be
invalid, illegal or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions of such Loan
Document shall not be affected or impaired thereby.
8.13. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
8.14 Location of Transactions. The Administrative Agent
and each Bank that is a party hereto on the date hereof and which is not a
resident of Canada acknowledges: (a) that it has conducted all negotiations
with respect to the Loan Documents and the Guaranty outside of Canada, (b) that
it has made all credit decisions concerning the Loan Documents and the Guaranty
outside of Canada, and (c) that it has executed the Loan Documents to which it
is a party outside of Canada. The Borrower acknowledges: (a) that it has
conducted all negotiations with the Administrative Agent and each Bank that is
a party hereto on the date hereof and which is not a resident of Canada
concerning the Loan Documents and the Guaranty outside of Canada, and (b) that
it has executed the Loan Documents to which it is a party outside of Canada.
8.15. Currency Conversion and Indemnity. All payments made
hereunder shall be made in the currency in respect of which the obligations
requiring such payment arose. If, in connection with any action or proceeding
brought in connection with this Agreement or any of the Loan Documents or any
judgment or order obtained as a result thereof, it becomes necessary to convert
any amount due hereunder in one currency (the "first currency") into another
currency (the "second currency"), then the conversion shall be made at the
Exchange Rate on the first Business Day prior to the day on which payment is
received.
If the conversion is not able to be made in the manner contemplated by
the preceding paragraph in the jurisdiction in which the action or proceeding
is brought, then the conversion shall be made at the Exchange Rate on the day
on which the judgment is given.
If the Exchange Rate on the date of payment is different from the
Exchange Rate on such first Business Day or on the date of judgment, as the
case may be, the Borrower shall pay such additional amount (if any) in the
second currency as may be necessary to ensure that the amount paid on such
payment date is the aggregate amount in the second currency which, when
converted at the Exchange Rate on the date of payment, is the amount due in the
first currency, together with all costs, charges and expenses of conversion.
Any additional amount owing by the Borrower to the Banks pursuant to the
provisions of this Section 8.15 shall be due as a separate
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<PAGE> 46
debt and shall give rise to a separate cause of action and shall not be
affected by or merged into any judgment obtained for any other amounts due
under or in respect of this Agreement or any of the Loan Documents.
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<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER:
EOG COMPANY OF CANADA
By: /s/ W. C. Wilson
------------------------------------
Walter C. Wilson
Senior Vice President, Chief
Financial Officer and Treasurer
[Signature Page 1]
<PAGE> 48
ADMINISTRATIVE AGENT:
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By /s/ Scott Richardson
-------------------------------------
Name: Scott Richardson
Title: Vice President
[Signature Page 2]
<PAGE> 49
COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY
By /s/ H. Yergey /s/ Paul Mahoney
--------------------------------------------
Name: H. Yergey P. Mahoney
Title: Vice President Assistant Cashier
[Signature Page 3]
<PAGE> 50
ROYAL BANK OF CANADA
By /s/ B. J. Belliveau
-------------------------------------
Name: B. J. Belliveau
Title: Senior Manager
[Signature Page 4]
<PAGE> 51
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By /s/ Scott Richardson
-------------------------------------
Name: Scott Richardson
Title: Vice President
[Signature Page 5]
<PAGE> 52
THE BANK OF NEW YORK
By /s/ Raymond J. Palmer
-------------------------------------
Name: Raymond J. Palmer
Title: Vice President
[Signature Page 6]
<PAGE> 53
THE BANK OF NOVA SCOTIA
By /s/ A. S. Norsworthy
-------------------------------------
Name: A. S. Norsworthy
Title: Assistant Agent
[Signature Page 7]
<PAGE> 54
ANNEX I
COMMITMENTS
<TABLE>
<CAPTION>
Bank Commitment Percentage Share
---- ---------- ----------------
<S> <C> <C>
Texas Commerce Bank $ 25,000,000 23.809523810%
Commerzbank $ 25,000,000 23.809523810%
Royal Bank of Canada $ 25,000,000 23.809523810%
Bank of New York $ 15,000,000 14.285714286%
Bank of Nova Scotia $ 15,000,000 14.285714286%
------------ -------------
$105,000,000 100%
</TABLE>
<PAGE> 55
SCHEDULE I
APPLICABLE MARGIN
<TABLE>
<CAPTION>
=======================================================================
Rating Level Eurodollar Base Rate CD Rate
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Level I .275% .000% .400%
- -----------------------------------------------------------------------
Level II .300% .000% .425%
- -----------------------------------------------------------------------
Level III .325% .000% .450%
- -----------------------------------------------------------------------
Level IV .375% .000% .500%
- -----------------------------------------------------------------------
Level V .500% .000% .625%
- -----------------------------------------------------------------------
Level VI .750% .000% .875%
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
S&P Moody's
<S> <C> <C>
Level I: A A2
Level II: A- A3
Level III: BBB+ Baa1
Level IV: BBB Baa2
Level V: BBB- Baa3
Level VI: BB+ Ba1 or lower
</TABLE>
Note: The higher of Guarantor's S&P or Moody's Rating Level will apply.
<PAGE> 56
SCHEDULE II
LENDING OFFICES
THE BANK OF NEW YORK
Domestic, CD and Eurodollar Lending Office
Eurodollar/Cayman Funding Area
The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Nina Russo
Telephone: (212) 635-7921
Facsimile: (212) 635-7923/x7924 or x7552
with copy to:
The Energy Industries Division
The Bank of New York
One Wall Street, 19th Floor
New York, New York 10286
Attn: Raymond J. Palmer
Vice President
Telephone: (212) 635-7834
Facsimile: (212) 635-7923/x7924
THE BANK OF NOVA SCOTIA
Domestic, CD and Eurodollar Lending Office
600 Peachtree Street, Suite 2700
Atlanta, Georgia 30308
Attn: Lauren Bianchi/Jefrey Jones
Telephone: (404) 887-1549
Facsimile: (404) 888-8998
<PAGE> 57
with copy to:
The Bank of Nova Scotia
1100 Louisiana, Suite 3000
Houston, Texas 77002
Attn: Richard Slaid
Telephone: (713) 759-3433
Facsimile: (713) 752-2425
COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY
Domestic, CD and Eurodollar Lending Office
1230 Peachtree St., N.E., Suite 3500
Atlanta, Georgia 30309
Attn: G. Schmidtchen
Telephone: (212) 266-7345
Facsimile: (212) 266-7593
or
C. Perez - Gomes
Telephone: (212) 266-7314
Facsimile: (212) 266-7593
with copy to:
Commerzbank Aktiengesellschaft, Atlanta Agency
1230 Peachtree St., N.E., Suite 3500
Atlanta, Georgia 30309
Attn: Harry Yergey
Telephone: (409) 888-6500
Facsimile: (404) 888-6539
ROYAL BANK OF CANADA
Domestic, CD and Eurodollar Lending Office
1 Financial Square, 24th Floor
New York, New York 10005-3531
<PAGE> 58
Attn: Jewel Haines, Assistant Manager
Telephone: (212) 428-6321
Facsimile: (212) 428-2372
with copy to:
Royal Bank of Canada
600 Wilshire Blvd., Suite 800
Los Angeles, California 90017
Attn: Gil J. Bernard
Senior Manager
Telephone: (213) 955-5321
Facsimile: (213) 955-5350
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Domestic, CD and Eurodollar Lending Office
712 Main Street
Houston, Texas 77002
Attn: Loan Syndication Services
Gale Manning
Telephone: (713) 750-2784
Facsimile: (713) 750-3810
with copy to:
Texas Commerce Bank National Association
707 Travis, 5th Floor, MS 5-TCBN-86
Houston, Texas 77002
Attn: Jim McBride
Telephone: (713) 216-4395
Facsimile: (713) 216-4117
<PAGE> 59
EXHIBIT A
PROMISSORY NOTE
U.S. $______________ Dated: _________, _____
FOR VALUE RECEIVED, the undersigned, EOG COMPANY OF CANADA, an
unlimited liability company incorporated under the laws of the province of Nova
Scotia (the "Borrower"), hereby promises to pay to the order of
________________________ (the "Bank") for the account of its Applicable Lending
Office (as defined in the Credit Agreement referred to below) on or before the
Maturity Date, principal sum of ___________________________ U.S. dollars (U.S.
$________________) at the Payment Office of the Administrative Agent.
The Borrower promises to pay to the order of the Bank interest on the
unpaid principal amount of this Note from the date hereof until such principal
amount is paid in full, at such interest rates, and payable at such times, as
are specified in the Credit Agreement dated as of January 12, 1996 among the
Borrower, the Bank, certain other lenders parties thereto and Texas Commerce
Bank National Association, as Administrative Agent for the Bank and such other
lenders (such Credit Agreement, as amended from time to time being herein
referred to as the "Credit Agreement"). All capitalized terms used in this
Note which are not defined herein shall have the meaning assigned such terms in
the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Texas Commerce Bank National Association, as
Administrative Agent, at the Payment Office, in same day funds. All payments
made on account of principal of the Advance evidenced hereby shall be recorded
by the Bank and, prior to any transfer hereof, endorsed on the grid attached
hereto which is part of this Note; provided that the failure of the Bank to
make any such recordation or endorsement shall not affect the obligations of
the Borrower hereunder or under the Credit Agreement.
This Note is one of the Notes referred to in, and is subject to and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for this Note to evidence the indebtedness of the
Borrower owing to the Bank in the amount of this Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of
certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
Except only for any notices which are specifically required
by the Credit Agreement, the Borrower waives notice (including, but not limited
to, notice of intent to accelerate and notice of acceleration, notice of
protest and notice of dishonor), demand, presentment, presentment for payment
and protest.
A-1
<PAGE> 60
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS, OTHER THAN THE CONFLICT OF LAWS RULES THEREOF.
EOG COMPANY OF CANADA
By:
-------------------------------------
Name:
Title:
A-2
<PAGE> 61
PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Unpaid
Principal Principal Notation
Date Paid or Prepaid Balance Made By
- ---- --------------- --------- --------
<S> <C> <C> <C>
</TABLE>
A-3
<PAGE> 62
EXHIBIT B
NOTICE OF BORROWING
Texas Commerce Bank National Association,
as Administrative Agent
712 Main Street
Houston, Texas 77002
Attention: [Enron Account Officer]
Ladies and Gentlemen:
The undersigned, EOG Company of Canada, refers to the Credit
Agreement, dated as of January 12, 1996 (such Credit Agreement, as amended from
time to time being herein referred to as the "Credit Agreement", the terms
defined therein being used herein as therein defined), among the undersigned,
certain Banks parties thereto and Texas Commerce Bank National Association, as
Administrative Agent for said Banks (in such capacity, the "Administrative
Agent"), and hereby gives you notice, irrevocably, pursuant to Section 2.2 of
the Credit Agreement that the undersigned hereby requests the Borrowing under
the Credit Agreement, and in that connection sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by Section
2.2(a) of the Credit Agreement:
(i) The day of the Proposed Borrowing is January 12, 1996.
(ii) The Types of Advances comprising the Proposed Borrowing are as
follows:
[Adjusted CD Rate Advances in the aggregate amount of
$_________________ with an Interest Period of ___ days];
[Base Rate Advances in the aggregate amount of $__________________]
[Eurodollar Advances in the aggregate amount of $_________________
with an Interest Period of ___ months].
(iii) The aggregate amount of the Proposed Borrowing is
$105,000,000.
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed
Borrowing:
_______________________________
B-1
<PAGE> 63
(A) the representations and warranties contained in Section 4.1 of the
Credit Agreement and the other Loan Documents to which the undersigned is a
party are correct, before and after giving effect to the Proposed Borrowing and
to the application of the proceeds therefrom, as though made on and as of such
date; and
(B) no event has occurred and is continuing, or would result from such
Proposed Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
Very truly yours,
EOG Company of Canada
By:
-------------------------------------
Name:
Title:
For the purposes of the Proposed Borrowing, Enron Oil & Gas Company, a Delaware
corporation (the "Guarantor") certifies:
(A) the representations and warranties contained in the Guaranty are
correct, before and after giving effect to the Proposed Borrowing and to the
application of the proceeds therefrom, as though made on and as of such date;
and
(B) no event has occurred and is continuing, or would result from such
Proposed Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
Enron Oil & Gas Company
By:
------------------------------------
Name:
Title:
B-2
<PAGE> 64
EXHIBIT C-1
[VINSON & ELKINS LETTERHEAD]
January 16, 1996
To each of the Banks parties
to the Credit Agreement
dated as of January 12, 1996 among
EOG Company of Canada,
said Banks and Texas Commerce Bank
National Association, as Administrative
Agent for said Banks and to such
Administrative Agent
RE: EOG Company of Canada
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.1(d)(i) of the
Credit Agreement, dated as of January 16, 1996 (the "Credit Agreement"), among
EOG Company of Canada (the "Borrower"), the Banks parties thereto and Texas
Commerce Bank National Association, as Administrative Agent for said Banks.
Except as otherwise defined herein, terms defined in the Credit Agreement are
used herein as therein defined.
We have acted as counsel for the Borrower and Enron Oil & Gas Company,
a Delaware corporation (the "Guarantor"), in connection with the preparation,
execution, delivery and effectiveness of the Credit Agreement and the Guaranty
dated as of even date with the Credit Agreement made by the Guarantor in favor
of the Administrative Agent and the Banks.
In that connection, we have examined:
(1) the Credit Agreement;
(2) the Notes;
(3) the Guaranty; and
(4) the other documents furnished by the Borrower pursuant to the
conditions precedent set forth in Article III of the Credit
Agreement.
<PAGE> 65
Page 2
January 16, 1996
In addition, we have investigated such questions of law and relied on
such certificates from officers and representatives of the Guarantor, the
Borrower, Enron Corp., and from public officials, as we have deemed necessary
or appropriate for the purposes of this opinion.
In rendering the opinions herein set forth, we have assumed (i) the
due authorization, execution and delivery of each document referred to in
clauses (1), (2) and (3) of the third paragraph of this opinion by all parties
to such documents and that each such document is valid, binding and enforceable
(subject to limitations on enforceability of the types referred to in
paragraphs (a) and (b) below) against the parties thereto other than the
Guarantor and the Borrower, (ii) the legal capacity of natural persons, (iii)
the genuineness of all signatures, (iv) the authenticity of all documents
submitted to us as originals, (v) the conformity to original documents of all
documents submitted to us as copies, and (vi) that Section 8.15 of the Credit
Agreement is valid under the laws of Canada and each Province thereof, and that
no laws of any jurisdiction (including, but not limited to, Canada, Nova Scotia
and each other Province of Canada) other than the jurisdictions specified in
the penultimate paragraph of this opinion will adversely affect the opinions
set forth herein.
Based upon the foregoing and upon such investigations as we have
deemed necessary, we are of the following opinion:
1. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required to be made or obtained by the Borrower for the
execution, delivery and performance by the Borrower of each Loan
Document to which it is a party.
2. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required to be made or obtained by the Guarantor for the
execution, delivery and performance by the Guarantor of the Guaranty.
3. The execution, delivery and performance by the
Borrower of each Loan Document to which it is a party and the
execution, delivery and performance by the Guarantor of the Guaranty,
do not contravene any provision of law or regulation (including,
without limitation, Regulation X issued by the Federal Reserve Board)
applicable to the Borrower or the Guarantor, or of Regulation U issued
by the Federal Reserve Board.
<PAGE> 66
Page 3
January 16, 1996
4. The Credit Agreement and the Notes constitute the
legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their terms.
5. The Guaranty constitutes the legal, valid and binding
obligations of the Guarantor enforceable against the Guarantor in
accordance with its terms.
6. The Credit Agreement has been duly executed and
delivered by the Borrower.
7. Neither the Borrower nor the Guarantor is an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
8. Neither the Borrower nor the Guarantor is a "holding
company" or a "subsidiary company" of a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended,
or regulated pursuant to such Act or the rules and regulations
promulgated thereunder or any order or interpretation of the
Securities and Exchange Commission promulgated thereunder.
The opinions set forth above are subject to the following qualifications:
(a) Our opinions in paragraphs 4 and 5 above are subject,
as to enforceability, to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting
creditors' rights generally.
(b) Our opinions in paragraphs 4 and 5 above are subject,
as to enforceability, to the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or at
law), including without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and also to the possible
unavailability of specific performance or injunctive relief. Such
principles of equity are of general application, and in applying such
principles a court, among other things, might not allow a creditor to
accelerate maturity of a debt upon the occurrence of a default deemed
immaterial or might decline to order the Borrower or the Guarantor to
perform covenants. We also express no opinion with respect to the
enforceability of provisions purporting to waive or not give effect to
rights to notice, demands, legal or equitable defenses or remedies or
statutes of limitations, that cannot be waived or rendered ineffective
under applicable law, to the extent that such provisions are contained
in the Loan Documents or the Guaranty.
(c) In rendering the opinion set forth in paragraph 4
above, we express no opinion as to the enforceability of Section 8.15
of the Credit Agreement.
<PAGE> 67
Page 4
January 16, 1996
In rendering the opinions expressed herein, we have relied upon (A)
the opinions stated in paragraphs 1 and 2 (so far as such paragraph 2 relates
to the corporate powers of, and due authorization, execution and delivery of
the Guaranty by the Guarantor and to no contravention of, and no default under,
the Restated Certificate of Incorporation and By-laws, as amended, of the
Guarantor) of the opinion, dated today, of the Vice President and General
Counsel of the Guarantor which is being delivered to you pursuant to Section
3.1(d)(iii) of the Credit Agreement, and (B) the opinions stated in paragraphs
1, 2, 3(a) through (e), 4 and 8 of the opinion, dated today, of Stewart
McKelvey Stirling Scales to the Borrower which is being delivered to you
pursuant to Section 3.1(d)(ii) of the Credit Agreement.
We have not been called upon to, and accordingly do not, express any
opinion as to the various state and Federal laws of the United States of
America regulating banks or the conduct of their business (except Regulation U
issued by the Federal Reserve Board) that may relate to the Loan Documents or
the Guaranty or the transactions contemplated thereby. Without limiting the
generality of the foregoing, we express no opinion as to the effect of the law
of any jurisdiction other than the State of Texas wherein any Bank may be
located or where any enforcement of the Loan Documents or the Guaranty may be
sought which limits the rates of interest legally chargeable or collectible.
This opinion is limited to the laws of the State of Texas, the Federal
law of the United States of America and, with respect to the Guarantor, the
General Corporation law of the State of Delaware.
The opinions herein have been furnished at your request and are solely
for your benefit and the benefit of your respective successors, assigns,
participants and other transferees in connection with the subject transaction
and may not be relied upon by any other person or by you or any other person in
any other context without the prior written consent of the undersigned.
Very truly yours,
Vinson & Elkins L.L.P.
<PAGE> 68
EXHIBIT C-2
[BENNETT JONES VERCHERE LETTERHEAD]
January 16, 1996
To each of the Banks (the "Banks") party
to the Credit Agreement dated as of
January 16, 1996 among EOG Company
of Canada, the Banks and Texas
Commerce Bank National Association, as
Administrative Agent for the Banks and
to such Administrative Agent
Re: EOG Company of Canada (the "Borrower")
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Article 3.1(d)(ii) of that certain
Credit Agreement, dated as of January 16, 1996 (the "Credit Agreement"), among
the Borrower, the Banks and Texas Commerce Bank National Association, as
Administrative Agent for the Banks. Except as otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined.
We have acted as special Canadian counsel to the Borrower and the Guarantor in
connection with the execution of the Credit Agreement and the Guaranty. In
that consideration and in rendering the opinions hereinafter set forth, we have
examined:
1. the Credit Agreement;
2. the Guaranty;
3. the Notes (the Credit Agreement, the Guaranty and the Notes being
collectively referred to as the "Loan Documents"); and
4. a certificate of status dated January 10, 1995 issued by the Registrar
of Joint Stock Companies for the Province of Nova Scotia with respect
to the Company.
We have also examined and relied upon originals or photostatic or certified
copies of such corporate records, certificates of officers of the Borrower
(including certificates of encumbency and delivery and the certificate of
Walter W. Wilson dated January 16, 1996, a copy of which is attached hereto)
and of public officials, and such other agreements, documents and instruments
as we have deemed relevant and necessary as the basis of the opinions
hereinafter expressed. In such examination, we have assumed (i) the legal
capacity of natural persons, (ii) the genuineness of all signatures, (iii) the
authenticity of all documents submitted to us as originals and (iv) the
conformity to original documents of all documents submitted to us as copies.
<PAGE> 69
Page 2
Based upon the foregoing and upon such investigations as we have deemed
necessary, we are of the opinion that:
1. The Borrower is not required, under the Income Tax Act (Canada), to
withhold tax from interest or principal paid or credited by the
Borrower on the Notes or any other amounts which may be paid or
credited under the Credit Agreement to any non-resident of Canada with
whom the Borrower is, at all times, dealing at arm's length within the
meaning of the Income Tax ACT (Canada).
2. The Guarantor is not required, under the Income Tax Act (Canada), to
withhold tax from interest or principal paid or credited by the
Guarantor o the Guaranty or any other amounts which may be required
to be paid or credited under the Guaranty to any non-resident of
Canada with whom the Guarantor is, at all times, dealing at arm's
length within the meaning of the Income Tax Act (Canada).
3. Neither the Agents nor the Banks (except for The Bank of Nova Scotia
and the Royal Bank of Canada) will be subject to taxation under the
Income Tax Act (Canada) by virtue of executing the Loan Documents, or
making the Advances, or commencing legal proceedings to enforce their
rights, under the Loan Documents.
4. No franchise, income, sales, gross receipts or other like taxes, and
no documentary or other tax, is payable under the Income Tax Act
(Canada) by the Agent or the Banks (except for The Bank of Nova Scotia
and the Royal Bank of Canada) in connection with the execution and
delivery of the Loan Documents, or the making of the Advances, or the
commencement of legal proceedings to enforce their rights, under the
Loan Documents.
5. The execution and delivery of the Loan Documents and the making of the
Advances, the performance by the parties of their obligations under
the Loan Documents and the enforcement of the rights of the Agent and
the Banks under the Loan Documents do not contravene the Bank Act
(Canada), including section 508 thereof.
6. The execution, delivery and performance by the Borrower of each of the
Loan Documents and the borrowings thereunder (a) do not require, in
respect of the borrower, any action by or in respect of, or filing
with, any governmental body, agency or official of the Government of
Canada and (b) do not contravene or violate, or constitute a default
under, any provision of any Canadian federal law or regulation
applicable to the Borrower.
The opinion expressed in paragraph 5 above does not apply to The Bank of Nova
Scotia or the Royal Bank of Canada.
The opinions set forth above are based on the following assumptions:
(a) the Borrower is an unlimited liability company duly incorporated and
organized, validly existing and in good standing under the laws of the
Province of Nova Scotia;
(b) the Guarantor is a non-resident of Canada within the meaning of the
Income Tax Act (Canada) at the time any amounts are paid or payable by
it under the Guaranty;
(c) the Agents and the Banks (except for The Bank of Nova Scotia and the
Royal Bank of Canada) are non-residents of Canada within the meaning
of the Income Tax Act
<PAGE> 70
Page 3
(Canada) at all times and do not, and will not, otherwise carry on
business in Canada within the meaning of the Income ax Act (Canada)
during any period up to and including the enforcement of their
rights under the Loan Documents; and
(d) the terms of the Loan Documents were negotiated and approved, and the
Credit Agreement, the Guaranty and the other Loan Documents were
executed and delivered, by the Banks (except for The Bank of Nova
Scotia and the Royal Bank of Canada) outside Canada.
This opinion is furnished in connection with the transactions evidenced by the
Credit Agreement and anticipated in connection therewith and may not be relied
upon in connection with any other transaction or by any person other than you;
or provided, however, that Vinson & Elkins L.L.P. may rely upon this opinion or
the purposes of rendering its opinion in connection with the Credit Agreement.
Yours very truly,
BENNETT JONES VERCHERE
<PAGE> 71
EXHIBIT C-3
January 16, 1996
To each of the Banks (the "Banks") party
to the Credit Agreement dated as of
January 16, 1996 among EOG Company
of Canada, the Banks and Texas
Commerce Bank National Association, as
Administrative Agent for the Banks and
to such Administrative Agent
RE: EOG Company of Canada (the "Borrower")
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Article 3.1(d)(ii) of that certain
Credit Agreement, dated as of January 16, 1996 (the "Credit Agreement"), among
the Borrower, the Banks named therein (the "Banks") and Texas Commerce Bank
National Association, as Administrative Agent for the Banks (the "Agent").
Except as otherwise defined herein, the capitalized terms defined in the Credit
Agreement are used herein as therein defined.
We have acted as special Nova Scotia counsel to the Borrower in connection with
the execution of the following documents (collectively, the "Documents"):
1. the Credit Agreement;
2. promissory notes, each dated January 16, 1996
(a) payable to the order of Texas Commerce Bank National
Association and in the principal amount of $US25,000,000;
(b) payable to the order to Commezbank Aktingesellschaft and in
the principal amount of $US25,000,000;
(c) payable to the order of Royal Bank of Canada and in the
principal amount of $US25,000,000;
<PAGE> 72
January 16, 1996
Page 2
(d) payable to the order of Bank of New York and in the principal
amount of $US15,000,000; and
(e) payable to the order of Bank of Nova Scotia and in the
principal amount of $US15,000,000; and
3. a notice of borrowing addressed to the Agent.
In that consideration and in rendering the opinions hereinafter set forth, we
have examined:
(a) executed copies of each of the Documents;
(b) the Memorandum of Association and Articles of Association of the
Borrower;
(c) a certificate of states dated January 10, 1996 issued by the Registrar
of Joint Stock Companies for the Province of Nova Scotia with respect
to the Borrower;
(d) the corporate records of the Borrower including, in particular, a
certified copy of a resolution of Borrower dated December 14, 1995
authorizing the Borrower to borrow money and give security therefor
and a certified copy of a directors' resolution of the Borrower dated
January 10, 1996 authorizing the Borrower to enter into the Credit
Agreement and perform its obligations thereunder; and
(e) such other documents, agreements and instruments, and such questions
of law as we have deemed necessary as a basis for the opinions
hereinafter expressed.
We have also examined and relied upon originals or photostatic or certified
copies of such corporate records, certificates of officers of the Borrower
(including a certificate of encumbency, for the purposes of our opinions in
paragraph 4 below a certificate attesting to the delivery of the Documents, and
for the purposes of our opinions in paragraphs 2 and 3(c) below a certificate
describing the business of the Borrower) and of public officials, and such
other agreements, documents and instruments as we have deemed relevant and
necessary as the basis for the opinions hereinafter expressed. In such
examination, we have assumed (i) the legal capacity of natural persons, (ii)
the genuineness of all signatures, (iii) the authenticity of all documents
submitted to us as originals and (iv) the conformity to original documents of
all documents submitted to us as copies.
Based upon the foregoing and subject to the qualifications following we are of
the opinion that:
1. The Borrower is an unlimited liability company duly incorporated and
organized, validly existing and in good standing under the laws of the
Province of Nova Scotia.
<PAGE> 73
January 16, 1996
Page 3
2. The Borrower has all power and all material governmental licenses,
authorizations, consents and approvals, if any, required to be issued
by public authorities in the Province of Nova Scotia in order to
permit the Borrower to carry on its business.
3. The execution, delivery and performance by the Borrower of each
Document and the borrowings thereunder (a) are within the Borrower's
corporate powers, (b) have been duly authorized by all necessary
action of the Borrower, (c) require, in respect of the Borrower, no
action by or in respect of, or filing with, any governmental body,
agency or official in the Province of Nova Scotia, (d) do not
contravene or violate, or constitute a default under, any provision of
law or regulation of the Province of Nova Scotia applicable to the
Borrower or the Memorandum of Association or the Articles of
Association of the Borrower or, to the best of our knowledge, any
judgment, injunction, order, decree or material agreement known to us
and binding upon the Borrower, and (e) do not result in the creation
or imposition of any lien, security interest or other charge or
encumbrance on any asset of the Borrower.
4. The Documents have each been duly executed and delivered by the
Borrower and, although the Documents contain choice of law provisions
which state that they shall be governed by and construed in accordance
with the laws of the State of Texas, in the event that any action in a
Nova Scotia Court to enforce the obligations of the Borrower under the
Documents Texas law was not provided or otherwise not applied and the
laws of Nova Scotia were applied to govern the legality, validity and
interpretation of the Documents, each of the Documents would
constitute a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms.
5. To the best of our knowledge there is no litigation or legal, arbitral
or administrative proceeding pending against Borrower.
6. The Borrower is not required, under any taxing legislation of the
Province of Nova Scotia, to withhold tax from interest or principal
paid or credited by the Borrower on the Notes or any other amounts
which may be required to be paid or credited under the Credit
Agreement to any non-resident of Canada with which the Borrower is
dealing at arm's length within the meaning of the Income Tax Act
(Canada).
7. The Guarantor is not required under any taxing legislation of the
Province of Nova Scotia, to withhold tax from interest or principal
paid or credited by the guarantor on the Guaranty or any other amounts
which may be required to be paid or credited under the Guaranty to any
non-resident of Canada with whom the Guarantor is dealing at arm's
length within the meaning of the Income Tax Act (Canada).
8. The courts of the Province of Nova Scotia will enforce the choice of
law provisions in the Documents.
<PAGE> 74
January 16, 1996
Page 4
9. Any judgment for a fixed and definite sum of money rendered by the
courts of the State of Texas (the "Foreign Court"), which has become
final and conclusive under the judicial system of the State of Texas
in respect of any suit, action or proceeding against the Borrower for
the enforcement of its obligations under any of the Documents, in an
action to enforce such judgments in the courts of the Province of Nova
Scotia (the "Domestic Court"), be recognized as conclusive and
enforceable without reconsideration of the merits adjudicated upon,
provided that
(i) such judgment does not conflict with another final and
conclusive judgment on the same cause of action and no new
admissible evidence relevant to the action is discovered prior
to the rendering of judgment by the Domestic Court;
(ii) such judgment was not obtained by fraud or in a manner
contrary to natural justice and the claim for relief on which
the foreign judgment was based is not repugnant to the public
policy as that term is understood under the laws of the
Province of Nova Scotia;
(iii) the Foreign Court which rendered the judgment was impartial
and provided procedures compatible with the due process and
natural justice standards of the Domestic Court;
(iv) the Foreign Court which rendered the judgment had jurisdiction
over the relevant contracting parties and the subject matter
and, if jurisdiction in the foreign court was based on
personal service alone, the Foreign Court was not a seriously
inconvenient forum for the trial of the action;
(v) the proceedings in the Foreign Court were not contrary to an
agreement under which the dispute in question was to be
settled otherwise than by proceedings in that Foreign Court;
(vi) such judgment is a subsisting judgment and has not been
satisfied;
(vii) such judgment, if issued in default of appearance of a
contracting party, is not manifestly wrong;
(viii) the enforcement of the judgment would not be contrary to any
order made by the Attorney-General of Canada under the Foreign
Extraterritorial Measures Act (Canada) or the Competition
Tribunal under the Competition Act (Canada) in respect of
certain judgments, laws, and directives having effects on
competition in Canada; and
(ix) after the date of judgment in the Foreign Court, application
to the Domestic Court to enforce such judgment is made with
the six year limitation period specified by the laws of the
Province of Nova Scotia.
<PAGE> 75
January 16, 1996
Page 5
10. Neither the Agent nor the Banks will be subject to taxation in the
Province of Nova Scotia by virtue of entering into the Documents or
making the Advances under the Documents. No franchise, income, sales,
gross receipts or other like taxes, and no documentary or other tax,
is payable in the Province of Nova Scotia in connection with the
execution and delivery of the Documents or the making of the Advances
under the Documents.
11. Neither the execution and delivery of the Documents nor the making of
the Advances under the Documents will cause the Agent or any Bank to
be transacting business within Canada or Nova Scotia so as to require
the Agent or any Bank to qualify to do business in Nova Scotia or
require the Agent or any Bank to register to carry on business
therein.
The opinions set forth above are subject in all respects to the following
qualifications:
(a) our opinions are based on and limited to the laws of the Province of
Nova Scotia and the federal laws of Canada applicable therein. We
render no opinion with respect to the laws of any other jurisdiction;
(b) the validity and enforceability of the Documents may be limited by:
i. Bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws (including court decisions) nor or
hereafter in effect and affecting the rights of creditors
generally;
ii. The qualification that specific performance and other
equitable remedies lie within the discretion of the court and
may not be available if damages are deemed to be an adequate
remedy;
iii. The qualification that a court has power to grant relief from
forfeiture, to stay proceedings before it and to stay
executions on judgments; and
iv. Applicable laws regarding limitation of actions;
(c) the costs of or incidental to all proceedings taken in a court are in
the discretion of the court and, notwithstanding any provisions of the
Credit Agreement, the court has the discretion to determine by whom
and to what extent the costs shall be paid and expenses recovered;
(d) the provisions of the Credit Agreement permitting severance of any
provision thereof which may be held to be illegal, invalid or
unenforceable in order to save other provisions thereof, will be
enforced only subject to the discretion of a court;
(e) a judgment of a Canadian court may be awarded only in Canadian
currency;
<PAGE> 76
January 16, 1996
Page 6
(f) for the purposes of our opinion in paragraph 4 as to enforceability,
we have assumed that
i. each of the Documents has been duly authorized, and validly
executed and delivered, by each party thereto other than the
Borrower and is enforceable against each such person in
accordance with its terms;
ii. each of the Documents has been delivered by the Borrower in
accordance with the laws of the State of Texas; and
iii. the execution and delivery of the Documents and the making of
the Advances, the performance by the parties of their
obligations under the Documents and the enforcement of the
rights of the Agent and the Banks under the Documents do not
contravene the Bank Act (Canada), including section 508
thereof;
(g) our opinion that the courts of the Province of Nova Scotia would
enforce the choice of law provisions in the Documents is subject to
the assumptions that
i. such choice of law is legal under the laws of the State of
Texas;
ii. such choice of laws is bone fide (in the sense that it was not
made with a view to avoiding the consequences of the law of
the jurisdiction with which the transaction has its most real
and substantial connection);
iii. such choice of law is not contrary to public policy, public
order or good morals, as such terms are interpreted under the
laws of the Province of Nova Scotia and the federal laws of
Canada applicable therein. We have no reason from reviewing
the Documents to believe that such choice of law would be
contrary to pubic policy, public order or good morals, as such
terms are interpreted under the laws of the Province of Nova
Scotia and the federal laws of Canada applicable therein;
and is further subject to the qualifications that in any proceeding
taken in the Province of Nova Scotia to interpret and enforce any of
the Documents
iv. the choice of law set forth in the relevant Document would
only be recognized to the extent specifically pleaded and
proved as a fact by expert evidence;
v. the choice of law set forth in the relevant Document would
only be recognized with respect to issues which under conflict
of laws rules in effect in the Province of Nova Scotia are
characterized to be substantive contract issues and the laws
of Texas would not be applied to the extent such foreign laws
were found to be (i) procedural in nature, or (ii) in conflict
with the laws of the Province of Nova Scotia or the federal
laws of Canada applicable therein as determined by such court
to be of overriding or mandatory effect; and
<PAGE> 77
January 16, 1996
Page 7
vi. a court of competent jurisdiction in the Province of Nova
Scotia may decline to hear a proceeding where such court
determines that the Province of Nova Scotia is not the
convenient forum to hear the proceeding or if concurrent
proceedings are brought elsewhere;
(h) we express no opinion as to the enforceability of any provision of the
Credit Agreement purporting to relieve any person from any liability
which they might otherwise have;
(i) the opinions expressed herein are as of the date hereof only, and we
assume no obligation to update or supplement such opinions to reflect
any fact or circumstances that may hereafter come to our attention or
any changes in law that may hereafter occur or become effective;
(j) our opinions in paragraph 6 are based upon the assumption that the
Borrower is not required, under the Income Tax Act (Canada), to
withhold tax from interest or principal paid or credited by the
Borrower on the Notes or any other amounts which may be required to be
paid under the Credit Agreement to any non-resident of Canada with
whom the Borrower is dealing at arm's length within the meaning of the
Income Tax Act (Canada);
12. our opinions in paragraphs 7 are based upon the assumption that the
Guarantor is not required, under the Income Tax Act (Canada), to
withhold tax from interest or principal paid or credited by the
Guarantor on the Guaranty or any other amounts which may be required
to be paid under the Guaranty to any non-resident of Canada with whom
the Guarantor is dealing at arm's length within the meaning of the
Income Tax Act (Canada); and
13. our opinions in paragraphs 10 are based upon the assumption that
neither the Agent nor the Banks will be subject to taxation under the
Income Tax Act (Canada) by virtue of entering into the Documents or
making the Advances under the Documents and that no franchise, income,
sales, gross receipts or other like taxes, and no documentary or other
tax, is payable under the Income Tax Act (Canada) in connection with
the execution and delivery of the Documents or the making of the
Advances under the Documents.
This opinion is furnished in connection with the transactions evidenced by the
Credit Agreement and anticipated in connection therewith and may not be relied
upon in connection with any other transaction or by any person other than you;
or provided, however, that Vinson & Elkins L.L.P. may rely upon this opinion or
the purposes of rendering its opinion in connection with the Credit Agreement.
Yours very truly,
STEWART MCKELVEY STIRLING SCALES
<PAGE> 78
EXHIBIT D
[ENRON OIL & GAS COMPANY LETTERHEAD]
January 16, 1996
To each of the Banks parties
to the Credit Agreement dated
as of January 16, 1996 among
EOG Company of Canada, said Banks
and Texas Commerce Bank National
Association, as Administrative Agent
for said Banks and to such
Administrative Agent
RE: Guaranty dated as of January 16, 1996 by Enron Oil & Gas
Company, as Guarantor, in favor of the Banks named therein and
Texas Commerce Bank National Association, as Administrative
Agent
Ladies and Gentlemen:
As Vice President and General Counsel of Enron Oil & Gas Company, a
Delaware corporation (the "Company"), I am familiar with the Guaranty (the
"Guaranty") made and entered into as of January 16, 1996 by the Company in
favor of the Banks named therein and Texas Commerce Bank National Association,
as Administrative Agent. In such capacities, I am also familiar with the
Restated Certificate of Incorporation, as amended, and By-laws, as amended, of
the Company. This opinion is being furnished to you pursuant to Section
3.1(d)(iii) of that certain Credit Agreement dated as of January 16, 1996 among
EOG Company of Canada, as the Borrower, and the Banks named therein and Texas
Commerce Bank National Association, as Administrative Agent. Except as
otherwise defined herein, terms defined in the Guaranty are used herein as
therein defined.
Before rendering the opinions hereinafter set forth, I (or other
attorneys with the Company's legal department acting under my direction) have
examined the Guaranty, and have examined and relied upon originals or
photostatic or certified copies of such corporate records, certificates of
officers of the Company and of public officials, and such agreements, documents
and instruments, and made such investigations of law, as I (or such other
attorneys) have deemed relevant and necessary as the basis for the opinions
hereinafter expressed. In such examination, I (or such other attorneys) have
assumed the genuineness of all signatures (other than those of officers of the
<PAGE> 79
January 16, 1996
Page 2
Company) and the authenticity of all documents submitted to me (or such other
attorneys) as originals, and the conformity to original documents of all
documents submitted to me (or such other attorneys) as photostatic or certified
copies.
Upon the basis of the foregoing, and subject to the assumptions,
qualifications and explanations set forth herein, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to
carry on its business as now conducted, except to the extent
failure to obtain such licenses, authorizations, consents or
approvals would not materially adversely affect the Company
and its Principal Subsidiaries taken as a whole.
2. The execution, delivery and performance by the Company of the
Guaranty are within the Company's corporate powers, have been
duly authorized by all necessary corporate action on the part
of the Company, and do not contravene, nor constitute a
default under, (a) the Restated Certificate of Incorporation,
as amended, or the By-laws, as amended, of the Company, (b)
any contractual restriction contained in any material (meaning
for purposes of this opinion those creating a monetary
liability of $50,000,000 or more) agreement binding upon the
Company, or (c) any judgment, injunction, order or decree
known to me binding upon the Company. The execution, delivery
and performance by the Company of the Guaranty will not result
in the creation or imposition of any lien, security interest
or other charge or encumbrance on any asset of the Company or
any of its Subsidiaries. The Guaranty has been duly executed
and delivered by the Company.
3. Except as disclosed in the Company's Form 10-K for the year
ended December 31, 1994, or the Company's Form 10-Q for the
quarter ended September 30, 1995, to my knowledge, there is no
action, suit or proceeding pending or threatened against the
Company or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in
which there is a reasonable possibility of an adverse decision
which could materially adversely affect the consolidated
financial position or consolidated results of operations of
the Company and its Subsidiaries taken as a whole or which in
any manner draws into question the validity of the Guaranty.
<PAGE> 80
January 16, 1996
Page 3
4. Neither the Company nor any Subsidiary is an "investment
company" within the meaning of the Investment Company Act of
1940, as amended.
5. Neither the Company nor any Principal Subsidiary is a "holding
company", a "subsidiary company" of a "holding company", an
"affiliate" of a "holding company", or an "affiliate" of a
"subsidiary company" of a "holding company", in each case as
such terms are defined in the Public Utility Holding Company
Act of 1935, as amended, or regulated pursuant to such Act or
the rules and regulations promulgated thereunder or any order
or interpretation of the Securities and Exchange Commission or
its staff issued pursuant thereto.
The opinions set forth above are subject in all respects to the
following qualifications:
(a) In rendering the opinions expressed in paragraph 2 above,
neither I nor any other attorney acting under my direction
have made any examination of any accounting or financial
matters related to certain of the covenants contained in
certain documents to which the Company may be subject, and I
express no opinion with respect thereto.
(b) In rendering the opinions expressed in paragraph 3 above, I
(or such other attorneys acting under my direction) have only
reviewed the files and records of the Company and the
Subsidiaries, and we have consulted with such senior officers
of the Company and the Subsidiaries as we have deemed
necessary.
(c) This opinion is limited in all respects to the laws of the
State of Texas and the General Corporation Law of the State of
Delaware and the Federal law of the United States.
(d) The opinions expressed herein are as of the date hereof only,
and I assume no obligation to update or supplement such
opinions to reflect any fact or circumstances that may
hereafter come to my attention or any changes in law that may
hereafter occur or become effective.
This opinion is furnished in connection with the Guaranty and is
solely for the benefit of the Banks, the Administrative Agent, and their
respective successors, assigns, participants and other transferees, and may not
be relied upon in connection with any other transaction or by any other person;
provided, however, that Vinson &
<PAGE> 81
January 16, 1996
Page 4
Elkins L.L.P. may rely on certain provisions of this opinion to the extent
stated in its opinion for the purposes of rendering its opinion pursuant to
Section 3.1(d)(i) of the Credit Agreement.
Very truly yours,
Dennis M. Ulak
<PAGE> 82
EXHIBIT E
NOTICE OF CONVERSION
Texas Commerce Bank
National Association
as Administrative Agent
712 Main Street
Houston, Texas 77002
Attention: Manager, Energy Group
5 TCB-N 86
Ladies and Gentlemen:
The undersigned, EOG Company of Canada refers to the Credit Agreement,
dated as of January 12, 1996 (such Credit Agreement, as amended from time to
tome being herein referred to as the "Credit Agreement", the terms defined
therein being used herein as therein defined), among the undersigned, certain
Banks parties thereto and Texas Commerce Bank National Association, as
Administrative Agent for said Banks, and hereby gives you notice, irrevocably,
pursuant to Section 2.8 of the Credit Agreement that the undersigned hereby
requests a Conversion under the Credit Agreement, and in that connection sets
forth below the information relating to such Conversion (the "Proposed
Conversion") as required by Section 2.8 of the Credit Agreement:
(1) The Business Day of the Proposed Conversion is
_______________, 199__.
(2) The Advances to be converted are: ____________________
(3) The Advances are to be Converted into the following
Types and amounts of Advances:
[Base Rate Advances]
[Adjusted CD Rate Advances]
[Eurodollar Advances]
Amount:
E-1
<PAGE> 83
*[(4) The Interest Period for each such Advance is _____
(days) (months).]
Very truly yours,
EOG COMPANY OF CANADA
By:
------------------------------------
Title:
---------------------------------
__________________________________
*To be included for a Proposed Conversion to Adjusted CD Rate Advances or
Eurodollar Advances.
E-2
<PAGE> 84
EXHIBIT F
[Form of]
ASSIGNMENT AND ACCEPTANCE
Dated: ___________________, _____
Reference is made to the Credit Agreement dated as of January 16, 1996
(as restated, amended, modified, supplemented and in effect from time to time,
the "Credit Agreement"), among EOG Company of Canada, a Nova Scotia unlimited
liability company (the "Borrower"), the banks named therein (the "Banks"), and
Texas Commerce Bank National Association, as administrative agent for the Banks
(the "Administrative Agent"). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to such terms in the Credit Agreement.
This Assignment and Acceptance between the Assignor (as defined and set forth
on Schedule I hereto and made a part hereof) and the Assignee (as defined and
set forth on Schedule I hereto and made a part hereof) is dated as of the
Effective Date (as set forth on Schedule I hereto and made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the
Assignee without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the Assignor, as of
the Effective Date, an undivided interest (the "Assigned Interest") in and to
all the Assignor's rights and obligations under the Credit Agreement and
Assignor's Note or Notes to the extent described on Schedule I hereto the
("Assigned Facility") in a principal amount as set forth on Schedule I.
2. The Assignor (i) makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement, any other
Loan Document or the Guaranty or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Loan Document, the Guaranty or any other instrument or document furnished
pursuant thereto, other than that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim; (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the Guarantor or the performance or observance by the Borrower or
the Guarantor of any of its respective obligations under the Credit Agreement,
any other Loan Document, the Guaranty or any other instrument or document
furnished pursuant thereto; and (iii) attaches the Note(s) held by it
evidencing the Assigned Facility and requests that the Administrative Agent
exchange such Note(s) for a new Note or Notes payable to the Assignor (if the
Assignor has retained any interest in the Assigned Facility) and a new Note or
Notes payable to the Assignee in the respective amounts which reflect the
assignment being made hereby (and after giving effect to any other assignments
which have become effective on the Effective Date).
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Credit
F-1
<PAGE> 85
Agreement and the Guaranty, together with copies of the financial statements
referred to in Section 3.1(d) of the Guaranty, or if later, the most recent
financial statements delivered pursuant to Section 4.1(a) of the Guaranty and
such other documents and information as it has deemed appropriate to make its
own credit analysis; (iii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Assignor or any other Bank and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement, the Guaranty and the Loan Documents; (iv) appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under the Credit Agreement, the other Loan
Documents and the Guaranty as are delegated to the Administrative Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
(v) agrees that it will be bound by the provisions of the Credit Agreement and
will perform in accordance with its terms all the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Bank; and
(vi) if the Assignee is organized under the laws of a jurisdiction outside the
United States, attaches the forms prescribed by the Internal Revenue Service of
the United States certifying as to the Assignee's exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Credit Agreement or such other documents as are necessary to indicate that
all such payments are subject to such tax at a rate reduced by an applicable
tax treaty.
4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Administrative Agent for acceptance by it and the Borrower
effective as of the Effective Date (which Effective Date shall, unless
otherwise agreed to by the Administrative Agent, be at least five Business Days
after the execution of this Assignment and Acceptance).
5. Upon such acceptance, from and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignee, whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. The Assignor and Assignee shall make
all appropriate adjustments in payments for periods prior to the Effective Date
by the Administrative Agent or with respect to the making of this assignment
directly between themselves.
6. From and after the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment
and Acceptance, have the rights and obligations of a Bank thereunder, and (ii)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, OTHER THAN THE
CONFLICT OF LAWS RULES THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed by their respective duly authorized
officers on Schedule I hereto.
F-2
<PAGE> 86
Schedule I to Assignment and Acceptance
Legal Name of Assignor:
------------------------------------
Legal Name of Assignee:
------------------------------------
Effective Date of Assignment: ,
----------------------- -----
<TABLE>
<CAPTION>
Percentage Assigned of
Each Note (to at least 8
Principal decimals) (Shown as percentage
Amount of aggregate original principal
Note Dated: Assigned original principal of all Banks)
- ----------- -------- --------------------------------
<S> <C> <C>
January 16, 1996: $ %
-------------- ------
: $ %
------------------- -------------- ------
: $ %
-------------------- -------------- ------
Total $
--------------
</TABLE>
Accepted:
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as the Administrative Agent
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
EOG COMPANY OF CANADA
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
FS-1
<PAGE> 87
- ---------------------------------
as Assignor
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
- ---------------------------------
as Assignee
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Domestic Lending Office of Assignee:
- ---------------------------------
- ---------------------------------
- ---------------------------------
CD Lending Office of Assignee:
- ---------------------------------
- ---------------------------------
- ---------------------------------
Eurodollar Lending Office of Assignee:
- ---------------------------------
- ---------------------------------
- ---------------------------------
Address for Notices to Assignee:
- ---------------------------------
- ---------------------------------
- ---------------------------------
Telephone No.:
-------------------
Facsimile No.:
-------------------
Attention:
-----------------------
FS-2
<PAGE> 1
EXHIBIT 10.65
GUARANTY
Dated as of January 16, 1996
by
ENRON OIL & GAS COMPANY,
as Guarantor
in favor of
THE BANKS NAMED HEREIN
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Administrative Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
1.1. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
---------------------
1.2. Other Defined Terms; Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-------------------------------------
1.3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-------------
ARTICLE II
2.1. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
--------
2.2. Guaranty Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-----------------
2.3. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
------
ARTICLE III
3.1. Representations and Warranties of the Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-----------------------------------------------
ARTICLE IV
4.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------------------
4.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
------------------
ARTICLE V
5.1. Guarantor Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
------------------
ARTICLE VI
6.1. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
---------------
6.2. Addresses for Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
---------------------
6.3. No Waiver; Cumulative Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-----------------------------------------
6.4. Continuing Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-------------------
6.5. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-------------------------
6.6. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-------------------------------
6.7. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
--------
6.8. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
------------
6.9. Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
----------------
6.10. Joinder; Independent Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------------------------
6.11. Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-------------------------
6.12. Location of Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------------------------
6.13. Assignments to Federal Reserve Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
------------------------------------
6.14. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--------
Exhibit A - Negative Pledge
</TABLE>
<PAGE> 3
GUARANTY
This Guaranty (this "Guaranty"), dated effective as of January 16, 1996,
is made by ENRON OIL & GAS COMPANY, a Delaware corporation (the "Guarantor"),
in favor of the Banks (as such term is defined herein) and the Administrative
Agent (as such term is defined herein).
PRELIMINARY STATEMENTS
A. EOG Company of Canada, an unlimited liability company
incorporated under the laws of the province of Nova Scotia (the "Borrower"),
has entered into the Credit Agreement with the Banks and the Administrative
Agent.
B. The Borrower is a direct or indirect wholly owned Subsidiary of
the Guarantor.
C. In order to induce the Banks and the Administrative Agent to
enter into the Credit Agreement and to induce the Banks to lend money to the
Borrower, the Guarantor has agreed to enter into this Guaranty.
D. The guaranties provided in this Guaranty are reasonably expected
to benefit, directly or indirectly, the Guarantor. Further, it is in the best
interest of the Guarantor to provide the guaranties set forth hereunder, and
such guaranties are necessary or convenient to the conduct, promotion or
attainment of the business of the Guarantor and are also necessary or
convenient to the conduct, promotion or attainment of the business of other
directly or indirectly wholly-owned Subsidiaries of the Guarantor.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Administrative Agent and the Banks to enter into the Credit Agreement, the
Guarantor hereby agrees as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Certain Defined Terms. As used in this Guaranty, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined and
such meanings shall apply and be interpreted together when two or more of such
terms are used together):
"Consolidated" refers to the consolidation of the accounts of the
Guarantor and its Subsidiaries in accordance with GAAP.
1
<PAGE> 4
"Consolidated Net Worth" means at any date the Consolidated
shareholders' equity of the Guarantor and its Consolidated Subsidiaries.
"Credit Agreement" means the Credit Agreement dated of even date
herewith among the Borrower, the Administrative Agent and the Banks, as
amended, supplemented or modified from time to time in the future.
"Debt" of any Person means, at any date, without duplication, (a)
obligations for the repayment of money borrowed which (1) are evidenced by
bonds, notes, debentures, loan agreements, credit agreements or similar
instruments or agreements and (2) are or should be shown on a balance sheet as
debt in accordance with GAAP, (b) obligations as lessee under leases which, in
accordance with GAAP, are capital leases, and (c) guaranties of payment or
collection of any obligations described in clauses (a) and (b) of other
Persons, provided, that clauses (a) and (b) include, in the case of obligations
of the Borrower or any Subsidiary, only such obligations as are or should be
shown as debt or capital lease liabilities on a Consolidated balance sheet in
accordance with GAAP; provided, further, that none of the following shall
constitute Debt: (A) transfers of accounts receivable pursuant to a
receivables purchase facility considered as a sale under GAAP (and
indemnification, recourse or repurchase obligations thereunder as are
reasonable given market standards for transactions of similar type), (B) the
liability of any Person as a general partner of a partnership for Debt of such
partnership, if the partnership is not a Subsidiary of such Person, and (C)
obligations (other than borrowings, capital leases or financial guaranties by
the Borrower or any Subsidiary) related to the sale, purchase or delivery of
hydrocarbons in respect of volumetric production payments conveyed in transfers
constituting sales of real property interests for which proceeds are accounted
for as deferred revenues under GAAP.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute of similar
import, together with the regulations thereunder, as in effect from time to
time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is a member of a group of which the Guarantor is a member
and which is under common control within the meaning of the regulations under
Section 414 of the Code.
"GAAP" means generally accepted accounting principles consistent
with those applied in the preparation of the audited consolidated financial
statements referred to in Section 3.1(d).
"Guaranteed Obligations" means (a) all amounts owed by and other
obligations of the Borrower pursuant to the terms of the Loan Documents
(including but not limited to the principal of and interest accrued on all
Advances (including additional Advances under Section 2.15 of the Credit
Agreement), the fees and the costs, indemnification payments or obligations and
other amounts owed by the Borrower to the
2
<PAGE> 5
Administrative Agent or any other Person under the Loan Documents), (b) all
damages sustained by the Administrative Agent, any Bank or any other Person as
a consequence of the falsity of a representation or warranty of the Borrower or
the breach of a covenant of the Borrower under the Loan Documents, and (c) the
reasonable out-of-pocket costs of the Administrative Agent and the Banks
(including reasonable fees and expenses of legal counsel) incurred in
connection with the enforcement of the Loan Documents and this Guaranty and in
connection with the collection of the amounts and damages described in clauses
(a) and (b) of this definition above.
"Guarantor Default" shall have the meaning given such term in
Section 5.1 hereof.
"Guaranty" means this Guaranty, as the same may be amended,
supplemented or modified from time to time.
"Indenture" means that certain Indenture dated as of September
1, 1991 between the Guarantor and Texas Commerce Bank National Association, as
Trustee, without giving effect to any amendment, modification or discharge
thereof.
"Insufficiency" means, with respect to any Plan, the amount, if
any, by which the present value of the accrued benefits under such Plan exceeds
the fair market value of the assets of such Plan allocable to such benefits.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Guarantor or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of
the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means an employee benefit plan, other
than a Multiemployer Plan, subject to Title IV of ERISA to which the Guarantor
or any ERISA Affiliate, and more than one employer other than the Guarantor or
an ERISA Affiliate, is making or accruing an obligation to make contributions
or, in the event that any such plan has been terminated, to which the Guarantor
or any ERISA Affiliate made or accrued an obligation to make contributions
during any of the five plan years preceding the date of termination of such
plan.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
federal agency or authority of the United States from time to time succeeding
to its function.
"Plan" means an employee benefit plan (other than a Multiemployer
Plan) which is (or, in the event that any such plan has been terminated within
five years after a transaction described in Section 4069 of ERISA, was)
maintained for employees of the Guarantor or any ERISA Affiliate and covered by
Title IV of ERISA.
3
<PAGE> 6
"Principal Subsidiary" means at any time of determination any
Subsidiary of the Guarantor (other than the Borrower) having total assets in
excess of $100,000,000. For purposes of this definition, total assets shall be
determined based on the most recent quarterly or annual financial statements
available prior to such determination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, joint venture or other entity of which more than 50% of the
outstanding capital stock or other equity interests having ordinary voting
power (irrespective of whether or not at the time capital stock or other equity
interest of any other class or classes of such corporation, partnership, joint
venture or other entity shall or might have voting power upon the occurrence of
any contingency) is at the time directly or indirectly owned by such Person, or
one or more of such Person's Subsidiaries, or such Person and one or more of
its Subsidiaries. Unless otherwise indicated, any reference in this Guaranty
to a "Subsidiary" shall be a reference to a Subsidiary of the Guarantor;
provided, that the definition of "Subsidiary" in Exhibit A shall apply to
Section 4.2(a) hereof and only to Section 4.2(a) hereof.
"Termination Event" means (a) a "reportable event", as such term
is described in Section 4043 of ERISA (other than a "reportable event" not
subject to the provision for 30-day notice to the PBGC), or an event described
in Section 4062(e) of ERISA, or (b) the withdrawal of the Guarantor or any
ERISA Affiliate from a Multiple Employer Plan during a plan year in which it
was a "substantial employer", as such term is defined in Section 4001(a)(2) of
ERISA, or the incurrence of liability by the Guarantor or any ERISA Affiliate
under Section 4064 of ERISA upon the termination of a Multiple Employer Plan,
or (c) the distribution of a notice of intent to terminate a Plan pursuant to
Section 4041(a)(2) of ERISA or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (d) the institution of proceedings
to terminate a Plan by the PBGC under Section 4042 of ERISA, or (e) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Plan.
"Total Capitalization" means, at any time, the sum (without
duplication) of (a) Total Debt, and (b) Consolidated Net Worth less any amount
thereof attributable to "minority interests" (as defined below). For the
purpose of this definition, "minority interests" means any investment or
interest of the Guarantor in any corporation, partnership or other entity to
the extent that the total amount thereof owned by the Guarantor (directly or
indirectly) constitutes 50% or less of all outstanding interests or investments
in such corporation, partnership or entity.
"Total Debt" means, at any time, all Consolidated Debt of the
Guarantor and its Consolidated Subsidiaries.
"Withdrawal Liability" shall have the meaning given such term
under Part I of Subtitle E of Title IV of ERISA.
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1.2. Other Defined Terms; Accounting Terms. Capitalized terms
used herein but not otherwise defined herein shall have the meaning given such
terms in the Credit Agreement. All accounting terms not specifically defined
herein shall be construed in accordance with, and certificates of compliance
with financial covenants shall be based on, GAAP; provided, however, the
financial statements and reports required pursuant to Sections 4.1(a)(1) and
(8) shall be prepared in accordance with generally accepted accounting
principles in effect at the time of application thereof except to the extent
stated therein.
1.3. Miscellaneous. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Guaranty shall refer
to this Guaranty as a whole and not to any particular provision of this
Guaranty, and Article, Section and Exhibit references are to Articles and
Sections of and Exhibits to this Guaranty, unless otherwise specified. The
term "including" shall mean "including, without limitation,".
ARTICLE II
GUARANTY
2.1. Guaranty. The Guarantor hereby unconditionally and
irrevocably guarantees to the Administrative Agent and the Banks the punctual
payment when due (following the expiration of any applicable grace period),
whether at stated maturity, by acceleration or otherwise, of the Guaranteed
Obligations; provided that all payments by the Guarantor under this Guaranty
shall be made in immediately available funds within one (1) Business Day after
the Administrative Agent's demand therefor given in writing to the Guarantor
(which demand will set forth the basis and calculation of the amount for which
demand is made); provided further, that if the Guaranteed Obligations become
due and payable by virtue of a Guarantor Default described in Section 5.1(d),
the Guaranteed Obligations shall automatically become due and payable by the
Guarantor hereunder without demand or any notice of any kind, all of which are
hereby expressly WAIVED by the Guarantor. Without limiting the generality of
the foregoing, the Guarantor's liability shall extend to all amounts which
constitute part of the Guaranteed Obligations and would be owed by the Borrower
to the Administrative Agent or any other Person under the Loan Documents but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving the Borrower.
2.2. Guaranty Absolute. The Guarantor guarantees that (subject
to the demand and payment provisions set forth in Section 2.1) the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Credit
Agreement. This Guaranty is a guaranty of payment and not of collection, and
the Guarantor's obligations hereunder are primary obligations of the Guarantor
concerning which the Guarantor is the principal obligor and not a surety, and
are separate and several from the obligations of the Borrower under the Loan
Documents. The obligations of the Guarantor hereunder shall not be
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subject to, and payments by the Guarantor shall be made free and clear of any
defense of the Borrower and without deduction for, any setoff, counterclaim,
diminution, suspension or deferment that the Guarantor may have with respect to
the Borrower or any other Person. The liability of the Guarantor under this
Guaranty shall be absolute and unconditional irrespective of:
(a) any lack of validity, legality or enforceability of the
Credit Agreement, the Notes or any other Loan Document;
(b) any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of the terms of the Credit Agreement, the
Notes or any other Loan Document, or the rights of the Administrative
Agent or any Bank with respect thereto;
(c) any change in the time, manner or place of performance or
payment of, or in any other term of, the Guaranteed Obligations, or any
other amendment, extension or waiver of or any consent to departure
from, or any indulgence or compromise with respect to, or any failure,
omission, delay, neglect, refusal or lack of diligence on the part of
the Administrative Agent or any Bank to enforce, the Credit Agreement,
the Notes or any other Loan Document;
(d) the existence of, or any release or amendment or waiver of
or consent to departure from, any other guaranty, for all or any of the
Guaranteed Obligations;
(e) any assignment, mortgaging or transfer of the Guaranteed
Obligations, any Loan Document, this Guaranty or any interest therein or
any furnishing, acceptance or release of security or additional
security;
(f) any merger or consolidation of the Guarantor or the
Borrower, into or with any other Person or any sale, lease, transfer,
divestiture or other disposition of any or all of the assets of the
Borrower;
(g) any direct or indirect change in the ownership of the
Borrower;
(h) the voluntary or involuntary liquidation, dissolution,
sale of all or substantially all of the assets, marshalling of the
assets and liabilities, receivership, conservatorship, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of, or other similar proceeding
with respect to the Guarantor (subject to the powers of a bankruptcy
court under the Bankruptcy Code and the equitable powers of a bankruptcy
court), the Borrower, the Administrative Agent or any Bank or any action
taken by any trustee or receiver or by any court in any such proceeding;
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(i) any withholding or diminution at the source, by reason of
any taxes, expenses, indebtedness, obligations or liabilities or any
claims, demands, charges or liens of any nature against any sums payable
under the Loan Documents or this Guaranty; or
(j) any election of remedies by the Administrative Agent or
any Bank which results in any impairment or destruction of any
subrogation rights of the Guarantor.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Administrative Agent or any Bank
for any reason, including, without limitation, the insolvency, bankruptcy or
reorganization of the Guarantor (subject to the powers of a bankruptcy court
under the Bankruptcy Code and the equitable powers of a bankruptcy court) or
the Borrower or otherwise, all as though such payment had not been made, and,
in such event, the Guarantor will pay to the Administrative Agent (for
distribution to the Banks in the manner set forth in the Credit Agreement) an
amount equal to any such payment that has been rescinded or returned, and such
obligation of the Guarantor shall not be diminished, released, discharged,
impaired or otherwise adversely affected by any prior cancellation or surrender
of this Guaranty. This Guaranty shall be absolute and unconditional
notwithstanding the occurrence of any other event or the existence of any other
circumstances which might constitute a defense available to a guarantor or the
Borrower (including failure of consideration, allegations of frauds, usury,
forgery, breach of warranty, statute of fraud, statute of limitation, accord
and satisfaction and any defense based on election of remedies) or a legal or
equitable discharge of a surety or guarantor except indefeasible payment in
full of the Guaranteed Obligations. The provisions of this paragraph will
survive any release or termination of this Guaranty. It is further agreed that
it shall never be necessary for this Guaranty to be ratified or confirmed in
order for it to include among the Guaranteed Obligations any increase in the
total amount of the indebtedness outstanding under the Credit Agreement
pursuant to Section 2.15 of the Credit Agreement. No increase in the in the
total amount of the indebtedness outstanding under the Credit Agreement
pursuant to Section 2.15 of the Credit Agreement shall impair, diminish,
discharge or release the liability of the Guarantor under this Guaranty.
If and to the extent that the Guarantor makes any payment to the
Administrative Agent, any Bank or to any other Person pursuant to or in respect
of this Guaranty, any claim which the Guarantor may have against the Borrower
by reason thereof shall be subject and subordinate to the prior indefeasible
payment in full of the Guaranteed Obligations.
2.3. Waiver. Except as otherwise set forth herein, the
Guarantor hereby waives, to the fullest extent permitted by applicable law,
promptness, diligence, notice of acceptance and any other notice with respect
to any of the Guaranteed Obligations and this
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Guaranty (including notice of any sale, transfer or other disposition of any
right, title to or interest in any Loan Document or this Guaranty by the
Administrative Agent or any Bank, notice of the existence of any matter
described in Section 2.2, and notice or proof of reliance) and any requirement
that the Administrative Agent and/or the Banks protect, secure, perfect or
insure any collateral or exhaust any right or take any action against the
Borrower or any other Person or any collateral.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Guarantor. The
Guarantor represents and warrants to the Banks as follows (which
representations and warranties are deemed made by the Guarantor on the date of
each Borrowing and shall survive the execution and delivery of this Guaranty
and the Loan Documents and the making of the Advances contemplated by the
Credit Agreement):
(a) The Guarantor and each Principal Subsidiary are
corporations duly incorporated, validly existing and in good standing
under the laws of their respective jurisdictions of incorporation. The
Guarantor and each Principal Subsidiary have all corporate powers and
all material governmental licenses, authorizations, consents and
approvals required in each case to carry on its business as now
conducted.
(b) The execution, delivery and performance by the Guarantor
of this Guaranty are within the Guarantor's corporate powers, have been
duly authorized by all necessary corporate action of the Guarantor,
require, in respect of the Guarantor, no action by or in respect of, or
filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of law or
regulation (including Regulation X issued by the Federal Reserve Board)
applicable to the Guarantor or Regulation U issued by the Federal
Reserve Board or the restated certificate of incorporation or by-laws of
the Guarantor or any judgment, injunction, order, decree or material
("material" for the purposes of this representation meaning creating a
liability of $50,000,000 or more) agreement binding upon the Guarantor
or result in the creation or imposition of any lien, security interest
or other charge or encumbrance on any asset of the Guarantor or any of
its Subsidiaries.
(c) This Guaranty is the legal, valid and binding obligation
of the Guarantor enforceable against the Guarantor in accordance with
its terms, except as the enforceability thereof may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and by
general principles of equity.
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(d) The audited consolidated balance sheet of the Guarantor
and its Subsidiaries as of December 31, 1994 and the related audited
consolidated statements of income, cash flows and changes in
shareholders' equity accounts for the fiscal year then ended and the
unaudited consolidated balance sheet of the Guarantor and its
Subsidiaries as of September 30, 1995, and the related unaudited
consolidated statements of income, cash flows and changes in
shareholders' equity accounts for the fiscal quarter then ended,
certified by the chief financial or accounting officer of the Guarantor,
copies of which have been delivered to each of the Banks, fairly
present, in conformity with GAAP except as otherwise expressly noted
therein, the consolidated financial position of the Guarantor and its
Subsidiaries as of such dates and their consolidated results of
operations and changes in financial position for such fiscal periods,
subject (in the case of the unaudited balance sheet and statements) to
changes resulting from audit and normal year-end adjustments.
(e) Since December 31, 1994, there has been no material
adverse change in the consolidated financial position or consolidated
results of operations of the Guarantor and its Subsidiaries, considered
as a whole.
(f) Except as disclosed in the Guarantor's Form 10-K for the
year ended December 31, 1994 or the Guarantor's Form 10-Q for the
quarter ended September 30, 1995, which were delivered to the Banks
prior to the date hereof, there is no action, suit or proceeding pending
against the Guarantor or any of its Subsidiaries, or to the knowledge of
the Guarantor threatened against the Guarantor or any of its
Subsidiaries, before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an
adverse decision which could materially adversely affect the
consolidated financial position or consolidated results of operations of
the Guarantor and its Subsidiaries taken as a whole or which in any
manner draws into question the validity of this Guaranty.
(g) No Termination Event has occurred or is reasonably
expected to occur with respect to any Plan for which an Insufficiency in
excess of $50,000,000 exists. Neither the Guarantor nor any ERISA
Affiliate has received any notification (or has knowledge of any reason
to expect) that any Multiemployer Plan is in reorganization or has been
terminated, within the meaning of Title IV of ERISA, for which a
Withdrawal Liability in excess of $50,000,000 exists.
(h) United States federal income tax returns of the Guarantor
and its Subsidiaries have been examined and closed through the fiscal
year ended December 31, 1987. The Guarantor and its Subsidiaries have
filed or caused to be filed all United States federal income tax returns
and all other material domestic tax returns which to the knowledge of
the Guarantor are required to be filed by them and have paid or provided
for the payment, before the same become delinquent, of all taxes due
pursuant to such returns or pursuant to any assessment received by the
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Guarantor or any Subsidiary, other than those taxes contested in good
faith by appropriate proceedings. The charges, accruals and reserves on
the books of the Guarantor and its Subsidiaries in respect of taxes are,
in the opinion of the Guarantor, adequate to the extent required by
GAAP.
(i) Neither the Guarantor nor any Subsidiary is an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(j) Neither the Guarantor nor any Principal Subsidiary is a
"holding company", a "subsidiary company" of a "holding company", an
"affiliate" of a "holding company", or an "affiliate" of a "subsidiary
company" of a "holding company", in each case as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended.
(k) This Guaranty is made as an inducement to the Banks to
extend the Advances under the Credit Agreement, which extension of
Advances benefits the Guarantor. The value of the consideration
received and to be received by the Guarantor is, in the judgment of the
Guarantor, reasonably worth at least as much as the liability and
obligation of the Guarantor hereunder, and such liability and obligation
will result in direct financial benefits to the Guarantor.
(l) The Guarantor has had full and complete access to the Loan
Documents and all other instruments and documents executed by the
Borrower and any other Person in connection with the Guaranteed
Obligations and has reviewed those documents and is fully aware of their
contents. The Guarantor is fully informed of all circumstances which a
diligent inquiry would reveal. The Guarantor has adequate means to
obtain from the Borrower on a continuing basis information concerning
the Loan Documents and it is not depending on the Administrative Agent
or any Bank to provide such information, now or in the future. The
Guarantor agrees that neither the Administrative Agent nor any Bank
shall have any obligation to advise or notify it or to provide the
Guarantor with any data or information.
(m) Following application of the proceeds of each Borrowing,
not more than 25 percent of the value of the assets (both of the
Guarantor only and of the Guarantor and its Subsidiaries on a
consolidated basis), which are subject to any arrangement with the
Administrative Agent or any Bank (herein or otherwise) whereby the
Guarantor's or any Subsidiary's right or ability to sell, pledge or
otherwise dispose of assets is in any way restricted, will be margin
stock (within the meaning of Regulation U issued by the Federal Reserve
Board).
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ARTICLE IV
COVENANTS OF THE GUARANTOR
4.1. Affirmative Covenants. The Guarantor covenants and agrees
that so long as any Note shall remain unpaid, the Guarantor will, unless the
Majority Banks shall otherwise consent in writing:
(a) Reporting Requirements. Furnish to each Bank:
(1) (A) promptly after the sending or filing thereof, a copy
of each of the Guarantor's reports on Form 8-K (or any comparable
form), (B) promptly after the filing or sending thereof, and in
any event within 75 days after the end of each of the first three
fiscal quarters of each fiscal year of the Guarantor, a copy of
the Guarantor's report on Form 10-Q (or any comparable form) for
such quarter, which report will include the Guarantor's quarterly
unaudited consolidated financial statements as of the end of and
for such quarter, and (C) promptly after the filing or sending
thereof, and in any event within 135 days after the end of each
fiscal year of the Guarantor, a copy of the Guarantor's annual
report which it sends to its public security holders, and a copy
of the Guarantor's report on Form 10-K (or any comparable form)
for such year, which annual report will include the Guarantor's
annual audited consolidated financial statements as of the end of
and for such year;
(2) simultaneously with the delivery of each of the annual
or quarterly reports referred to in clause (1) above, a
certificate of the chief financial officer or the chief
accounting officer of the Guarantor in a form acceptable to the
Administrative Agent (x) setting forth in reasonable detail the
calculations required to establish whether the Guarantor was in
compliance with the requirements of Section 4.2(b) on the date of
the financial statements contained in such report, and (y)
stating whether there exists on the date of such certificate any
Guarantor Default or event which, with the giving of notice or
lapse of time, or both, would constitute an Guarantor Default,
and, if so, setting forth the details thereof and the action
which the Guarantor has taken and proposes to take with respect
thereto;
(3) as soon as is possible and in any event within five days
after a change in, or issuance of, any rating of any of the
Guarantor's senior unsecured long-term debt by Standard & Poor's
or Moody's which causes a change in the applicable Rating Level,
notice of such change;
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(4) as soon as possible and in any event within five days
after an executive officer of the Guarantor having obtained
knowledge thereof, notice of the occurrence of any Guarantor
Default or any event which, with the giving of notice or lapse of
time, or both, would constitute an Guarantor Default, continuing
on the date of such notice, and a statement of the chief
financial officer of the Guarantor setting forth details of such
Guarantor Default or event and the action which the Guarantor has
taken and proposes to take with respect thereto;
(5) as soon as possible and in any event (A) within 30
Business Days after the Guarantor or any ERISA Affiliate knows or
has reason to know that any Termination Event described in clause
(a) of the definition of Termination Event with respect to any
Plan for which an Insufficiency in excess of $50,000,000 exists,
has occurred and (B) within 10 Business Days after the Guarantor
or any ERISA Affiliate knows or has reason to know that any other
Termination Event with respect to any Plan for which an
Insufficiency in excess of $50,000,000 exists, has occurred or is
reasonably expected to occur, a statement of the chief financial
officer or chief accounting officer of the Guarantor describing
such Termination Event and the action, if any, which the
Guarantor or such ERISA Affiliate proposes to take with respect
thereto;
(6) promptly and in any event within five Business Days after
receipt thereof by the Guarantor or any ERISA Affiliate, copies
of each notice received by the Guarantor or any ERISA Affiliate
from the PBGC stating its intention to terminate any Plan for
which an Insufficiency in excess of $50,000,000 exists or to have
a trustee appointed to administer any Plan for which an
Insufficiency in excess of $50,000,000 exists;
(7) promptly and in any event within five Business Days after
receipt thereof by the Guarantor or any ERISA Affiliate from the
sponsor of a Multiemployer Plan, a copy of each notice received
by the Guarantor or any ERISA Affiliate indicating liability in
excess of $50,000,000 incurred or expected to be incurred by the
Guarantor or any ERISA Affiliate in connection with (A) the
imposition of a Withdrawal Liability by a Multiemployer Plan, (B)
the determination that a Multiemployer Plan is, or is expected to
be, in reorganization within the meaning of Title IV of ERISA, or
(C) the termination of a Multiemployer Plan within the meaning of
Title IV of ERISA; and
(8) such other information respecting the Consolidated
financial position or Consolidated results of operations
(including an annual report or reports on oil and gas reserves of
the
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Guarantor and its Subsidiaries), of the Guarantor that any Bank
through the Administrative Agent may from time to time reasonably
request.
(b) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, with all applicable laws, rules, regulations and
orders to the extent noncompliance therewith would have a material
adverse effect on the Guarantor and its Subsidiaries taken as a whole,
such compliance to include, without limitation, the paying before the
same become delinquent of all taxes, assessments and governmental
charges imposed upon it or upon its property except to the extent
contested in good faith by appropriate proceedings.
(c) Visitation Rights. At any reasonable time and from time
to time, after reasonable notice, permit the Administrative Agent or any
of the Banks or any agents or representatives thereof to examine the
records and books of account of, and visit the properties of, the
Guarantor and any of the Principal Subsidiaries to discuss the affairs,
finances and accounts of the Guarantor and any of the Principal
Subsidiaries with any of the officers or directors of the Guarantor.
(d) Maintenance of Insurance. Maintain, and cause each of the
Principal Subsidiaries to maintain, insurance with responsible and
reputable insurance companies or associations in such amounts and
covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties as the Guarantor or
such Principal Subsidiary, provided, that self-insurance by the
Guarantor or any such Principal Subsidiary shall not be deemed a
violation of this covenant to the extent that companies engaged in
similar businesses and owning similar properties as the Guarantor or
such Principal Subsidiary self-insure. The Guarantor may maintain the
Principal Subsidiaries' insurance on behalf of them.
(e) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of the Principal Subsidiaries to preserve and
maintain, its corporate existence, rights (charter and statutory), and
franchises; provided, however, that this Section 4.1(e) shall not apply
to any transactions permitted by Section 4.2(c) or (d) and shall not
prevent the termination of existence, rights and franchises of any
Principal Subsidiary pursuant to any merger or consolidation to which
such Principal Subsidiary is a party, and provided, further, that the
Guarantor or any Principal Subsidiary shall not be required to preserve
any right or franchise if the Guarantor or such Principal Subsidiary
shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Guarantor or such Principal
Subsidiary, as the case may be, and that the loss thereof is not
disadvantageous in any material respect to the Banks.
4.2. Negative Covenants. So long as any Note shall remain
unpaid, the Guarantor will not at any time, without the written consent of the
Majority Banks:
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(a) Negative Pledge. Fail to perform and observe any term,
covenant or agreement contained in Section 1007 of the Indenture (as
modified for purposes hereof as set forth in this Section 4.2). For
purposes of this Section 4.2(a), Section 1007 and the definitions of all
terms defined in the Indenture and used in or otherwise applicable to
such Section 1007 are set forth on Exhibit A and are hereby incorporated
in this Guaranty by reference as if such provisions and definitions were
set forth in full herein; provided, however, that solely for purposes of
this Section 4.2, the word "Securities" used in the Indenture shall mean
the Notes, the word "Company" used therein shall mean the Guarantor, the
phrase "Section 1007" used therein shall mean this Section 4.2(a), the
word "Trustee" as used therein shall mean the Administrative Agent, the
phrase "Board of Directors" used in the Indenture shall mean the
management of the Guarantor, Section 301 of the Indenture shall not
apply to any Note, and the phrase "So long as any of the Securities are
outstanding" used therein shall mean so long as any Note shall remain
unpaid or any Bank shall have any Commitment under the Credit Agreement.
(b) Total Debt to Capitalization. Have a ratio of (i) Total
Debt to (ii) Total Capitalization greater than 50%.
(c) Disposition of Assets. Lease, sell, transfer or otherwise
dispose of, voluntarily or involuntarily, all or substantially all of
its assets.
(d) Mergers, Etc. Merge or consolidate with or into, any
Person, unless (1) the Guarantor is the survivor or (2) the surviving
Person, if not the Guarantor, is organized under the laws of the United
States or a state thereof and assumes all obligations of the Guarantor
under this Guaranty; provided, in each case that both immediately before
and after giving effect to such proposed transaction, no Guarantor
Default or event which, with the giving of notice or the lapse of time,
or both, would constitute an Guarantor Default exists, or would exist or
result.
(e) Compliance with ERISA. (1) Terminate, or permit any ERISA
Affiliate to terminate, any Plan so as to result in any liability in
excess of $50,000,000 of the Guarantor or any ERISA Affiliate to the
PBGC, or (2) permit circumstances which give rise to a Termination Event
described in clauses (b), (d) or (e) of the definition of Termination
Event with respect to a Plan so as to result in any liability in excess
of $50,000,000 of the Guarantor or any ERISA Affiliate to the PBGC.
(f) Ownership of the Borrower. Own, directly or indirectly,
less than fifty percent (50%) (other than directors' qualifying shares)
of the issued and outstanding shares of the capital stock of the
Borrower.
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ARTICLE V
GUARANTOR DEFAULT
5.1. Guarantor Defaults. If any of the following events (each
a "Guarantor Default") shall occur and be continuing:
(a) Any representation or warranty made or deemed made by the
Guarantor (or any of its officers) hereunder shall prove to have been
incorrect in any material respect when made or deemed made and such
materiality is continuing; or
(b) The Guarantor shall fail to perform or observe any term,
covenant or agreement contained in Section 4.2 or shall fail to perform
or observe any other term, covenant or agreement contained in this
Guaranty on its part to be performed or observed if, in the case of such
other term, covenant or agreement, such failure shall remain unremedied
for 30 days after written notice thereof shall have been given to the
Guarantor by the Administrative Agent at the request of any Bank; or
(c) The Guarantor or any Principal Subsidiary shall (1) fail
to pay any principal of or premium or interest on any Debt (other than
Debt described in clause (c) of the definition of Debt) which is
outstanding in the principal amount of at least $50,000,000 in the
aggregate, of the Guarantor or such Principal Subsidiary (as the case
may be), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate
the maturity of such Debt; or any such Debt shall be declared to be due
and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment or as a result of the giving of notice of
a voluntary prepayment), prior to the stated maturity thereof, or (2)
with respect to Debt described in clause (c) of the definition of Debt,
fail to pay any such Debt which is outstanding in the principal amount
of at least $50,000,000 in the aggregate, of the Guarantor or such
Principal Subsidiary (as the case may be), when the same becomes due and
payable, and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to
such Debt; or
(d) The Guarantor or any Principal Subsidiary shall generally
not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Guarantor or any Principal Subsidiary
15
<PAGE> 18
seeking to adjudicate it as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), shall remain
undismissed or unstayed for a period of 60 days; or the Guarantor or any
Principal Subsidiary shall take any corporate action to authorize any of
the actions set forth above in this subsection (d); or
(e) Any judgment, decree or order for the payment of money in
excess of $50,000,000 shall be rendered against the Guarantor or any
Principal Subsidiary and shall remain unsatisfied and either (1)
enforcement proceedings shall have been commenced by any creditor upon
such judgment, decree or order or (2) there shall be any period longer
than (i) 30 consecutive days or (ii) such longer period as allowed by
applicable law during which a stay of enforcement of such judgment,
decree or order, by reason of a pending appeal or otherwise, shall not
be in effect; or
(f) Any Termination Event as defined in clauses (b), (d) or
(e) of the definition thereof with respect to a Plan shall have occurred
and, 30 days after notice thereof shall have been given to the Guarantor
by the Administrative Agent, (1) such Termination Event shall still
exist and (2) the sum (determined as of the date of occurrence of such
Termination Event) of the liabilities to the PBGC resulting from all
such Termination Events is equal to or greater than $100,000,000; or
(g) The Guarantor or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer
Plans in connection with Withdrawal Liabilities (determined as of the
date of such notification), exceeds $100,000,000 or requires payments
exceeding $50,000,000 in any year; or
(h) The Guarantor or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of
Title IV of ERISA, if as a result of such reorganization or termination
the aggregate annual contributions of the Guarantor and its ERISA
Affiliates to all Multiemployer Plans which are then in reorganization
or being terminated have been or will be increased over the amounts
contributed to such Multiemployer Plans for the respective plan years
which include the date hereof by an amount exceeding $50,000,000 in the
aggregate;
16
<PAGE> 19
then, and in such event, the Banks and the Administrative Agent shall have (a)
all rights and remedies provided for in this Guaranty and in any Loan Document
following a Guarantor Default, and (b) all rights and remedies at law or in
equity following a Guarantor Default.
ARTICLE VI
MISCELLANEOUS
6.1. Amendments, Etc. No amendment or waiver of any provision
of this Guaranty, nor consent to any departure by the Guarantor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Majority Banks, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given;
provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Banks, do any of the following: (a) take any
action which requires the consent of all the Banks pursuant to the terms of
this Guaranty, (b) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes which shall be required for the Banks or
any of them to take any action under this Guaranty, (c) amend this Section 6.1,
or (d) release the Guarantor from its obligations under this Guaranty; and
provided, further, that no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Banks
required above to take such action, affect the rights or duties of the
Administrative Agent under this Guaranty.
6.2. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier
communication) and mailed, telecopied or delivered, if to the Guarantor, at its
address or telecopier number set forth below:
Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
Attention: Senior Vice President and Chief Financial
Officer
Telecopier No.: 713-646-2113
17
<PAGE> 20
if to any Bank, at its Domestic Lending Office specified in the Credit
Agreement; if to the Administrative Agent, at its address or telecopier number
set forth below:
Texas Commerce Bank National Association
712 Main Street
Houston, Texas 77002
Attention: Manager
Energy Group
Telecopier No.: 713-216-4117
or, as to the Guarantor or the Administrative Agent, at such other address as
shall be designated by such party in a written notice to the other parties and,
as to each other party, at such other address as shall be designated by such
party in a written notice to the Guarantor and the Administrative Agent. All
such notices and communications shall be effective, if delivered, upon such
delivery; if mailed, three (3) Business Days after deposit in the mails; if
sent by overnight courier, one (1) Business Day after delivery to the courier
company; and if sent by telecopier, when received by the receiving telecopier
equipment, respectively; provided, however, that (a) notices and communications
to the Administrative Agent shall not be effective until received by the
Administrative Agent and (b) telecopied notices received by any party after its
normal business hours (or on a day other than a Business Day) shall be
effective on the next Business Day.
6.3. No Waiver; Cumulative Rights and Remedies. No failure on
the part of the Administrative Agent to exercise, and no delay in exercising,
and no course of dealing with respect to, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any right
hereunder preclude any other or further exercise thereof or the exercise of any
other right. Each of the rights and remedies herein provided are cumulative
and not exclusive of any rights and remedies provided by law or in any other
documents or in equity.
6.4. Continuing Guaranty. The obligations of the Guarantor
under this Guaranty shall be continuing and (i) remain in full force and effect
until termination of the Credit Agreement pursuant to Section 8.11 thereof,
(ii) be binding upon the Guarantor, its successors and assigns, and (iii) inure
to the benefit of and be enforceable by the Administrative Agent, the Banks and
their respective successors, transferees and assigns; provided that the
obligations of the Guarantor under Sections 4.1 and 4.2 hereof shall remain in
effect only until the time specified in Sections 4.1 and 4.2.
6.5. Execution in Counterparts. This Guaranty may be executed
in any number of counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
18
<PAGE> 21
6.6. Governing Law; Entire Agreement. THIS GUARANTY SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
THIS GUARANTY CONSTITUTES THE ENTIRE UNDERSTANDING AMONG THE GUARANTOR, THE
ADMINISTRATIVE AGENT AND THE BANKS WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
6.7. Captions. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Guaranty.
6.8. Severability. Whenever possible, each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Guaranty shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions of this Guaranty shall not be
affected or impaired thereby.
6.9. Right of Set-Off. If the Guarantor fails to pay any
Guaranteed Obligation at the time the Guarantor is required to make payment
thereof pursuant to Section 2.1 hereof, each Bank is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Bank to or for the credit or the account of the Guarantor against any and all
of the obligations of the Guarantor now or hereafter existing under this
Guaranty. Each Bank agrees promptly to notify the Guarantor after any such
set-off and application made by such Bank; provided that the failure to give
such notice shall not affect the validity of such set- off and application.
The rights of each Bank under this Section 6.9 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which
such Bank may have.
6.10. Joinder; Independent Action. At the option of the
Administrative Agent, the Guarantor may be joined in any action or proceeding
in connection with or based on any of the Loan Documents, and recovery may be
had against the Guarantor in such action or proceeding or in any independent
action or proceeding against the Guarantor, without any requirement that the
Administrative Agent or any Bank first assert, prosecute or exhaust any remedy
or claim against the Borrower or any other Person.
6.11. Third Party Beneficiaries. There are no third-party
beneficiaries to this Guaranty.
6.12. Location of Certain Actions. The Guarantor acknowledges
that (a) it has conducted all negotiations with the Administrative Agent and
the Banks which are not residents of Canada and which are parties to the Credit
Agreement on the date hereof, outside of Canada, and (b) it has executed this
Guaranty outside of Canada.
19
<PAGE> 22
6.13. Assignments to Federal Reserve Board. In addition to the
assignments and participations permitted under Section 8.6 of the Credit
Agreement, any Bank may assign, as collateral or otherwise, any of its rights
under this Guaranty to any Federal Reserve Bank without notice to or consent of
the Borrower, the Guarantor or the Administrative Agent; provided, that no such
assignment under this Section 6.13 shall release the assigning Bank from its
obligations under the Credit Agreement or under this Guaranty.
6.14. Interest. The parties to this Guaranty intend to strictly
comply with all applicable laws, including applicable usury laws. Accordingly,
the provisions of this Section 6.14 shall govern and control over every other
provision of any Loan Document or this Guaranty which conflicts or is
inconsistent with this Section 6.14, even if such other provision declares that
it controls. As used in this Section 6.14, the term "interest" includes the
aggregate of all charges, fees, benefits or other compensation which constitute
interest under applicable law; provided that, to the maximum extent permitted
by applicable law, (a) any non-principal payment shall be characterized as an
expense or as compensation for something other than the use, forbearance or
detention of money, and not as interest and (b) all interest at any time
contracted for, taken, reserved, charged or received shall be amortized,
prorated, allocated and spread during the full term of the Advances and the
Commitments. In no event shall the Guarantor, the Borrower or any other Person
be obligated to pay, or the Administrative Agent or any Bank have any right or
privilege to reserve, receive or retain, (x) any interest in excess of the
maximum amount of nonusurious interest permitted under the laws of the State of
Texas or the applicable laws (if any) of the United States, the Government of
Canada or of any other state or province thereof or (y) total interest in
excess of the amount which the Administrative Agent or such Bank could lawfully
have contracted for, taken, reserved, received, retained or charged had the
interest been calculated for the full term of the Advances at the Highest
Lawful Rate. On each day, if any, that the interest rate (the "Stated Rate")
called for under any Loan Document exceeds the Highest Lawful Rate, the rate at
which interest shall accrue shall automatically be fixed by operation of this
sentence at the Highest Lawful Rate for that day, and shall remain fixed at the
Highest Lawful Rate for each day thereafter until the total amount of interest
accrued equals the total amount of interest which would have accrued if there
were no such ceiling rate as is imposed by this sentence. Thereafter, interest
shall accrue at the Stated Rate unless and until the Stated Rate again exceeds
the Highest Lawful Rate when the provisions of the immediately preceding
sentence shall again automatically operate to limit the interest accrual rate.
The daily interest rates to be used in calculating interest at the Highest
Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate
per annum by the number of days in the calendar year for which such calculation
is being made. None of the terms and provisions contained in this Guaranty or
any Loan Document which directly or indirectly relate to interest shall ever be
construed without reference to this Section 6.14, or be construed to create a
contract to pay for the use, forbearance or detention of money at an interest
rate in excess of the Highest Lawful Rate. If the term of any of the Notes is
shortened by reason of acceleration of maturity or by reason of any required or
permitted prepayment, and if for that (or any other) reason the Administrative
20
<PAGE> 23
Agent or any Bank at any time, including the stated maturity, is owed or
receives (and/or has received) interest in excess of interest calculated at the
Highest Lawful Rate, then and in any such event all of any such excess interest
shall be cancelled automatically as of the date of such acceleration,
prepayment or other event which produces the excess, and, if such excess
interest has been paid to the Administrative Agent or such Bank, it shall be
credited pro tanto against the then outstanding principal balance of the
Borrower's (or the Guarantor's, as appropriate) obligations to the
Administrative Agent or such Bank, effective as of the date or dates when the
event occurs which causes it to be excess interest, until such excess is
exhausted or all of such principal has been fully paid and satisfied, whichever
occurs first, and any remaining balance of such excess shall be promptly
refunded to its payor.
21
<PAGE> 24
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
ENRON OIL & GAS COMPANY
By: /s/ Ben B. Boyd
-----------------------------------
Ben B. Boyd
Vice President and Controller
THIS GUARANTY CONSTITUTES THE ENTIRE UNDERSTANDING AMONG THE GUARANTOR,
THE ADMINISTRATIVE AGENT AND THE BANKS WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH
RESPECT THERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
ENRON OIL & GAS COMPANY
By: /s/ Ben B. Boyd
-----------------------------------
Ben B. Boyd
Vice President and Controller
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Administrative Agent for
the Banks
By: /s/ Scott Richardson
-----------------------------------
Name: Scott Richardson
Title: Vice President
22
<PAGE> 25
Section 1007. Negative Pledge and Exceptions Thereto.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, so long as any of the Securities are outstanding, the
Company will not create or suffer to exist, or permit any of its Subsidiaries
to create or suffer to exist, except in favor of the Company or any Subsidiary,
any Lien upon any Principal Property at any time owned by it, to secure any
Funded Debt of the Company or any Subsidiary, without making effective
provisions whereby the Securities shall be equally and ratably secured with any
and all such Funded Debt and with any other indebtedness similarly entitled to
be equally and ratably secured; provided, however, that this restriction shall
not apply to or prevent the creation or existence of any:
(a) Acquisition Lien or Permitted Encumbrance; or
(b) Lien created or assumed by the Company or any Subsidiary in
connection with the issuance of debt securities the interest on which is
excludable from gross income of the holder of such security pursuant to the
Internal Revenue Code of 1986, as amended, for the purpose of financing, in
whole or in part, the acquisition or construction of property or assets to be
used by the Company or a Subsidiary.
In case the Company or any Subsidiary shall propose to create or permit
to exist a Lien on any Principal Property at any time owned by it to secure any
Funded Debt of the Company or any Subsidiary, other than Funded Debt permitted
to be secured under clauses (a) or (b) of this Section 1007, the Company will
prior thereto give written notice thereof to the Trustee, and the Company will,
or will cause such Subsidiary to, prior to or simultaneously with such creation
or permission to exist, by supplemental indenture executed to the Trustee (or
to the extent legally necessary to another trustee or additional or separate
trustee), in form satisfactory to the Trustee, effectively secure all the
Securities equally and ratably with such Funded Debt and any other indebtedness
entitled to be equally and ratably secured.
Notwithstanding the foregoing provisions of this Section 1007, the
Company or a Subsidiary may issue, assume or guarantee Funded Debt secured by
Liens which would otherwise be subject to the foregoing restrictions in an
aggregate amount which, together with all other Funded Debt of the Company or a
Subsidiary secured by Liens which (if originally issued, assumed or guaranteed
at such time) would otherwise be subject to the foregoing restrictions (not
including Funded Debt permitted to be secured under clauses (a) or (b) above)
does not at the time exceed 10% of the Consolidated Net Tangible Assets of the
Company, as shown on the audited consolidated financial statements of the
Company as of the end of the fiscal year preceding the date of determination.
Page 1 of 6 Pages
EXHIBIT A
<PAGE> 26
"Acquisition Lien" means any (i) Lien upon any property heretofore or
hereafter acquired, created at the time of acquisition or within one year
thereafter to secure all or a portion of the purchase price thereof, or
existing thereon at the date of acquisition, whether or not assumed by the
Company or any Subsidiary, provided that any such Lien shall apply only to the
property so acquired and fixed improvements thereon, (ii) Lien upon any
property heretofore or hereafter acquired by any corporation that is or becomes
a Subsidiary after the date hereof ("Acquired Entity"), provided that any such
Lien (I) shall either (A) exist prior to the time the Acquired Entity becomes a
Subsidiary or (B) be created at the time the Acquired Entity becomes a
Subsidiary or within one year thereafter to secure all or a portion of the
acquisition price thereof and (2) shall only apply to those properties owned by
the Acquired Entity at the time it becomes a Subsidiary or thereafter acquired
by it from sources other than the Company or any other Subsidiary, and (iii)
any extension, renewal or refunding, in whole or in part, of any Lien permitted
by clause (i) or (ii) above, if limited to the same property or any portion
thereof subject to, and securing not more than the amount secured by, the Lien
extended, renewed or refunded.
"Consolidated Net Tangible Assets" means total assets less (a) total
current liabilities (excluding indebtedness due within 12 months) and (b)
goodwill, patents and trademarks, all as reflected in the Company's audited
consolidated balance sheet preceding the date of a determination under the last
paragraph of Section 1007.
"Funded Debt" as applied to the Company or any Subsidiary means all
indebtedness incurred, created, assumed or guaranteed by the Company or any
Subsidiary, or upon which such corporation customarily pays interest charges,
which matures, or is renewable by the Company or any Subsidiary to a date, more
than one year after the date as of which Funded Debt is being determined.
"Indebtedness", as applied to the Company or any Subsidiary, shall mean
bonds, debentures, notes and other instruments representing obligations created
or assumed by any such corporation for the repayment of money borrowed (other
than unamortized debt discount or premium). All indebtedness secured by a Lien
upon property owned by the Company or any Subsidiary and upon which
indebtedness any such corporation customarily pays interest, although any such
corporation has not assumed or become liable for the payment of such
indebtedness, shall for all purposes hereof be deemed to be indebtedness of any
such corporation. All indebtedness for money borrowed incurred by other
persons which is directly guaranteed as to payment of principal by the Company
or any Subsidiary shall for all purposes hereof be deemed to be indebtedness of
any such corporation, but no other contingent obligation of any such
corporation in respect of indebtedness incurred by other persons shall for any
purpose be deemed indebtedness of such corporation. Indebtedness of the
Company or any Subsidiary shall not include (i) any amount representing
capitalized lease obligations; (ii) indirect guarantees or other contingent
obligations in connection with the indebtedness of others, including
agreements, contingent
Page 2 of 6 Pages
EXHIBIT A
<PAGE> 27
or otherwise, with such other persons or with third persons with respect to, or
to permit or ensure the payment of, obligations of such other persons,
including, without limitation, agreements to purchase or repurchase obligations
of such other persons, agreements to advance or supply funds to or to invest in
such other persons or agreements to pay for property, products, or services of
such other persons (whether or not conferred, delivered or rendered), and any
demand charge, throughput, take-or-pay, keep-well, make-whole, cash deficiency,
maintenance of working capital or earnings or similar agreements; and (iii) any
guarantees with respect to lease or other similar periodic payments to be made
by other persons.
"Lien" means any mortgage, pledge, lien, security interest or similar
charge or encumbrance.
"Permitted Encumbrances" means any
(a) undetermined or inchoate Lien incidental to construction,
maintenance, development or operation of any property;
(b) Lien for any tax or assessment for the then current year;
(c) Lien for any tax or assessment not at the time delinquent;
(d) Lien for specified tax or assessment which is delinquent
but the validity of which is being contested at the time by the Company
or any Subsidiary in good faith;
(e) Lien reserved in any oil, gas or other mineral lease for
rent, royalty or delay rental under such lease and for compliance with
the terms of such lease;
(f) Lien for any judgments or attachments in an aggregate
amount not in excess of $10,000,000, or for any judgment or attachment
the execution or enforcement of which has been stayed or which has been
appealed and secured, if necessary, by the filing of appeal bond;
(g) mechanics' or materialmen's Lien, any Lien or charge
arising by reason of any pledge or deposit to secure payment of
workmen's compensation or other insurance, good faith deposit in
connection with any tender, lease of real estate, bid or contract (other
than any contract for the payment of indebtedness), deposit to secure
any duty or public or statutory obligation, deposit to secure, or in
lieu of, surety, stay or appeal bond, and deposit as security for the
payment of any tax or assessment or similar charge;
Page 3 of 6 Pages
EXHIBIT A
<PAGE> 28
(h) Lien arising by reason of any deposit with, or the giving
of any form of security to, any governmental agency or any body created
or approved by law for any purpose at any time in connection with the
financing of the acquisition or construction of property to be used in
the business of the Company or Subsidiary or as required by law as a
condition to the transaction of any business or the exercise of any
privilege or license, or to enable the Company or a Subsidiary to
maintain self-insurance or to participate in any fund established to
cover any insurance risk or in connection with workmen's compensation,
unemployment insurance, old age pension or other social security, or to
share in the privileges or benefits required for companies participating
in such arrangements;
(i) easement, servitude, right-of-way or other right,
exception, reservation, condition, limitation, covenant or other
restriction or imperfection in title which does not materially detract
from or interfere with the operation, value or use of the properties
affected thereby;
(j) preferential right to purchase entered into the ordinary
course of business;
(k) conventional provision contained in any contract or
agreement affecting properties under which the Company or a Subsidiary
is required immediately before the expiration, termination or
abandonment of a particular property to reassign to the Company's or a
Subsidiary's predecessor in title all or a portion of the Company's or a
Subsidiary's rights, titles and interest in and to all or a portion of
such property;
(l) sale or other transfer of crude oil, condensate, natural
gas, natural gas liquids or other similar hydrocarbon substances in
place, or the future production thereof, for a period of time until, or
in an amount such that, the transferee will realize therefrom a
specified amount (however determined) of money or a specified amount of
such crude oil, condensate, natural gas, natural gas liquids or other
similar hydrocarbon substances or any sale or other transfer of any
other interest in property of the character commonly referred to as a
"production payment," "overriding royalty," "net profits interest,"
"royalty" or similar burden on any oil and gas property or mineral
interest owned by the Company or any Subsidiary;
(m) Lien consisting of or reserved in any (i) grant or
conveyance in the nature of a farm-out or conditional assignment to the
Company or any of its Subsidiaries entered into the ordinary course of
business to secure undertakings of the Company or any Subsidiary in such
grant or conveyance, (ii) interest of an assignee of any proved
undeveloped lease or proved undeveloped portion of any producing
property transferred to such assignee for the purpose of the development
Page 4 of 6 Pages
EXHIBIT A
<PAGE> 29
of such lease or property, (iii) unitization or pooling agreement or
declaration, (v) contract for the sale, purchase, exchange or processing
of production, or (v) operating agreement, area of mutual interest
agreement or other agreement which is customary in the oil and gas
business and which agreement does not materially detract from the value,
or materially impair the use of, the property affected thereby;
(n) Lien consisting of any (i) statutory landlord's lien under
any lease to which the Company or any Subsidiary is a party or any other
Lien on leased property reserved in any lease thereof for rent or for
compliance with the terms of such lease, (ii) right reserved to or
vested in any municipality or governmental, statutory or public
authority to control or regulate any property of the Company or any
Subsidiary or to use such property in any manner which does not
materially impair the use of such property for the purpose for which it
is held by the Company or any such Subsidiary, (iii) obligation or duty
to any municipality or public authority with respect to any franchise,
grant, license, lease or permit and the rights reserved or vested in any
governmental authority or public utility to terminate any such
franchise, grant, license, lease or permit or to condemn or expropriate
any property, or (iv) zoning law, ordinance or municipal regulation;
(o) Lien arising out of any forward contract, futures
contract, swap agreement or other commodities contract entered into by
the Company or any Subsidiary;
(p) Lien on oil and gas property of the Company or any
Subsidiary thereof, or on production therefrom, to secure any liability
of the Company or such Subsidiary for all or part of the Development
Cost for such property under any joint operating, drilling or similar
agreement for exploration, drilling or development of such property, or
any renewal or extension of any such Lien (as used in this subclause,
"Development Cost" means, for any oil and gas property, the cost of
exploration, drilling or development of such property or of altering or
repairing equipment used in connection with such exploration, drilling
or development, or in the case of property which is substantially
unimproved for the use intended by the Company or such Subsidiary, the
cost of construction of improvements directly related to such
exploration, drilling or development of such property);
(q) Lien on any property of the Company or any Subsidiary
thereof in favor of the government of the United States of America or of
any State, or any political subdivision of either thereof, or any
department, agency or instrumentality of either thereof (collectively,
"Governments"), in order to permit the Company or such Subsidiary to
perform any contract or subcontract made with or at the request of such
Government, securing any partial, progress, advance or other payment by
such Government to the Company or such Subsidiary under such contract or
Page 5 of 6 Pages
EXHIBIT A
<PAGE> 30
subcontract, to the extent such Lien is required by such contract or
subcontract or by any law relating thereto; and
(r) Lien to secure any indebtedness incurred in connection
with the construction, installation or financing of any pollution
control or abatement facility or other form of industrial revenue bond
financing issued or guaranteed by the United States, any State or any
department, agency or instrumentality of either.
"Principal Property" means any property interest in oil and gas reserves
located in the United States or offshore the United States owned by the Company
or any Subsidiary and which is capable of producing crude oil, condensate,
natural gas, natural gas liquids or other similar hydrocarbon substances in
paying quantities, the net book value of which property interest or interests
exceeds two (2) percent of Consolidated Net Tangible Assets, except any such
property interest or interests that in the opinion of the Board of Directors is
not of material importance to the total business conducted by the Company and
its Subsidiaries as a whole. Without limitation, the term "Principal Property"
shall not include (i) accounts receivable and other obligations of any obligor
under a contract for the sale, exploration, production, drilling, development,
processing or transportation of crude oil, condensate, natural gas, natural gas
liquids or other similar hydrocarbon substances by the Company or any of its
Subsidiaries, and all related rights of the Company or any of is Subsidiaries,
and all guarantees, insurance, letters of credit and other agreements or
arrangements of whatever character supporting or securing payment of such
receivables or obligations, or (ii) the production or any proceeds from
production of crude oil, condensate, natural gas, natural gas liquids or other
similar hydrocarbon substances.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of
any contingency.
Page 6 of 6 Pages
EXHIBIT A
<PAGE> 1
EXHIBIT 10.66
ISDA
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of January 16, 1996
ROYAL BANK OF CANADA and EOG COMPANY OF CANADA have entered and/or anticipate
entering into one or more transactions (each a "Transaction") that are or will
be governed by this Master Agreement, which includes the schedule (the
"Schedule"), and the documents and other confirming evidence (each a
"Confirmation") exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows:-
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than
by
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payment), such delivery will be made for receipt on the due date in the
manner customary for the relevant obligation unless otherwise specified in
the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of
the relevant Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in this Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five
Local Business Days prior to the scheduled date for the payment or
delivery to which such change applies unless such other party gives timely
notice of a reasonable objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in the respect of the same Transaction,
by each party to the other, then, on such date, each party's
obligation to make payment of any such amount will be automatically
satisfied and discharged and, if the aggregate amount that would
otherwise have been payable by one party exceeds the aggregate amount
that would otherwise have been payable by the other party, replaced by an
obligation upon the party by whom the larger aggregate amount would have been
payable to pay to the other party the excess of the larger aggregate amount
over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a
net amount will be determined in respect of all amounts payable on the same
date in the same currency in respect of such Transactions, regardless of
whether such amounts are payable in respect of the same Transaction. The
election may be made in the Schedule or a Confirmation by specifying that
subparagraph (ii) above will not apply to the Transactions identified as being
subject to the election, together with the starting date (in which case
subparagraph (ii) above will not, or will cease to, apply to such Transactions
from such date). This election may be made separately for different groups of
Transactions and will apply separately to each pairing of Offices through which
the parties make and receive payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS UP. All payments under this Agreement will be made without
deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as
modified by the practice of any relevant governmental revenue
authority, then in effect. If a party is so required to deduct or
withhold, then that party ("X") will:--
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount required
to be deducted or withheld (including the full amount required
to be deducted or withheld from any additional amount paid by
X to Y under this Section 2(d)) promptly upon the earlier of
determining that such deduction or withholding is required or
receiving notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise entitled under
this Agreement, such additional amount as is necessary to
ensure that the net amount actually received by Y (free and
clear of Indemnifiable Taxes, whether assessed against X or Y)
will equal the full amount Y would have received had no such
deduction or withholding been required. However, X will not
be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d); or
(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true
unless such failure would not have occurred but for
(I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or
after the date on which a Transaction is entered into
(regardless of whether such action is taken or
brought with respect to a party to this Agreement) or
(II) a Change in Tax Law.
(ii) LIABILITY. If:--
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to
make any deduction or withholding in respect of which X would
not be required to pay an additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or
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effective designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment obligation
will, to the extent permitted by law and subject to Section 6(c), be required
to pay interest (before as well as after judgment) on the overdue amount to the
other party on demand in the same currency as such overdue amount, for the
period from (and including) the original due date for payment to (but
excluding) the date of actual payment, at the Default Rate. Such interest will
be calculated on the basis of daily compounding and the actual number of days
elapsed. If, prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party defaults in
the performance of any obligation required to be settled by delivery, it will
compensate the other party on demand if and to the extent provided for in the
relevant Confirmation or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into and, in the case of the representations in Section 3(f), at all times
until the termination of this Agreement) that:-
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all necessary
action to authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision of
its constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been
complied with; and
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(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding
in equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3 (d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule
as being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule
as being made by it for the purposes of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any form or
document that may be required or reasonably requested in writing in
order to allow such other party or its Credit Support Provider to make
a payment under this Agreement or any applicable Credit Support
Document without any deduction or withholding for or on account of any
Tax or with such deduction or withholding at a reduced rate (so long
as the completion, execution or submission of such form or document
would not materially prejudice the legal or commercial position of the
party in receipt of such demand), with any such form or document to be
accurate and completed in a manner reasonably satisfactory to such
other party and to be executed and to be delivered with any reasonably
required certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain
in full force and effect all consents of any governmental or other authority
that are required to be obtained by it with respect to this Agreement or any
Credit Support Document to which it is a party and will use all reasonable
efforts to obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with
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all applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations under
this Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation
made by it under Section 3(f) to be accurate and true promptly upon learning of
such failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organized, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any of the following events constitutes an event of
default (an "Event of Default") with respect to such party:-
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any applicable
grace period has elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction
of all obligations of such party under each Transaction to which
such Credit Support Document relates without the written consent
of the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the
validity of, such Credit Support Document;
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(iv) MISREPRESENTATION. A representation (other than a representation under
Section 3(e) or (f) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however described) in
respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than
this applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on
the due date thereof in an aggregate amount of not less than the
applicable Threshold Amount under such agreements or instruments (after
giving effect to any applicable notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its
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inability generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted against it
a proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other similar
law affecting creditors' rights, or a petition is presented for its
winding-up or liquidation, and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding or
petition (A) results in a judgment of insolvency or bankruptcy or the
entry of an order for relief or the making of an order for its
winding-up or liquidation or (B) is not dismissed, discharged, stayed
or restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes subject
to the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official
for it or for all or substantially all its assets; (7) has a secured
party take possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal process
levied, enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any such
process is not dismissed, discharged, stayed or restrained, in each
case within 30 days thereafter; (8) causes or is subject to any event
with respect to it which, under the applicable laws or any
jurisdiction, has an analogous effect to any of the events specified
in clauses (1) to (7) (inclusive); or (9) takes any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:-
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the
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performance by such resulting, surviving or transferee entity of its
obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified
Entity of such party of any event specified below constitutes an Illegality if
the event is specified in (i) below, a Tax Event, if the event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below,
and, if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the
event is specified pursuant to (v) below:-
(i) ILLEGALITY. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party):-
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect of
such Transaction or to comply with any other material provision of
this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on which
a Transaction is entered into (regardless of whether such action is taken
or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount
in respect of a Indemnifiable Tax under Section 2(d)(i)(4) (except in
respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount is required to be deducted or withhold for or
on account of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid in
respect of such Tax under Section 2(d)(i)(4) (other than by reason of
Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next
succeeding Scheduled Payment Date will either (1) be required to pay an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the
other party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
party consolidating or amalgamating with, or merging with or into, or
transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an
event described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event" is
specified in the Schedule or any Confirmation as applying, the occurrence
of such event (and, in such event, the Affected Party or Affected Parties
shall be as specified for such Additional Termination Event in the
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Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an
Event of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as
an Early Termination Date in respect of all outstanding Transactions. If,
however, "Automatic Early Termination" is specified in the Schedule as applying
to a party, then an Early Termination Date in respect of all outstanding
Transactions will occur immediately upon the occurrence with respect to such
party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6)
or, to the extent analogous thereto, (8), and as of the time immediately
preceding the institution of the relevant proceeding or the presentation of the
relevant petition upon the occurrence with respect to such party of an Event of
Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto,
(8).
(b) RIGHTS TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
occurs and there are two Affected Parties, each party will use all
reasonable efforts to reach agreement within 30 days after notice thereof
is given under Section 6(b)(i) on action to avoid that Termination Event.
(iv) RIGHT TO TERMINATE. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event Upon
Merger occurs and the Burdened Party is not the Affected Party,
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either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a
Tax Event or an Additional Termination Event if there is more than
one Affected Party, or the party which is not the Affected Party in
the case of a Credit Event Upon Merger or an Additional Termination
Event if there is only one Affected Party may, by not more than 20
days notice to the other party and provided that the relevant
Termination Event is then continuing, designate a day not earlier
than the day such notice is effective as an Early Termination Date in
respect of all Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence of effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount,
if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence
of written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such
quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest
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thereon (before as well as after judgment) in the Termination Currency,
from (and including) the relevant Early Termination Date to (but
excluding) the date such amount is paid, at the Applicable Rate. Such
interest will be calculated on the basis of daily compounding and the
actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment
method, either the "First Method" or the "Second Method". If the parties fail
to designate a payment measure or payment method in the Schedule, it will be
deemed that "Market Quotation" or the "Second Method", as the case may be,
shall apply. The amount, if any, payable in respect of an Early Termination
Date and determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default:-
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the sum
of the Settlement Amount (determined by the Non-defaulting Party) in
respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party
over (B) theTermination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this
Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the Non-defaulting Party)
in respect to the Terminated Transactions and theTermination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party
less (B) the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party. If that amount is a positive number,
the Defaulting Party will pay it to the Non-defaulting Party; if it
is a negative number, the Non-defaulting Party will pay the absolute
value of that amount to the Defaulting Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the
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absolute value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:-
(1) ONE AFFECTED PARTY. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and
to the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the
Transactions are being terminated, Loss shall be calculated in
respect of all Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected Parties:-
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal to (I) the sum of (a) one-half
of the difference between the Settlement Amount of the party
with the higher Settlement Amount ("X") and the Settlement
Amount of the party with the lower Settlement Amount ("Y") and
(b) the Termination Currency Equivalent of the Unpaid Amounts
owing to X less (II) the Termination Currency Equivalent of the
Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all Terminated
Transactions) and an amount will be payable equal to one-half of
the difference between the Loss of the party with the higher
Loss ("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to
Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the
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date for payment determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for the loss of bargain
and the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to
any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be
void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement
will be made in the relevant currency specified in this Agreement for that
payment (the "Contractual Currency"). To the extent permitted by applicable
law, any obligation to make payments under this Agreement in the Contractual
Currency will not be discharged or satisfied by any tender in any currency
other than the Contractual Currency, except to the extent such tender results
in the actual receipt by the party to which payment is owed, acting a
reasonable manner and in good faith in converting the currency so tendered into
the Contractual Currency, of the full amount in the Contractual Currency of all
amounts payable in respect of this Agreement. If for any reason the amount in
the Contractual Currency so received falls short of the amount in the
Contractual Currency payable in respect of this Agreement, the party required
to make the payment will, to the extent permitted by applicable law,
immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason the amount in the
Contractual Currency so received exceeds the amount in the Contractual Currency
payable in respect of this Agreement, the party receiving the payment will
refund promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or other actually received by such
party. The term "rate of exchange" includes, without limitation, any premiums
and costs of exchange payable in connection with the purchase of or conversion
into the Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the
party to which any payment is owed and will not be affected by judgment being
obtained or claim or proof being made for any other sums payable in respect of
this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be
sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by
an exchange of telexes or electronic messages on an electronic messaging
system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Section 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
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(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through
its head or home office. This representation will be deemed to be repeated by
such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which is makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a
Transaction will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the
other party for and against all reasonable out-of-pocket expenses, including
legal fees and Stamp Tax, incurred by such other party by reason of the
enforcement and protection of its rights under this Agreement or any Credit
Support Document to which the Defaulting Party is a party or by reason of the
early termination of any Transaction, including, but not limited to, costs of
collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-
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(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an
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inconvenient forum and further waives the right to object, with respect to
such Proceedings, that such court does not have any jurisdiction over such
party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given
in the manner provided for notices in Section 12. Nothing in this Agreement
will affect the right of either party to serve process in any other manner
permitted by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:-
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality,Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person,
any entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control"
of any entity or person means ownership of a majority of the voting power of
the entity or person.
"Applicable Rate" means:-
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
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(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the
date on which the relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified
as such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former
connection between the jurisdiction of the government or taxation authority
imposing such Tax and the recipient of such payment or a person related to such
recipient (including, without limitation, a connection arising from such
recipient or related person being or having been a citizen or resident of such
jurisdiction, or being or having been organised, present or engaged in a trade
or business in such jurisdiction, or having or having had a permanent
establishment or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority)
and "lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section
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5(a)(i), in the city specified in the address for notice provided by the
recipient and, in the case of a notice contemplated by Section 2(b), in the
place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be
its total losses and costs (or gain, in which case expressed as a negative
number) in connection with this Agreement or that Terminated Transaction or
group of Terminated Transactions, as the case may be, including any loss of
bargain, cost of funding or, at the election of such party but without
duplication, loss or cost incurred as a result of its terminating, liquidating,
obtaining or reestablishing any hedge or related trading position (or any gain
resulting from any of them). Loss includes losses and costs (or gains) in
respect of any payment or delivery required to have been made (assuming
satisfaction of each applicable condition precedent) on or before the relevant
Early Termination Date and not made, except, so as to avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a
party's legal fees and out-of-pocket expenses referred to under Section 11. A
party will determine its Loss as of the relevant Early Termination Date, or, if
that is not reasonably practicable, as of the earliest date thereafter as it
reasonably practicable. A party may (but need not) determine its Loss by
reference to quotations of relevant rates or prices from one or more leading
dealers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition
precedent) by the parties under Section 2(a)(i) in respect of such Terminated
Transaction or group of Terminated Transactions that would, but for the
occurrence of the relevant Early Termination Date, have been required after
that date. For this purpose, Unpaid Amounts in respect of the Terminated
Transaction or group of Terminated Transactions are to be excluded but, without
limitation, any payment or delivery that would, but for the relevant Early
Termination Date, have been required (assuming satisfaction of each
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applicable condition precedent) after that Early Termination Date is to be
included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as
of the same day and time (without regard to different time zones) on or as soon
as reasonably practicable after the relevant Early Termination Date. The day
and time as of which those quotations are to be obtained will be selected in
good faith by the party obliged to make a determination under Section 6(e),
and, if each party is so obliged, after consultation with the other. If more
than three quotations are provided, the Market Quotation will be the arithmetic
mean of the quotations, without regard to the quotations having the highest and
lowest values. If exactly three such quotations are provided, the Market
Quotation will be the quotation remaining after disregarding the highest and
lowest quotations. For this purpose, if more than one quotation has the same
highest value or lowest value, then one of such quotations shall be
disregarded. If fewer than three quotations are provided, it will be deemed
that the Market Quotation in respect of such Terminated Transaction or group of
Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding whether to offer or
to make an extension of credit and (b) to the extent practicable, from among
such dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organised, managed and controlled or
considered to have its seat, (b) where an Office through which the party is
acting for purposes of this Agreement is located, (c) in which the party
executes this Agreement and (d) in relation to any payment, from or through
which such payment is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of
retention or withholding or similar right or requirement to which the payer of
an amount under Section 6 is entitled or subject (whether arising under this
Agreement, another contract, applicable law or otherwise) that is exercised by,
or imposed on, such payer.
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"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, import, duty, charge assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (In the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obligated to make a determination under Section 6(e), be selected
in good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to
20
<PAGE> 21
each party (as certified by such party) if it were to fund or of funding such
amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
ROYAL BANK OF CANADA
(Name of Party)
BY: /s/ Karen Haist
-----------------------------
Name: Karen Haist
Title: Manager, Documentation
Date: February 16/96
EOG COMPANY OF CANADA
(Name of Party)
21
<PAGE> 22
BY: /s/ W. C. Wilson
------------------------------
Name: Walter C. Wilson
Title: Senior VP and Chief Financial Officer and Treasurer
Date:
22
<PAGE> 23
SCHEDULE TO MASTER AGREEMENT
(MULTICURRENCY-CROSS BORDER)
dated as of January 16, 1996
ROYAL BANK OF CANADA
("Party A")
and
EOG COMPANY OF CANADA
("Party B")
PART 1
TERMINATION PROVISIONS
In this Master Agreement:
(1) "Specified Entity" does not apply.
(2) "Specified Transaction" will have the meaning specified in Section 14.
(3) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party
A and to Party B.
"Specified Indebtedness" shall mean all obligations (whether present or
future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money and evidenced by bonds, debentures, notes,
guarantees, reimbursement agreements or other similar obligations,
except that such term shall not include obligations in respect of
deposits received in the ordinary course of Party A's banking business.
"Threshold Amount" means, with respect to any party, an amount equal to
USD $50,000,000.
(4) The "Credit Event Upon Merger" provision of Section 5(b)(iv) will not
apply to Party A or to Party B.
(5) The "Automatic Early Termination" provision of Section 6(a) will not
apply to Party A or to Party B.
(6) Payments on Early Termination. For purposes of Section 6(e), Market
Quotation and Second Method will apply.
(7) "Termination Currency" means United States Dollars.
<PAGE> 24
PART 2
TAX REPRESENTATIONS
PAYOR REPRESENTATIONS. For the purpose of Section 3(e), each party
makes the following representation:
It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority of any Relevant
Jurisdiction to make any deduction or withholding for, or on account
of, any Tax from any payment (other than interest under Section 2(e),
Section 6(d)(ii) or Section 6(e)) to be made by it to the other party
under this Master Agreement. In making this representation, it may rely
on: (i) the accuracy of any representation made by the other party
pursuant to Section 3(f); (ii) the satisfaction of the agreement of the
other party contained in Section 4(a)(i) or Section 4(a)(iii) and the
accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or Section 4(a)(iii); and (iii) the
satisfaction of the agreement of the other party contained in Section
4(d), provided that it shall not be a breach of this representation
where reliance is placed on clause (ii) and the other party does not
deliver a form or document under Section 4(a)(iii) by reason of
material prejudice to its legal or commercial position; provided
further, that for the purposes of Section 3(c) of this Master
Agreement, Party A's Payer Representation shall not apply in respect of
Canadian Tax where payments under the Transactions entered pursuant to
this Master Agreement do not have matching or corresponding Scheduled
Payment Dates or where Party A's Scheduled Payment Dates occur more
frequently than Party B's Scheduled Payment Dates.
PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of this Master
Agreement, each of Party A and Party B represent that it is not a non-resident
of Canada.
PART 3
DOCUMENTS TO BE DELIVERED
For the purpose of Section 4(a):
(1) Tax forms, documents or certificates to be delivered are: IRS Form 4224
or Form 1001, as applicable, and any form, certificate or document required or
reasonably requested in writing by either Party A or Party B to allow the other
party to make payments under this Master Agreement without any deduction or
withholding for, or on account of, any Taxes or with such deduction or
withholding at a reduced rate. Such forms, documents or certificates are to be
furnished upon execution of this Master Agreement and thereafter as required by
applicable law. Such forms, documents or certificates, if specified, shall be
governed by the representation contained in Section 3(d) of this Master
Agreement.
<PAGE> 25
(2) Other documents to be delivered are:
(a) Party A shall deliver upon the execution of this Master
Agreement a certificate of its secretary, assistant secretary or other
duly authorized officer certifying the incumbent officers of each who
are authorized to sign this Master Agreement and such Confirmations and
their specimen signatures. Such certificate shall be covered by the
representation contained in Section 3(d) of this Master Agreement.
Party B may conclusively rely upon such certificate until notified to
the contrary by Party A.
(b) Party B shall deliver upon the execution of this Master
Agreement a certificate of its secretary, assistant secretary or other
duly authorized officer certifying (i) resolutions of its board of
directors or other proof of authorizations with respect to its
authority to execute and deliver this Master Agreement and the
Confirmations contemplated hereby and perform its respective
obligations hereunder and thereunder, (ii) the incumbent officers of
each who are authorized to sign this Master Agreement and such
Confirmations and their specimen signatures, (iii) if requested, that
attached thereto are true and complete copies of its charter documents.
Such certificate shall be covered by the representation contained in
Section 3(d) of this Master Agreement. Party A may conclusively rely
upon such certificate until notified to the contrary by Party B.
(c) Each of Party A and Party B shall deliver, promptly upon
written request, such other documents as the other party may reasonably
request in connection with each Transaction. Such documents, if
specified, shall be governed by the representation contained in Section
3(d) of this Master Agreement.
PART 4
MISCELLANEOUS
(1) ADDRESS FOR NOTICES. For the purpose of Section 12(a):
Address for notices or communications to Party A with respect to this
Master Agreement and relating to a particular Transaction concluded
with its Toronto office, shall be given to it at the following address:
Address: Royal Bank of Canada
17th Floor, South Tower
Royal Bank Plaza
200 Bay Street
Toronto, Ontario
CANADA M5J 2J5
Attention: Manager, Capital Market
Products Operations
<PAGE> 26
Telex No.: 06-217897 Answerback: ROYSWAP TOR
Facsimile No.: (416) 974-7043 or 574-5635
Electronic Messaging System Details: Not Applicable
Address for notices or communications to Party A relating to a
particular Transaction concluded with its Tokyo Office, shall be given
to it at the following address:
Address: Royal Bank of Canada
Treasury Department
12th Floor, Hibiya Kokusai Bldg.
2-3 Uchisaiwaicho, 2-chome
Chlyoda-ku, Tokyo 100
JAPAN
Attention: Manager, Capital Markets
Telex: J26636 Answerback: ROYALTK
Facsimile No.: (03) 3508-2507
Address for notices or communications to Party A relating to a particular
Transaction concluded with its London office, shall be given to it at the
following address:
Address: Royal Bank of Canada
71/71A Queen Victoria Street
London EC4V 4DE
ENGLAND
Attention: Derivative Product Operation
Telex: 92 6933 Answerback: RBCSWP G
Facsimile No.: 44-171-329-6156
Address for notices or communications to Party A relating to a
particular Transaction concluded with its New York Office, shall be
given to it at the following address:
Address: Royal Bank of Canada
New York Branch
Financial Square
New York, New York
10005-3531
U.S.A.
<PAGE> 27
Attention: Investment Banking & Treasury- Swaps
Telex: 420464 Answerback: RBOC
Facsimile No.: 212-968-1314
Address for notices or communications to Party A relating to a
particular Transaction concluded with its Singapore Office, shall be
given to it at the following address:
Address: Royal Bank of Canada
140 Cecil Street
#01-00
PIL Building
Singapore 0106
Republic of Singapore
Attention: Head, Treasury Operations, Asia
Telex: RS 29338 Answerback: ROYSPO
Facsimile: 65-224-0185
Address for notices or communications (other than with respect to
payments) to Party B:
EOG Company of Canada
c/o Enron Oil & Gas Company
1400 Smith Street
Suite 4341
Houston, Texas 77002
Attn: Assistant Treasurer - Corporate Treasury
Facsimile No: (713) 646-2375
(2) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation relating to the relevant Transaction.
(3) CREDIT SUPPORT DOCUMENT. Guaranty of Enron Oil & Gas Company dated of
even date herewith in favor of Party A.
(4) CREDIT SUPPORT PROVIDER. With respect to Party A, none; and with
respect to Party B, Enron Oil & Gas Company.
(5) GOVERNING LAW. THIS MASTER AGREEMENT (INCLUDING, BUT NOT LIMITED TO,
THE VALIDITY AND ENFORCEABILITY HEREOF) WILL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, OTHER
THAN THE CONFLICT OF LAWS RULES THEREOF.
<PAGE> 28
(6) NETTING OF PAYMENTS. From the date hereof, Subparagraph (ii) of Section
2(c) will apply to each Transaction unless specified in the relevant
Confirmation.
(7) MULTIBRANCH PARTIES; OFFICES.
(a) OFFICES. The provisions of Section 10(a) will apply to Party A and
Party B; provided, however, that without in any way limiting the effect
of the foregoing, each party agrees to deal first with the office of
the other party specified in the Confirmation rather than such party's
head or home office with respect to resolving any default that results
solely from wire transfer difficulties or an error or omission of an
administrative or operational nature. Notwithstanding the foregoing, a
party (the "Owed Party") may seek payment from the head or home office
of the other party (the "Owing Party") with respect to this Master
Agreement in the event that an amount payable to the Owed Party by the
Owing Party pursuant to this Master Agreement as a result of the
designation of an Early Termination Date has not been said in full when
due.
(b) MULTI-BRANCH. For the purpose of Section 10(c) of this Master
Agreement:
Party A is a Multibranch Party and may act through its Toronto, New
York, Tokyo, London and Singapore offices.
Party B is not a Multi-branch Party.
(8) PROCESS AGENT. There shall be no Process Agent for either Party A or
Party B.
PART 5
OTHER PROVISIONS
(1) DEFINITIONS. This Master Agreement incorporates, and is subject to and
governed by, unless otherwise specified in a Confirmation, the 1991
ISDA Definitions (the "1991 Definitions"), and the 1992 ISDA FX and
Currency Option Definitions (the "FX Definitions"), in each case
published by the International Swap and Derivatives Association, Inc.
(formerly known as the International Swap Dealers Association, Inc.).
In the event of any inconsistency between this Master Agreement, the
1991 Definitions or the FX Definitions, this Master Agreement will
prevail. In the event of any inconsistency between the provisions of
any Confirmation and this Master Agreement, the 1991 Definitions or the
FX Definitions, such Confirmation will prevail for the purpose of the
relevant Transaction. In the event of any inconsistency between the
provisions of the 1991 Definitions and the FX Definitions, the FX
Definitions will prevail.
(2) CONFIRMATIONS; RECORDINGS. With respect to each Transaction, Party A
shall on or promptly after the Trade Date send Party B a Confirmation,
via facsimile transmission, which shall be promptly acknowledged by
Party B. Subject to the terms of Section 9(e)(ii), the failure by Party
B to acknowledge receipt or affirm a Confirmation shall not
<PAGE> 29
constitute an acceptance or affirmation of the terms thereof. Each
party (i) consents to the recording of the telephone conversations of
trading and marketing personnel of the parties and their Affiliates in
connection with this Master Agreement or any potential Transaction and
(ii) agrees to obtain any necessary consent of, and give notice of such
recording to, such personnel of it and its Affiliates. Such record of
telephone conversations may be used as evidence of any Transaction in
any proceeding.
(3) CROSS DEFAULT. The words ", or becoming capable at such time of being
declared," as they appear after the word "becoming" and before the word
"due" in the seventh line of Section 5(a)(vi) are deleted.
(4) BANKRUPTCY. For purposes of this Master Agreement, Section 5(a)(vii) is
hereby modified by deleting the number "30" as it appears after the
word "within" and before the word "days" in the tenth and eighteenth
lines thereof and inserting the number "60" in place thereof.
(5) ILLEGALITY. For purposes of Section 5(b)(i), the obligation of Party A
to comply with any official directive issued or given by any government
agency or authority having competent jurisdiction which has the result
referred to in Section 5(b)(i) will be deemed to be an "Illegality".
(6) TAX EVENT. Section 5(b)(ii) is amended by deleting the words ", or
there is a substantial likelihood that it will" from the fourth line
thereof.
(7) SET-OFF. Section 6 of the Master Agreement is amended by adding the
following new subsection 6(f):
(f) Notwithstanding anything to the contrary contained in this
Master Agreement, in the event of a designation of an Early Termination
Date as a result of an Event of Default or a Termination Event, if the
Defaulting Party or the Affected Party would be owed amounts under this
Master Agreement in respect of the Terminated Transactions as a result
of such designation, the Non-defaulting Party or the non-Affected Party
shall be entitled, at its option, to set off any obligations owed
(whether or not then due, in U.S. Dollars or any other currency) by the
Defaulting Party or Affected Party to the Non-defaulting Party or
non-Affected Party (including any of its offices or branches) under
this Master Agreement or another Specified Transaction, against the
amounts owed by the Non-defaulting Party or the non-Affected Party to
the Defaulting Party or the Affected Party or any Credit Support
Provider or any Specified Entity of such party under this Master
Agreement or another Specified Transaction. The obligation of the
Non-defaulting Party or the non-Affected Party hereunder in respect of
such Terminated Transactions shall be deemed satisfied and discharged
to the extent of any such setoff. Any obligation of the Non-defaulting
Party or the non-Affected Party to make any payment to a Defaulting
Party or the Affected Party hereunder shall in any event be conditioned
upon and shall arise only upon the date of the payment (by setoff, by
cash payment or otherwise) in full by the
<PAGE> 30
Defaulting Party or the Affected Party or any Credit Support Provider
or any Specified Entity of such party of all obligations then due and
owing hereunder or under another Specified Transaction by the
Defaulting Party or the Affected Party or any Credit Support Provider
or any Specified Entity of such party to the Non-defaulting Party or
the non-Affected Party (including any of its offices or branches).
(8) BUSINESS PURPOSE REPRESENTATION. Party A represents that it has entered
into this Master Agreement (including each Transaction now or hereafter
entered into in connection herewith) in conjunction with its line of
business, including financial intermediation, or the financing of its
business and not for speculative purposes. Party B represents and
warrants that it has entered into this Master Agreement (including each
Transaction now or hereafter entered into in connection herewith) to
hedge its actual or expected exposure to changes in currency exchange
rates and/or interest rates or for other normal business purposes
independent of this Master Agreement, and not for speculative purposes.
Each party represents that it is an "eligible swap participant" for
purposes of the exemption of swap agreements (17 C.F.R. Section 35.2),
as in the case of Party A, a bank acting on its own behalf, and, in the
case of Party B, a corporation that meets the requirements further set
forth in 17 C.F.R. Section 35.1(2)(vi).
(9) SUITABILITY REPRESENTATION. Each party represents that in entering into
this Master Agreement and each Transaction: (i) it understands and
acknowledges that the other party has been and will be acting only on
an arm's length basis and not as its agent, fiduciary, broker or
advisor in any respect, (ii) it is relying solely upon its own
evaluation of this Master Agreement and any Transaction (including the
present and future results, consequences, risks and benefits thereof,
whether financial, accounting, tax, legal or otherwise) and upon advice
from its own professional advisors, (iii) it understands this Master
Agreement and the Transactions contemplated hereby and the risks
associated therewith, has determined that those risks are appropriate
for it, and is willing to assume those risks, and (iv) it has not
relied and will not be relying upon any evaluation or advice (including
any recommendation, opinion or representation) from the other party or
its Affiliates or the representatives or advisors of the other party or
its Affiliates.
(10) ENTIRE AGREEMENT. THIS MASTER AGREEMENT AND EACH OF THE CONFIRMATIONS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
(11) SUBMISSION TO JURISDICTION. The provisions of Section 13(b) are hereby
deleted in their entirety and inserted in lieu thereof, the following:
"(b) JURISDICTION. With respect to any suit, action or
proceedings relating to this Master Agreement ("Proceedings"), neither
party waives any objection which it may have at any time to the laying
of venue of any Proceedings
<PAGE> 31
brought in any such court, waives any claim that such Proceedings have
been brought in an inconvenient forum or waives the right to object,
with respect to such Proceedings, that such court does not have any
jurisdiction over such party.
Nothing in this Master Agreement precludes either party from
bringing Proceedings in any jurisdiction nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction."
(12) LIMITATION OF RATE. In no event shall the Default Rate, Non-default
Rate or the Termination Rate be permitted to exceed the Highest Lawful
Rate. For purposes hereof, "Highest Lawful Rate" shall mean, with
respect to each party hereto, 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 subject indebtedness under
the laws applicable to such party which are presently in effect or, to
the extent allowed by law, which under such applicable laws may
hereafter be in effect and which allow a higher maximum nonusurious
interest rate than applicable laws now allow.
(13) APPLICATION OF UNIFORM COMMERCIAL CODE. The parties agree that to the
fullest extent permitted by applicable law, Section 2-609 of the New
York Uniform Commercial Code and any equivalent rights existing at
common law shall not apply to this Master Agreement or any Transaction.
(14) EQUIVALENCY CLAUSE. For the purposes of the Interest Act (Canada) and
disclosure thereunder, whenever any interest is made payable under this
Master Agreement at any rate or percentage for or based on a period of
three hundred sixty days (360), the yearly rate or percentage of
interest to which such rate or percentage of interest is equivalent is
the rate or percentage stipulated herein multiplied by the actual
number of days in a period of one (1) year divided by three hundred
sixty (360). The foregoing sentence is for disclosure purposes only and
shall not otherwise affect the terms of this Master Agreement as set
forth herein.
(15) MATCHING PAYMENTS. The parties agree and confirm that Transactions
entered into pursuant to this Master Agreement either shall have
matching or corresponding Scheduled Payment Dates or shall have Party
A's Scheduled Payment Dates occurring more frequently than Party B's
Scheduled Payment Dates. If, despite the foregoing, a Transaction is
entered into other than as above, the parties shall make (i) such
amendments to this Master Agreement; (ii) include such provisions in
the Confirmation for such Transaction; or (iii) enter into such other
arrangements, as may reasonably be necessary to give effect to such
Transaction pursuant to this Master Agreement.
<PAGE> 1
EXHIBIT 10.67
ISDA
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as ofJanuary 16, 1996
ROYAL BANK OF CANADA and ENRON OIL & GAS COMPANY have entered and/or anticipate
entering into one or more transactions (each a "Transaction") that are or will
be governed by this Master Agreement, which includes the schedule (the
"Schedule"), and the documents and other confirming evidence (each a
"Confirmation") exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows:-
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this
Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value on
that date in the place of the account specified in the relevant Confirmation
or otherwise pursuant to this Agreement, in freely transferable funds and in
the manner customary for payments in the required currency. Where settlement
is by delivery (that is, other than by
1
<PAGE> 2
payment), such delivery will be made for receipt on the due date in the
manner customary for the relevant obligation unless otherwise specified in
the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing, (2)
the condition precedent that no Early Termination Date in respect of the
relevant Transaction has occurred or been effectively designated and (3)
each other applicable condition precedent specified in this Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to
which such change applies unless such other party gives timely notice of a
reasonable objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in the respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS UP. All payments under this Agreement will be made without
deduction or
<PAGE> 3
withholding for or on account of any Tax unless such deduction or
withholding is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that
party ("X") will:--
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount required
to be deducted or withheld (including the full amount required
to be deducted or withheld from any additional amount paid by
X to Y under this Section 2(d)) promptly upon the earlier of
determining that such deduction or withholding is required or
receiving notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition
to the payment to which Y is otherwise entitled under this
Agreement, such additional amount as is necessary to ensure
that the net amount actually received by Y (free and clear of
Indemnifiable Taxes, whether assessed against X or Y) will
equal the full amount Y would have received had no such
deduction or withholding been required. However, X will not be
required to pay any additional amount to Y to the extent that
it would not be required to be paid but for:--
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d); or
(B) the failure of a representation made by Y
pursuant to Section 3(f) to be accurate and true
unless such failure would not have occurred but for
(I) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or
after the date on which a Transaction is entered into
(regardless of whether such action is taken or
brought with respect to a party to this Agreement) or
(II) a Change in Tax Law.
(ii) LIABILITY. If:--
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to
make any deduction or withholding in respect of which X would
not be required to pay an additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or
2
<PAGE> 4
effective designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment obligation
will, to the extent permitted by law and subject to Section 6(c), be required to
pay interest (before as well as after judgment) on the overdue amount to the
other party on demand in the same currency as such overdue amount, for the
period from (and including) the original due date for payment to (but excluding)
the date of actual payment, at the Default Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. If, prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party defaults in the
performance of any obligation required to be settled by delivery, it will
compensate the other party on demand if and to the extent provided for in the
relevant Confirmation or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:-
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that
it is required by this Agreement to deliver and to perform its obligations
under this Agreement and any obligations it has under any Credit Support
Document to which it is a party and has taken all necessary action to
authorise such execution, delivery and performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do
not violate or conflict with any law applicable to it, any provision of its
constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with; and
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(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding in
equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3 (d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purposes of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to
allow such other party or its Credit Support Provider to make a payment
under this Agreement or any applicable Credit Support Document without
any deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and
to be executed and to be delivered with any reasonably required
certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with
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all applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organized, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:-
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
notice of a Termination Event or any agreement or obligation under Section
4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
in accordance with this Agreement if such failure is not remedied on or
before the thirtieth day after notice of such failure is given to the
party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such party
to comply with or perform any agreement or obligation to be complied
with or performed by it in accordance with any Credit Support Document
if such failure is continuing after any applicable grace period has
elapsed;
(2) the expiration or termination of such Credit Support Document or
the failing or ceasing of such Credit Support Document to be in full
force and effect for the purpose of this Agreement (in either case
other than in accordance with its terms) prior to the satisfaction
of all obligations of such party under each Transaction to which
such Credit Support Document relates without the written consent
of the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the validity
of, such Credit Support Document;
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(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f) made or repeated or deemed to have been made or
repeated by the party or any Credit Support Provider of such party in this
Agreement or any Credit Support Document proves to have been incorrect or
misleading in any material respect when made or repeated or deemed to have
been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party (1)
defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however described) in
respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them (individually
or collectively) in an aggregate amount of not less than this applicable
Threshold Amount (as specified in the Schedule) which has resulted in such
Specified Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments, before it
would otherwise have been due and payable or (2) a default by such party,
such Credit Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date thereof in an
aggregate amount of not less than the applicable Threshold Amount under
such agreements or instruments (after giving effect to any applicable
notice requirement or grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:-
(1) is dissolved (other than pursuant to a consolidation, amalgamation
or merger); (2) becomes insolvent or is unable to pay its debts or
fails or admits in writing its
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inability generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the benefit
of its creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other
relief under any bankruptcy or insolvency law or other similar law
affecting creditors' rights, or a petition is presented for its
winding-up or liquidation, and, in the case of any such proceeding or
petition instituted or presented against it, such proceeding or
petition (A) results in a judgment of insolvency or bankruptcy or the
entry of an order for relief or the making of an order for its
winding-up or liquidation or (B) is not dismissed, discharged, stayed
or restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes subject
to the appointment of an administrator, provisional liquidator,
conservator, receiver, trustee, custodian or other similar official
for it or for all or substantially all its assets; (7) has a secured
party take possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal process
levied, enforced or sued on or against all or substantially all its
assets and such secured party maintains possession, or any such
process is not dismissed, discharged, stayed or restrained, in each
case within 30 days thereafter; (8) causes or is subject to any event
with respect to it which, under the applicable laws or any
jurisdiction, has an analogous effect to any of the events specified
in clauses (1) to (7) (inclusive); or (9) takes any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:-
(1) the resulting, surviving or transferee entity fails to assume all
the obligations of such party or such Credit Support Provider under
this Agreement or any Credit Support Document to which it or its
predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the
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performance by such resulting, surviving or transferee entity of
its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event, if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below:-
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered into,
or due to the promulgation of, or any change in, the interpretation by
any court, tribunal or regulatory authority with competent
jurisdiction of any applicable law after such date, it becomes
unlawful (other than as a result of a breach by the party of Section
4(b)) for such party (which will be the Affected Party):-
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material
provision of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party
(or such Credit Support Provider) has under any Credit Support
Document relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action
is taken or brought with respect to a party to this Agreement) or (y)
a Change in Tax Law, the party (which will be the Affected Party)
will, or there is a substantial likelihood that it will, on the next
succeeding Scheduled Payment Date (1) be required to pay to the other
party an additional amount in respect of a Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is
required to be deducted or withhold for or on account of a Tax (except
in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no
additional amount is required to be paid in respect of such Tax under
Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or
(B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has
been deducted or withheld for or on account of any Indemnifiable Tax
in respect of which the other party is not required to pay an
additional amount (other than by reason of Section 2(d)(i)(4)(A) or
(B)), in either case as a result of a party consolidating or
amalgamating with, or merging with or into, or transferring all or
substantially all its assets to, another entity (which will be the
Affected Party) where such action does not constitute an event
described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of
X consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and
such action does not constitute an event described in Section
5(a)(viii) but the creditworthiness of the resulting, surviving or
transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be,
immediately prior to such action (and, in such event, X or its
successor or transferee, as appropriate, will be the Affected Party);
or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination
Event" is specified in the Schedule or any Confirmation as applying,
the occurrence of such event (and, in such event, the Affected Party
or Affected Parties shall be as specified for such Additional
Termination Event in the
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Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHTS TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will, promptly
upon becoming aware of it, notify the other party, specifying the nature of
that Termination Event and each Affected Transaction and will also give such
other information about that Termination Event as the other party may
reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
Affected Party, the Affected Party will, as a condition to its right to
designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under
this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days after
the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to
and conditional upon the prior written consent of the other party, which
consent will not be withheld if such other party's policies in effect at
such time would permit it to enter into transactions with the transferee on
the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) occurs
and there are two Affected Parties, each party will use all reasonable
efforts to reach agreement within 30 days after notice thereof is given
under Section 6(b)(i) on action to avoid that Termination Event.
(iv) RIGHT TO TERMINATE. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under Section
6(b)(iii), as the case may be, has not been effected with respect to
all Affected Transactions within 30 days after an Affected Party gives
notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger
or an Additional Termination Event occurs, or a Tax Event Upon Merger
occurs and the Burdened Party is not the Affected Party,
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either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a
Tax Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event
if there is only one Affected Party may, by not more than 20 days
notice to the other party and provided that the relevant Termination
Event is then continuing, designate a day not earlier than the day such
notice is effective as an Early Termination Date in respect of all
Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under Section
6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence of effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount, if
any, payable in respect of an Early Termination Date shall be determined
pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in determining
a Market Quotation, the records of the party obtaining such quotation will
be conclusive evidence of the existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any Early
Termination Date under Section 6(e) will be payable on the day that notice
of the amount payable is effective (in the case of an Early Termination Date
which is designated or occurs as a result of an Event of Default) and on the
day which is two Local Business Days after the day on which notice of the
amount payable is effective (in the case of an Early Termination Date which
is designated as a result of a Termination Event). Such amount will be paid
together with (to the extent permitted under applicable law) interest
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thereon (before as well as after judgment) in the Termination Currency, from
(and including) the relevant Early Termination Date to (but excluding) the
date such amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event
of Default:-
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method and Market
Quotation apply, the Defaulting Party will pay to the Non-defaulting
Party the excess, if a positive number, of (A) the sum of the
Settlement Amount (determined by the Non-defaulting Party) in respect
of the Terminated Transactions and the Termination Currency Equivalent
of the Unpaid Amounts owing to the Non-defaulting Party over (B)
theTermination Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and Market
Quotation apply, an amount will be payable equal to (A) the sum of the
Settlement Amount (determined by the Non-defaulting Party) in respect
to the Terminated Transactions and theTermination Currency Equivalent
of the Unpaid Amounts owing to the Non-defaulting Party less (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party. If that amount is a positive number, the Defaulting
Party will pay it to the Non-defaulting Party; if it is a negative
number, the Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the
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absolute value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event:-
(1) ONE AFFECTED PARTY. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and
to the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the
Transactions are being terminated, Loss shall be calculated in
respect of all Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected Parties:-
(A) if Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions, and
an amount will be payable equal to (I) the sum of (a) one-half of
the difference between the Settlement Amount of the party with
the higher Settlement Amount ("X") and the Settlement Amount of
the party with the lower Settlement Amount ("Y") and (b) the
Termination Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the Unpaid
Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the Transactions
are being terminated, in respect of all Terminated Transactions)
and an amount will be payable equal to one-half of the difference
between the Loss of the party with the higher Loss ("X") and the
Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it
is a negative number, X will pay the absolute value of that amount to
Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be
subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under
this Agreement (and retained by such other party) during the period from
the relevant Early Termination Date to the
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date for payment determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate of
loss and not a penalty. Such amount is payable for the loss of bargain and
the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:-
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its
interest in any amount payable to it from a Defaulting Party
under Section 6(e).
Any purported transfer that is not in compliance with this
Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting a reasonable manner and in
good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party
seeking recovery, after recovery in full of the aggregate amount to which such
party is entitled pursuant to the judgment or order, will be entitled to
receive immediately from the other party the amount of any shortfall of the
Contractual Currency received by such party as consequence of sums paid in such
other currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or other actually received by such
party. The term "rate of exchange" includes, without limitation, any premiums
and costs of exchange payable in connection with the purchase of or conversion
into the Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Section 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers remedies and privileges provided in this Agreement are cumulative and not
exclusive of any rights, powers, remedies and privileges provided by law.
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<PAGE> 15
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by facsimile
transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable and
may be executed and delivered in counterparts (including by facsimile
transmission) or created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to this
Agreement. The parties will specify therein or through another effective
means that any such counterpart, telex or electronic message constitutes a
Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which is makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the
enforcement and protection of its rights under this Agreement or any Credit
Support Document to which the Defaulting Party is a party or by reason of the
early termination of any Transaction, including, but not limited to, costs of
collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-
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<PAGE> 16
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this Agreement is
expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an
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<PAGE> 17
inconvenient forum and further waives the right to object, with respect to
such Proceedings, that such court does not have any jurisdiction over such
party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given in
the manner provided for notices in Section 12. Nothing in this Agreement will
affect the right of either party to serve process in any other manner permitted
by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:-
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality,Tax Event or Tax Event Upon Merger, all Transactions
affected by the occurrence of such Termination Event and (b) with respect to any
other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person,
any entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:-
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
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<PAGE> 18
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section
5(b).
"Credit Support Document" means any agreement or instrument that is specified
as such in this Agreement.
"Credit Support Provider" has the meaning specified in the
Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"law" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section
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<PAGE> 19
5(a)(i), in the city specified in the address for notice provided by the
recipient and, in the case of a notice contemplated by Section 2(b), in the
place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as it reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each
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<PAGE> 20
applicable condition precedent) after that Early Termination Date is to be
included. The Replacement Transaction would be subject to such documentation as
such party and the Reference Market-maker may, in good faith, agree. The party
making the determination (or its agent) will request each Reference Market-maker
to provide its quotation to the extent reasonably practicable as of the same day
and time (without regard to different time zones) on or as soon as reasonably
practicable after the relevant Early Termination Date. The day and time as of
which those quotations are to be obtained will be selected in good faith by the
party obliged to make a determination under Section 6(e), and, if each party is
so obliged, after consultation with the other. If more than three quotations are
provided, the Market Quotation will be the arithmetic mean of the quotations,
without regard to the quotations having the highest and lowest values. If
exactly three such quotations are provided, the Market Quotation will be the
quotation remaining after disregarding the highest and lowest quotations. For
this purpose, if more than one quotation has the same highest value or lowest
value, then one of such quotations shall be disregarded. If fewer than three
quotations are provided, it will be deemed that the Market Quotation in respect
of such Terminated Transaction or group of Terminated Transactions cannot be
determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or
home office.
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of
retention or withholding or similar right or requirement to which the payer of
an amount under Section 6 is entitled or subject (whether arising under this
Agreement, another contract, applicable law or otherwise) that is exercised by,
or imposed on, such payer.
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"Settlement Amount" means, with respect to a party and any Early
Termination Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
"Tax" means any present or future tax, levy, import, duty, charge assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section
5(b).
"Terminated Transactions" means with respect to any Early Termination
Date (a) if resulting from a Termination Event, all Affected Transactions and
(b) if resulting from an Event of Default, all Transactions (in either case) in
effect immediately before the effectiveness of the notice designating that
Early Termination Date (or, if "Automatic Early Termination" applies,
immediately before that Early Termination Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (In the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obligated to make a determination under Section 6(e), be selected
in good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to
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<PAGE> 22
each party (as certified by such party) if it were to fund or of funding such
amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
ROYAL BANK OF CANADA
(Name of Party)
BY: /s/ Karen Haist
---------------
Name: Karen Haist
Title: Manager, Documentation
Date: January 16/96
ENRON OIL & GAS COMPANY
(Name of Party)
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BY: /s/Ben B. Boyd
--------------
Name: Ben B. Boyd
Title: Vice President and Controller
Date:
22
<PAGE> 24
SCHEDULE TO MASTER AGREEMENT
(MULTICURRENCY-CROSS BORDER)
dated as of January 16, 1996
ROYAL BANK OF CANADA
("Party A")
and
ENRON OIL & GAS COMPANY
("Party B")
PART 1
TERMINATION PROVISIONS
In this Master Agreement:
(1) "Specified Entity" in relation to Party A shall not apply, and, in
relation to Party B, shall mean for the purpose of:
Section 5(a)(v): EOG Company of Canada.
Section 5(a)(vi): EOG Company of Canada.
Section 5(a)(vii): EOG Company of Canada.
Section 5(b)(iv): EOG Company of Canada.
(2) "Specified Transaction" will have the meaning specified in Section 14.
(3) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party
A and to Party B.
"Specified Indebtedness" shall mean all obligations (whether present or
future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money and evidenced by bonds, debentures, notes,
guarantees, reimbursement agreements or other similar obligations,
except that such term shall not include obligations in respect of
deposits received in the ordinary course of Party A's banking business.
"Threshold Amount" means, with respect to any party, an amount equal to
USD $50,000,000.
(4) The "Credit Event Upon Merger" provision of Section 5(b)(iv) will not
apply to Party A or to Party B.
(5) The "Automatic Early Termination" provision of Section 6(a) will not
apply to Party A or to Party B.
<PAGE> 25
(6) Payments on Early Termination. For purposes of Section
6(e), Market Quotation and Second Method will apply.
(7) "Termination Currency" means United States Dollars.
PART 2
TAX REPRESENTATIONS
PAYOR REPRESENTATIONS. For the purpose of Section 3(e), each party
makes the following representation:
It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority of any Relevant
Jurisdiction to make any deduction or withholding for, or on account
of, any Tax from any payment (other than interest under Section 2(e),
Section 6(d)(ii) or Section 6(e)) to be made by it to the other party
under this Master Agreement. In making this representation, it may rely
on: (i) the accuracy of any representation made by the other party
pursuant to Section 3(f); (ii) the satisfaction of the agreement of the
other party contained in Section 4(a)(i) or Section 4(a)(iii) and the
accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or Section 4(a)(iii); and (iii) the
satisfaction of the agreement of the other party contained in Section
4(d), provided that it shall not be a breach of this representation
where reliance is placed on clause (ii) and the other party does not
deliver a form or document under Section 4(a)(iii) by reason of
material prejudice to its legal or commercial position; provided
further, that for the purposes of Section 3(c) of this Master
Agreement, Party A's Payer Representation shall not apply in respect of
Canadian Tax where payments under the Transactions entered pursuant to
this Master Agreement do not have matching or corresponding Scheduled
Payment Dates or where Party A's Scheduled Payment Dates occur more
frequently than Party B's Scheduled Payment Dates.
PAYEE REPRESENTATIONS. For the purpose of Section 3(f) of this Master
Agreement, Party A and Party B make the representations specified below, if any:
(i) The following representation will apply to Party A and
will apply to Party B:
It is fully eligible for the benefits of the "Business Profits" or
"Industrial and Commercial Profits" provision, as the case may be, the
"Interest" provision or the "Other Income" provision (if any) of the
Specified Treaty with respect to any payment described in such
provisions and received or to be received by it in connection with this
Master Agreement and no such payment is attributable to a trade or
business carried on by it through a permanent establishment in the
Specified Jurisdiction.
For the purposes of such representation:
"SPECIFIED TREATY" means, with respect to Party A, the income tax convention or
treaty, if any,
<PAGE> 26
between the Government of Canada and the Government of the United States of
America.
"SPECIFIED JURISDICTION" means, with respect to Party A, the United States of
America.
"SPECIFIED TREATY" means, with respect to Party B, the income tax convention or
treaty, if any, between the Government of the United States of America and the
Government of the jurisdiction in which Party A's office located for the purpose
of the relevant Transaction.
"SPECIFIED JURISDICTION" means, with respect to Party B, the country in which
the office through which Party A is acting for the purpose of the relevant
Transaction is located.
(ii) The following representation will apply to Party A when acting out
of its New York office and will apply to Party B:
Each payment received or to be received by it in connection with this
Master Agreement will be effectively connected with its conduct of a
trade or business in the Specified Jurisdiction.
For purposes of such representation:
"SPECIFIED JURISDICTION" means, with respect to Party A and Party B, the United
States of America.
(iii) The following representation will apply to Party A when acting
out of its London office and will not apply to Party B:
(A) It is entering into each Transaction in the ordinary course of its
trade as, and is, is either (1) a recognized U.K. bank or (2) a
recognized U.K. swaps dealer (in either case (1) or (2), for purposes
of the United Kingdom Inland Revenue extra statutory concession C17 on
interest and currency swaps dated March 14, 1989), and (B) it will
bring into account payments made and received in respect of each
Transaction in computing its income for United Kingdom tax purposes.
PART 3
DOCUMENTS TO BE DELIVERED
For the purpose of Section 4(a):
(1) Tax forms, documents or certificates to be delivered are: IRS Form 4224
or Form 1001, as applicable, and any form, certificate or document required or
reasonably requested in writing by either Party A or Party B to allow the other
party to make payments under this Master Agreement without any deduction or
withholding for, or on account of, any Taxes or with such deduction or
withholding at a reduced rate. Such forms, documents or certificates are to be
furnished upon execution of this Master Agreement and thereafter as required by
applicable law. Such forms, documents or certificates, if specified, shall be
governed by the representation
<PAGE> 27
contained in Section 3(d) of this Master Agreement.
(2) Other documents to be delivered are:
(a) Party A shall deliver upon the execution of this Master
Agreement a certificate of its secretary, assistant secretary or other
duly authorized officer certifying the incumbent officers of each who
are authorized to sign this Master Agreement and such Confirmations and
their specimen signatures. Such certificate shall be covered by the
representation contained in Section 3(d) of this Master Agreement.
Party B may conclusively rely upon such certificate until notified to
the contrary by Party A.
(b) Party B shall deliver upon the execution of this Master
Agreement a certificate of its secretary, assistant secretary or other
duly authorized officer certifying (i) resolutions of its board of
directors or other proof of authorizations with respect to its
authority to execute and deliver this Master Agreement and the
Confirmations contemplated hereby and perform its respective
obligations hereunder and thereunder, (ii) the incumbent officers of
each who are authorized to sign this Master Agreement and such
Confirmations and their specimen signatures, (iii) if requested, that
attached thereto are true and complete copies of its charter documents.
Such certificate shall be covered by the representation contained in
Section 3(d) of this Master Agreement. Party A may conclusively rely
upon such certificate until notified to the contrary by Party B.
(c) Each of Party A and Party B shall deliver, promptly upon
written request, such other documents as the other party may reasonably
request in connection with each Transaction. Such documents, if
specified, shall be governed by the representation contained in Section
3(d) of this Master Agreement.
PART 4
MISCELLANEOUS
(1) ADDRESS FOR NOTICES. For the purpose of Section 12(a):
Address for notices or communications to Party A with respect to this
Master Agreement and relating to a particular Transaction concluded
with its Toronto office, shall be given to it at the following address:
Address: Royal Bank of Canada
17th Floor, South Tower
Royal Bank Plaza
200 Bay Street
Toronto, Ontario
CANADA M5J 2J5
Attention: Manager, Capital Market
<PAGE> 28
Products Operations
Telex No.: 06-217897 Answerback: ROYSWAP TOR
Facsimile No.: (416) 974-7043 or 574-5635
Electronic Messaging System Details: Not Applicable
Address for notices or communications to Party A relating to a
particular Transaction concluded with its Tokyo Office, shall be given
to it at the following address:
Address: Royal Bank of Canada
Treasury Department
12th Floor, Hibiya Kokusai Bldg.
2-3 Uchisaiwaicho, 2-chome
Chlyoda-ku, Tokyo 100
JAPAN
Attention: Manager, Capital Markets
Telex: J26636 Answerback: ROYALTK
Facsimile No.: (03) 3508-2507
Address for notices or communications to Party A relating to a particular
Transaction concluded with its London office, shall be given to it at the
following address:
Address: Royal Bank of Canada
71/71A Queen Victoria Street
London EC4V 4DE
ENGLAND
Attention: Derivative Product Operation
Telex: 92 6933 Answerback: RBCSWP G
Facsimile No.: 44-171-329-6156
Address for notices or communications to Party A relating to a
particular Transaction concluded with its New York Office, shall be
given to it at the following address:
<PAGE> 29
Address: Royal Bank of Canada
New York Branch
Financial Square
New York, New York
10005-3531
U.S.A.
Attention: Investment Banking & Treasury-Swaps
Telex: 420464 Answerback: RBOC
Facsimile No.: 212-968-1314
Address for notices or communications to Party A relating to a
particular Transaction concluded with its Singapore Office, shall be
given to it at the following address:
Address: Royal Bank of Canada
140 Cecil Street
#01-00
PIL Building
Singapore 0106
Republic of Singapore
Attention: Head, Treasury Operations, Asia
Telex: RS 29338 Answerback: ROYSPO
Facsimile: 65-224-0185
Address for notices or communications (other than with respect to
payments) to Party B:
Enron Oil & Gas Company
1400 Smith Street
Suite 4341
Houston, Texas 77002
Attn: Assistant Treasurer - Corporate Treasury
Facsimile No: (713) 646-2375
(2) CALCULATION AGENT. The Calculation Agent is Party A, unless
otherwise specified in a Confirmation relating to the relevant
Transaction.
(3) CREDIT SUPPORT DOCUMENT. There shall be no Credit Support
Documents.
(4) CREDIT SUPPORT PROVIDER. Credit Support Provider shall not
apply
<PAGE> 30
(5) GOVERNING LAW. THIS MASTER AGREEMENT (INCLUDING, BUT NOT LIMITED TO,
THE VALIDITY AND ENFORCEABILITY HEREOF) WILL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, OTHER
THAN THE CONFLICT OF LAWS RULES THEREOF.
(6) NETTING OF PAYMENTS. From the date hereof, Subparagraph (ii) of Section
2(c) will apply to each Transaction unless specified in the relevant
Confirmation.
(7) MULTIBRANCH PARTIES; OFFICES.
(a) OFFICES. The provisions of Section 10(a) will apply to Party A
and Party B; provided, however, that without in any way limiting the
effect of the foregoing, each party agrees to deal first with the
office of the other party specified in the Confirmation rather than
such party's head or home office with respect to resolving any default
that results solely from wire transfer difficulties or an error or
omission of an administrative or operational nature. Notwithstanding
the foregoing, a party (the "Owed Party") may seek payment from the
head or home office of the other party (the "Owing Party") with respect
to this Master Agreement in the event that an amount payable to the
Owed Party by the Owing Party pursuant to this Master Agreement as a
result of the designation of an Early Termination Date has not been
said in full when due.
(b) MULTI-BRANCH. For the purpose of Section 10(c) of this
Master Agreement:
Party A is a Multibranch Party and may act through its Toronto, New
York, Tokyo, London and Singapore offices.
Party B is not a Multi-branch Party.
(8) PROCESS AGENT. There shall be no Process Agent for either Party A or
Party B.
PART 5
OTHER PROVISIONS
(1) DEFINITIONS. This Master Agreement incorporates, and is subject to and
governed by, unless otherwise specified in a Confirmation, the 1991
ISDA Definitions (the "1991 Definitions"), and the 1992 ISDA FX and
Currency Option Definitions (the "FX Definitions"), in each case
published by the International Swap and Derivatives Association, Inc.
(formerly known as the International Swap Dealers Association, Inc.).
In the event of any inconsistency between this Master Agreement, the
1991 Definitions or the FX Definitions, this Master Agreement will
prevail. In the event of any inconsistency between the provisions of
any Confirmation and this Master Agreement, the 1991 Definitions or the
FX Definitions, such Confirmation will prevail for the purpose of the
relevant Transaction. In the event of any inconsistency between the
provisions of the 1991 Definitions and the FX Definitions, the FX
Definitions will prevail.
<PAGE> 31
(2) CONFIRMATIONS; RECORDINGS. With respect to each Transaction, Party A
shall on or promptly after the Trade Date send Party B a Confirmation,
via facsimile transmission, which shall be promptly acknowledged by
Party B. Subject to the terms of Section 9(e)(ii), the failure by Party
B to acknowledge receipt or affirm a Confirmation shall not constitute
an acceptance or affirmation of the terms thereof. Each party (i)
consents to the recording of the telephone conversations of trading and
marketing personnel of the parties and their Affiliates in connection
with this Master Agreement or any potential Transaction and (ii) agrees
to obtain any necessary consent of, and give notice of such recording
to, such personnel of it and its Affiliates. Such record of telephone
conversations may be used as evidence of any Transaction in any
proceeding.
(3) CROSS DEFAULT. The words ", or becoming capable at such time of being
declared," as they appear after the word "becoming" and before the word
"due" in the seventh line of Section 5(a)(vi) are deleted.
(4) BANKRUPTCY. For purposes of this Master Agreement, Section 5(a)(vii) is
hereby modified by deleting the number "30" as it appears after the
word "within" and before the word "days" in the tenth and eighteenth
lines thereof and inserting the number "60" in place thereof.
(5) ILLEGALITY. For purposes of Section 5(b)(i), the obligation of Party A
to comply with any official directive issued or given by any government
agency or authority having competent jurisdiction which has the result
referred to in Section 5(b)(i) will be deemed to be an "Illegality".
(6) TAX EVENT. Section 5(b)(ii) is amended by deleting the words ", or
there is a substantial likelihood that it will" from the fourth line
thereof.
(7) SET-OFF. Section 6 of the Master Agreement is amended by adding the
following new subsection 6(f):
(f) Notwithstanding anything to the contrary contained in this
Master Agreement, in the event of a designation of an Early Termination
Date as a result of an Event of Default or a Termination Event, if the
Defaulting Party or the Affected Party would be owed amounts under this
Master Agreement in respect of the Terminated Transactions as a result
of such designation, the Non-defaulting Party or the non-Affected
Party shall be entitled, at its option, to set off any obligations owed
(whether or not then due, in U.S. Dollars or any other currency) by the
Defaulting Party or Affected Party to the Non-defaulting Party or
non-Affected Party (including any of its offices or branches) under
this Master Agreement or another Specified Transaction, against the
amounts owed by the Non-defaulting Party or the non-Affected Party to
the Defaulting Party or the Affected Party or any Credit Support
Provider or any Specified Entity of such party under this Master
Agreement or another Specified Transaction. The obligation of the
Non-defaulting Party or the non-Affected Party hereunder in respect of
such Terminated Transactions shall be deemed satisfied and discharged
<PAGE> 32
to the extent of any such setoff. Any obligation of the Non-defaulting
Party or the non-Affected Party to make any payment to a Defaulting
Party or the Affected Party hereunder shall in any event be conditioned
upon and shall arise only upon the date of the payment (by setoff, by
cash payment or otherwise) in full by the Defaulting Party or the
Affected Party or any Credit Support Provider or any Specified Entity
of such party of all obligations then due and owing hereunder or under
another Specified Transaction by the Defaulting Party or the Affected
Party or any Credit Support Provider or any Specified Entity of such
party to the Non-defaulting Party or the non-Affected Party (including
any of its offices or branches).
(8) BUSINESS PURPOSE REPRESENTATION. Party A represents that it has entered
into this Master Agreement (including each Transaction now or hereafter
entered into in connection herewith) in conjunction with its line of
business, including financial intermediation, or the financing of its
business and not for speculative purposes. Party B represents and
warrants that it has entered into this Master Agreement (including each
Transaction now or hereafter entered into in connection herewith) to
hedge its actual or expected exposure to changes in currency exchange
rates and/or interest rates or for other normal business purposes
independent of this Master Agreement, and not for speculative purposes.
Each party represents that it is an "eligible swap participant" for
purposes of the exemption of swap agreements (17 C.F.R. Section 35.2),
as in the case of Party A, a bank acting on its own behalf, and, in the
case of Party B, a corporation that meets the requirements further set
forth in 17 C.F.R. Section 35.1(2)(vi).
(9) SUITABILITY REPRESENTATION. Each party represents that in entering into
this Master Agreement and each Transaction: (i) it understands and
acknowledges that the other party has been and will be acting only on
an arm's length basis and not as its agent, fiduciary, broker or
advisor in any respect, (ii) it is relying solely upon its own
evaluation of this Master Agreement and any Transaction (including the
present and future results, consequences, risks and benefits thereof,
whether financial, accounting, tax, legal or otherwise) and upon advice
from its own professional advisors, (iii) it understands this Master
Agreement and the Transactions contemplated hereby and the risks
associated therewith, has determined that those risks are appropriate
for it, and is willing to assume those risks, and (iv) it has not
relied and will not be relying upon any evaluation or advice (including
any recommendation, opinion or representation) from the other party or
its Affiliates or the representatives or advisors of the other party or
its Affiliates.
(10) ENTIRE AGREEMENT. THIS MASTER AGREEMENT AND EACH OF THE CONFIRMATIONS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
(11) SUBMISSION TO JURISDICTION. The provisions of Section 13(b) are hereby
deleted in their entirety and inserted in lieu thereof, the following:
<PAGE> 33
"(b) JURISDICTION. With respect to any suit, action or
proceedings relating to this Master Agreement ("Proceedings"), neither
party waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum or
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Master Agreement precludes either party from
bringing Proceedings in any jurisdiction nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction."
(12) LIMITATION OF RATE. In no event shall the Default Rate, Non-default
Rate or the Termination Rate be permitted to exceed the Highest Lawful
Rate. For purposes hereof, "Highest Lawful Rate" shall mean, with
respect to each party hereto, 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 subject indebtedness under
the laws applicable to such party which are presently in effect or, to
the extent allowed by law, which under such applicable laws may
hereafter be in effect and which allow a higher maximum nonusurious
interest rate than applicable laws now allow.
(13) APPLICATION OF UNIFORM COMMERCIAL CODE. The parties agree that to the
fullest extent permitted by applicable law, Section 2-609 of the New
York Uniform Commercial Code and any equivalent rights existing at
common law shall not apply to this Master Agreement or any Transaction.
(14) EQUIVALENCY CLAUSE. For the purposes of the Interest Act (Canada) and
disclosure thereunder, whenever any interest is made payable under this
Master Agreement at any rate or percentage for or based on a period of
three hundred sixty days (360), the yearly rate or percentage of
interest to which such rate or percentage of interest is equivalent is
the rate or percentage stipulated herein multiplied by the actual
number of days in a period of one (1) year divided by three hundred
sixty (360). The foregoing sentence is for disclosure purposes only and
shall not otherwise affect the terms of this Master Agreement as set
forth herein.
(15) MATCHING PAYMENTS. The parties agree and confirm that Transactions
entered into pursuant to this Master Agreement either shall have
matching or corresponding Scheduled Payment Dates or shall have Party
A's Scheduled Payment Dates occurring more frequently than Party B's
Scheduled Payment Dates. If, despite the foregoing, a Transaction is
entered into other than as above, the parties shall make (i) such
amendments to this Master Agreement; (ii) include such provisions in
the Confirmation for such Transaction; or (iii) enter into such other
arrangements, as may reasonably be necessary to give effect to such
Transaction pursuant to this Master Agreement.
<PAGE> 1
Exhibit 10.68
ENRON OIL & GAS COMPANY
Guaranty
This Agreement (this "Guaranty"), dated effective as of January 16,
1996, is made and entered into by Enron Oil & Gas Company, a Delaware
corporation ("Guarantor").
W I T N E S S E T H
WHEREAS, Royal Bank of Canada ("Counterparty") and EOG Company of
Canada (the "Company"), is a subsidiary of Guarantor, are contemplating
entering into a Master Agreement dated as of the effective date hereof, a copy
of which is attached hereto as Exhibit "A" (such Master Agreement, as the same
may from time to time be modified, amended and supplemented, shall be referred
to herein as the "Contract"); and Guarantor will directly or indirectly benefit
from the transactions to be entered into between the Company and Counterparty.
NOW THEREFORE, in consideration of Counterparty entering into the
Contract, Guarantor hereby covenants and agrees as follows:
1. GUARANTY. Subject to the provisions hereof, Guarantor hereby
irrevocably and unconditionally guarantees the timely payment when due of the
obligations of Company (the "Obligations") to Counterparty under the Contract.
To the extent that Company shall fail to pay any Obligations, Guarantor shall
promptly pay to Counterparty the amount due. This Guaranty shall constitute a
guarantee of payment and not of collection. The liability of Guarantor under
the Guaranty shall be subject to the following:
a. Guarantor's liability hereunder shall be and is specifically
limited to payments expressly required to be made under the Contract (even if
such payments are deemed to be damages) and, except to the extent specifically
provided in the Contract, in no event shall Guarantor be subject hereunder to
consequential, exemplary, equitable, loss of profits, punitive, tort, or any
other damages, costs, or attorney's fees.
2. DEMANDS AND NOTICE. If Company fails or refuses to pay any
Obligations, Counterparty shall notify Company in writing of the manner in
which Company has failed to pay and demand that payment be made by Company. If
Company's failure or refusal to pay continues for a period of fifteen (15) days
after the date of Counterparty's notice to Company, and Counterparty has
elected to exercise its rights under this Guaranty, Counterparty shall make a
demand upon Guarantor (hereinafter referred to as a "Payment Demand"). A
Payment Demand shall be in writing and shall reasonably and briefly specify in
what manner and what amount Company has failed to pay and an explanation of why
such payment is due, with a specific statement that Counterparty is calling
upon Guarantor to pay under this Guaranty. A Payment Demand satisfying the
foregoing requirements shall be deemed sufficient notice to Guarantor that
<PAGE> 2
it must pay the Obligations. A single written Payment Demand shall be effective
as to any specific default during the continuance of such default, until
Company or Guarantor has cured such default, and additional written demands
concerning such default shall not be required until such default is cured.
3. REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants that:
(a) It is a corporation duly organized and validly existing under
the laws of the State of Delaware and has the corporate power and authority to
execute, deliver and carry out the terms and provisions of the Guaranty;
(b) no authorization, approval, consent or order of, or
registration or filing with, any court or other governmental body having
jurisdiction over Guarantor is required on the part of Guarantor for the
execution and delivery of this Guaranty; and;
(c) this Guaranty, when executed and delivered, will constitute a
valid and legally binding agreement of Guarantor, except as the enforceability
of this Guaranty may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditor's
rights generally and by general principles of equity.
4. SETOFFS AND COUNTERCLAIMS. Without limiting Guarantor's own
defenses and rights hereunder, Guarantor reserves to itself all rights,
setoffs, counterclaims and other defenses to which Company or any other
subsidiary of Guarantor is or may be entitled to arising from or out of the
Contract or otherwise, except for defenses arising out of the bankruptcy,
insolvency, dissolution or liquidation of Company.
5. AMENDMENT OF GUARANTY. No term or provision of this Guaranty
shall be amended, modified, altered, waived, or supplemented except in a
writing signed by Guarantor and Counterparty.
6. WAIVERS. Guarantor hereby waives (a) notice of acceptance of
this Guaranty; (b) presentment and demand concerning the liabilities of
Guarantor, except as expressly hereinabove set forth; and (c) any right to
require that any action or proceeding be brought against Company or any other
person, or except as expressly hereinabove set forth, to require that
Counterparty seek enforcement of any performance against Company or any other
person, prior to any action against Guarantor under the terms hereof.
Except as to applicable statutes of limitation, no delay of
Counterparty in the exercise of, or failure to exercise, any rights hereunder
shall operate as a waiver of such rights, a waiver of any other rights or a
release of Guarantor from any obligations hereunder.
<PAGE> 3
Guarantor consents to the renewal, compromise, extension, acceleration
or other changes in the time of payment of or other changes in the terms of
the Obligations, or any part thereof or any changes or modifications to the
terms of the Contract.
Guarantor may terminate this Guaranty by providing written notice of
such termination to Counterparty. No such termination shall be effective until
five (5) business days after receipt by Counterparty of such termination
notice. No such termination shall affect Guarantor's liability with respect to
any Transaction (as defined in the Contract) entered into prior to the time the
termination is effective, which Transaction shall remain guaranteed pursuant to
the terms of this Guaranty.
7. NOTICE. Any Payment Demand, notice, request, instruction,
correspondence or other document to be given hereunder by any party to another
(herein collectively called "Notice") shall be in writing and delivered
personally or mailed by certified mail, postage prepaid and return receipt
requested, or by telegram or telecopier, as follows:
<TABLE>
<S> <C> <C> <C>
Counterparty: Royal Bank of Canada Guarantor: Enron Oil & Gas Company
Treasury Division 1400 Smith
16th Floor, South Tower Houston, Texas 77002
Royal Bank Plaza Attn: Senior Vice President
Toronto, Ontario and Chief Financial Officer
CANADA M5J 2J5 Fax No: (713) 646-2113
Attn: Documentation Manager
Fax No.: (416) 974-7987
</TABLE>
Notice given by personal delivery or mail shall be effective upon
actual receipt. Notice given by telegram or telecopier shall be effective upon
actual receipt if received during the recipient's normal business hours, or at
the beginning of the recipient's next business day after receipt if not
received during the recipient's normal business hours. All Notices by telegram
or telecopier shall be confirmed promptly after transmission in writing by
certified mail or personal delivery. Any party may change any address to which
Notice is to be given to it by giving notice as provided above of such change
of address.
8. MISCELLANEOUS. THIS GUARANTY SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. This Guaranty shall be
binding upon Guarantor, its successors and assigns and inure to the benefit of
and be enforceable by Counterparty, its successors and assigns. The Guaranty
embodies the entire agreement and understanding between Guarantor and
Counterparty and supersedes all prior agreements and understandings relating to
the subject matter hereof. The headings in this Guaranty are for purposes of
reference only, and shall not affect the meaning hereof. This Guaranty may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument.
<PAGE> 4
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty on the
date first above written.
ENRON OIL & GAS COMPANY
By: /s/ BEN B. BOYD
___________________________
Name: Ben. B. Boyd
_________________________
Title: VP and Controller
________________________
<PAGE> 1
ENRON OIL & GAS COMPANY
LIST OF SUBSIDIARIES EXHIBIT 21
<TABLE>
<CAPTION>
Date of Where
Company Name Incorporation Incorporated
- -------------------------------------------------------------------- ------------- ------------
<S> <C> <C>
Enron Oil & Gas Company 06/12/85 Delaware
Enron Oil & Gas International, Inc. 05/27/93 Delaware
EOGI-Trinidad, Inc. 06/02/93 Delaware
EOGI Trinidad Company 06/02/93 Cayman Islands
Enron Gas & Oil Trinidad Limited 11/04/92 Trinidad
Enron Oil & Gas Capital Management I, Ltd. 12/08/95 Cayman Islands
EOGI - Trinidad U(a) Block, Inc. 11/07/95 Delaware
EOGI Trinidad - U(a) Block Company 11/09/95 Cayman Islands
Enron Gas & Oil Trinidad - U(a) Block Limited 11/10/95 Cayman Islands
EOGI-Australia, Inc. 06/02/93 Delaware
EOGI Australia Company 06/02/93 Cayman Islands
Enron Exploration Australia Pty Ltd 11/23/92 Australia
EOGI-France, Inc. 06/02/93 Delaware
Enron Exploration France S.A. 11/13/92 France
EOGI-Russia, Inc. 07/29/93 Delaware
Enron Exploration and Production (Russia) Limited 11/09/92 Cyprus
EOGI-Kazakhstan, Inc. 07/29/93 Delaware
Enron Oil & Gas Kazakhstan Ltd. 08/18/94 Cayman Islands
EOGI-United Kingdom, Inc. 07/29/93 Delaware
EOGI United Kingdom Company B.V. 12/04/81 The Netherlands
Enron Oil UK Limited 05/22/90 England
EOGI-India, Inc. 03/17/94 Delaware
Enron Oil & Gas India Ltd. 06/02/93 Cayman Islands
EOGI-China, Inc. 08/18/94 Delaware
Enron Oil & Gas China Ltd. 08/19/94 Cayman Islands
EOGI-Qatar, Inc. 09/22/94 Delaware
Enron Oil & Gas Qatar Ltd. 09/23/94 Cayman Islands
EOGI-Uzbekistan, Inc. 01/30/95 Delaware
Enron Oil & Gas Uzbekistan Ltd. 01/31/95 Cayman Islands
EOGI - Kuwait, Inc. 04/11/95 Delaware
Enron Oil & Gas Kuwait Ltd. 04/12/95 Cayman Islands
EOGI - Algeria, Inc. 11/07/95 Delaware
Enron Oil & Gas Algeria Ltd. 11/09/95 Cayman Islands
Enron Oil & Gas Jordan Ltd. 12/08/95 Cayman Islands
Enron Oil & Gas Venezuela Ltd. 01/11/96 Cayman Islands
Enron Oil & Gas - Carthage, Inc. 03/21/95 Delaware
ERSO, Inc. 04/24/67 Texas
Enron Oil & Gas Property Management, Inc. 04/20/95 Delaware
Enron Oil & Gas Investments, Inc. 04/24/95 Delaware
EOG Expat Services, Inc. 02/01/96 Delaware
Enron Oil & Gas Marketing, Inc. 04/09/90 Delaware
EOG - Canada, Inc. 03/13/85 Delaware
EOG Company of Canada 12/14/95 Nova Scotia
EOG Canada Company Ltd. 12/12/95 Alberta
Enron Oil Canada Ltd. 04/01/82 Alberta
Nilo Operating Company 04/04/94 Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
[DEGOLYER AND MACNAUGHTON LETTERHEAD]
February 29, 1996
Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
Gentlemen:
We hereby consent to the references to our firm and to our opinions
delivered to Enron Oil & Gas Company, hereinafter referred to as the "Company,"
relating to our comparison of estimates prepared by us to those furnished to us
by the Company of proved oil, condensate, natural gas liquids, and natural gas
reserves of certain selected properties owned by the Company as expressed in
our letter reports dated January 27, 1994, January 13, 1995, and January 22,
1996, for estimates as of January 1, 1994, January 1, 1995, and December 31,
1995, respectively, to be included in the section "Supplemental Information to
Consolidated Financial Statements - Oil and Gas Producing Activities" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, to
be filed with the Securities and Exchange Commission on or about March 5, 1996.
We also consent to the inclusion of our letter report, dated January 22, 1996,
addressed to the Company as Exhibit (23.2) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, to be filed with the Securities
and Exchange Commission. Additionally, we hereby consent to the incorporation
by reference of such references to our firm and to our opinions included in the
Company's Form 10-K in the Company's previously filed Registration Statement
nos. 33-42620, 33-52201, 33-58103, and 33-62005.
Very truly yours,
/s/ DEGOLYER AND MACNAUGHTON
DeGOLYER and MacNAUGHTON
<PAGE> 1
EXHIBIT 23.2
[DEGOLYER AND MACNAUGHTON LETTERHEAD]
January 22, 1996
Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
Gentlemen:
Pursuant to your request, we have prepared estimates, as of December
31, 1995, of the proved oil, condensate, natural gas liquids, and natural gas
reserves of certain selected properties in the United States, Canada, and
Trinidad owned by Enron Oil & Gas Company, hereinafter referred to as "Enron."
The properties consist of working interests located onshore in the states of
New Mexico, Texas, Utah, and Wyoming and in the offshore waters of Texas,
Louisiana, and Alabama, in the province of Saskatchewan in Canada, and in the
offshore waters of Trinidad. The estimates are reported in detail in our
"Report as of December 31, 1995 on Proved Reserves of Certain Properties in the
United States owned by Enron Oil & Gas Company c Selected Properties," our
"Report as of December 31, 1995 on Proved Reserves of Certain Properties in
Canada owned by Enron Oil & Gas Company c Selected Properties," and our "Report
as of December 31, 1995 on Proved Reserves of the Kiskadee Field, SECC Block,
Offshore Trinidad for Enron Oil and Gas Company," hereinafter collectively
referred to as the "Reports." We also have reviewed information provided to us
by Enron that it represents to be Enron's estimates of the reserves, as of
December 31, 1995, for the same properties as those included in the Reports.
Proved reserves estimated by us and referred to herein are judged to
be economically producible in future years from known reservoirs under existing
economic and operating conditions and assuming continuation of current
regulatory practices using conventional production methods and equipment.
Proved reserves are defined as those that have been proved to a high degree of
certainty by reason of actual completion, successful testing, or in certain
cases by adequate core analyses and electrical-log interpretation when the
producing characteristics of the formation
<PAGE> 2
are known from nearby fields. These reserves are defined areally by reasonable
geological interpretation of structure and known continuity of oil- or
gas-saturated material. This definition is in agreement with the definition of
proved reserves prescribed by the Securities and Exchange Commission.
Enron represents that its estimates of the proved reserves, as of
December 31, 1995, net to its leasehold interests in the properties included in
the Reports are as follows:
<TABLE>
<CAPTION>
Oil, Condensate, and
Natural Gas Liquids Natural Gas Net Equivalent
(thousand barrels) (million cubic feet) Million Cubic Feet
-------------------- -------------------- ------------------
<S> <C> <C>
17,536 1,408,800 1,514,016
</TABLE>
Note: Net equivalent million cubic feet is based on 1
barrel of oil, condensate, or natural gas liquids
being equivalent to 6,000 cubic feet of gas.
Enron has advised us, and we have assumed, that its estimates of
proved oil, condensate, natural gas liquids, and natural gas reserves are in
accordance with the rules and regulations of the Securities and Exchange
Commission.
Proved reserves estimated by us for the properties included in the
Reports, as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Oil, Condensate, and
Natural Gas Liquids Natural Gas Net Equivalent
(thousand barrels) (million cubic feet) Million Cubic Feet
-------------------- -------------------- ------------------
<S> <C> <C>
15,615 1,345,077 1,438,767
</TABLE>
Note: Net equivalent million cubic feet is based on 1
barrel of oil, condensate, or natural gas liquids
being equivalent to 6,000 cubic feet of gas.
In making a comparison of the detailed reserves estimates prepared by
us and by Enron of the properties involved, we have found differences, both
positive and negative, in reserves estimates for individual properties. These
differences appear to be compensating to a great extent when considering the
reserves of Enron in the properties included in our reports, resulting in
overall differences not being substantial. It is our opinion that the reserves
estimates prepared by Enron on the properties reviewed by us and referred to
above, when compared on the basis of net
<PAGE> 3
equivalent million cubic feet of gas, do not differ materially from those
prepared by us.
Submitted,
/s/ DEGOLYER AND MACNAUGHTON
DeGOLYER and MacNAUGHTON
[SEAL] /s/ VERNON E. PRINGLE, JR., P.E.
----------------------------------------
Vernon E. Pringle, Jr., P.E.
Senior Vice President
DeGolyer and MacNaughton
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report on the consolidated financial statements of Enron Oil & Gas Company
and subsidiaries included in this Form 10-K, into the Company's previously
filed Registration Statement File Nos. 33-42620, 33-58103 and 33-62005.
ARTHUR ANDERSEN LLP
Houston, Texas
March 5, 1996
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned, as a director of Enron Oil & Gas Company, a Delaware
corporation (the "Company"), in connection with the filing by the Company of
its Annual Report on Form 10-K for the year ended December 31, 1995, with the
Securities and Exchange Commission, does hereby make, constitute and appoint
Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full
power (any one of them acting alone), as true and lawful attorneys-in-fact and
agents, for and on behalf and in the name, place and stead of the undersigned,
in any and all capacities, to sign, execute and file such Annual Report on Form
10-K, together with any amendments or supplements thereto, with all exhibits
and any and all documents required to be filed with respect thereto with any
regulatory authority, granting unto each above-mentioned individual the full
power and authority to do and perform each and every act and action requisite
and necessary to be done in and about the premises in order to effectuate the
same as fully to all intents and purposes as the undersigned might or could do
if personally present, hereby ratifying and confirming all the said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand this
__________ day of February, 1996.
________________________________________
Fred C. Ackman
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned, as a director of Enron Oil & Gas Company, a Delaware
corporation (the "Company"), in connection with the filing by the Company of
its Annual Report on Form 10-K for the year ended December 31, 1995, with the
Securities and Exchange Commission, does hereby make, constitute and appoint
Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full
power (any one of them acting alone), as true and lawful attorneys-in-fact and
agents, for and on behalf and in the name, place and stead of the undersigned,
in any and all capacities, to sign, execute and file such Annual Report on Form
10-K, together with any amendments or supplements thereto, with all exhibits
and any and all documents required to be filed with respect thereto with any
regulatory authority, granting unto each above-mentioned individual the full
power and authority to do and perform each and every act and action requisite
and necessary to be done in and about the premises in order to effectuate the
same as fully to all intents and purposes as the undersigned might or could do
if personally present, hereby ratifying and confirming all the said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand this
__________ day of February, 1996.
_______________________________________
Edward Randall, III
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned, as a director of Enron Oil & Gas Company, a Delaware
corporation (the "Company"), in connection with the filing by the Company of
its Annual Report on Form 10-K for the year ended December 31, 1995, with the
Securities and Exchange Commission, does hereby make, constitute and appoint
Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full
power (any one of them acting alone), as true and lawful attorneys-in-fact and
agents, for and on behalf and in the name, place and stead of the undersigned,
in any and all capacities, to sign, execute and file such Annual Report on Form
10-K, together with any amendments or supplements thereto, with all exhibits
and any and all documents required to be filed with respect thereto with any
regulatory authority, granting unto each above-mentioned individual the full
power and authority to do and perform each and every act and action requisite
and necessary to be done in and about the premises in order to effectuate the
same as fully to all intents and purposes as the undersigned might or could do
if personally present, hereby ratifying and confirming all the said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand this
__________ day of February, 1996.
________________________________________
Kenneth L. Lay
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
The undersigned, as a director of Enron Oil & Gas Company, a Delaware
corporation (the "Company"), in connection with the filing by the Company of
its Annual Report on Form 10-K for the year ended December 31, 1995, with the
Securities and Exchange Commission, does hereby make, constitute and appoint
Forrest E. Hoglund, Walter C. Wilson and Angus H. Davis, each of them with full
power (any one of them acting alone), as true and lawful attorneys-in-fact and
agents, for and on behalf and in the name, place and stead of the undersigned,
in any and all capacities, to sign, execute and file such Annual Report on Form
10-K, together with any amendments or supplements thereto, with all exhibits
and any and all documents required to be filed with respect thereto with any
regulatory authority, granting unto each above-mentioned individual the full
power and authority to do and perform each and every act and action requisite
and necessary to be done in and about the premises in order to effectuate the
same as fully to all intents and purposes as the undersigned might or could do
if personally present, hereby ratifying and confirming all the said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand this
__________ day of February, 1996.
________________________________________
Richard D. Kinder
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 23,039
<SECURITIES> 0
<RECEIVABLES> 168,514
<ALLOWANCES> 0
<INVENTORY> 11,697
<CURRENT-ASSETS> 217,832
<PP&E> 3,380,924
<DEPRECIATION> (1,499,379)
<TOTAL-ASSETS> 2,147,258
<CURRENT-LIABILITIES> 169,297
<BONDS> 0
<COMMON> 0
0
201,600
<OTHER-SE> 962,059
<TOTAL-LIABILITY-AND-EQUITY> 2,147,258
<SALES> 576,493
<TOTAL-REVENUES> 648,702
<CGS> 0
<TOTAL-COSTS> 453,393
<OTHER-EXPENSES> (669)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,924
<INCOME-PRETAX> 184,054
<INCOME-TAX> 41,936
<INCOME-CONTINUING> 142,118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 142,118
<EPS-PRIMARY> .89
<EPS-DILUTED> .00
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